Public Law No: 111-203 (07/21/2010)
(This measure has not been amended since the Conference Report was filed in the House on June 29, 2010. The summary of that version is repeated here.)
Dodd-Frank Wall Street Reform and Consumer Protection Act – Title I: Financial Stability – Financial Stability Act of 2010 – Subtitle A: Financial Stability Oversight Council – (Sec. 111) Establishes the Financial Stability Oversight Council (Council), consisting of the heads of specified federal financial regulatory bodies and chaired by the Secretary of the Treasury.
(Sec. 112) Requires the Council, among other things, to: (1) identify risks to U.S. financial stability that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace; (2) promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure; (3) respond to emerging threats to the stability of the financial system.
Includes among the Council’s duties: (1) identifying gaps in regulation that could pose risks to U.S. financial stability; (2) requiring supervision by the Board of Governors of the Federal Reserve (Board) for nonbank financial companies that may pose risks to U.S. financial stability in the event of their material financial distress or failure, or because of specified activities; (3) making recommendations to the Board concerning the establishment of heightened prudential standards for risk-based capital, leverage, liquidity, contingent capital, and overall risk management for nonbank financial companies and large, interconnected bank holding companies supervised by the Board; and (4) identifying systemically important financial market utilities and payment, clearing, and settlement activities.
(Sec. 113) Authorizes the Council to determine that a foreign or a U.S. nonbank financial company shall be supervised by the Board and subject to prudential standards under this Act, if the Council determines that material financial distress, or activities at the company, could threaten U.S. financial stability.
Authorizes the company, upon the Council’s determination, to establish an intermediate holding company in which its financial activities (and those of its subsidiaries) are conducted in compliance with Board regulations or guidance. Subjects such intermediate holding company to Board supervision and to prudential standards under this Act as if it were a nonbank financial company supervised by the Board.
Restricts Board supervision to the company’s financial activities only.
Requires the Council, in exercising its duties with respect to foreign nonbank financial companies, foreign-based bank holding companies, and cross-border activities and markets, to consult with appropriate foreign regulatory authorities.
(Sec. 114) Requires any nonbank financial company determined to come under Board supervision to register with the Board.
(Sec. 115) Authorizes the Council to recommend to the Board prudential standards and reporting and disclosure requirements for Board-supervised nonbank financial companies and large, interconnected bank holding companies that: (1) are more stringent than those for other nonbank financial companies and bank holding companies that do not present similar risks to the U.S. financial stability; and (2) increase in stringency, based upon specified considerations.
Requires the Council to study and report to Congress on the feasibility, benefits, costs, and structure of a contingent capital requirement for Board-supervised nonbank financial companies and large, interconnected bank holding companies.
Authorizes the Council to make recommendations to the Board about Board-supervised nonbank financial companies and large, interconnected bank holding companies, including: (1) required periodic reports on company plans for rapid and orderly resolution in the event of material financial distress or failure; (2) company credit exposure; (3) standards to limit risks posed by failure of any individual company to other companies; and (4) short-term company debt limits.
(Sec. 116) Authorizes the Council, acting through the Office of Financial Research, to require a bank holding company with total consolidated assets of $50 billion or more or a Board-supervised nonbank financial company (and subsidiaries) to submit certified reports of condition and risk management systems.
(Sec. 117) Treats as a Board-supervised nonbank financial company any entity that: (1) was a bank holding company having total consolidated assets 50 billion or more as of January 1, 2010; (2) received financial assistance under or participated in the Capital Purchase Program established under the Troubled Asset Relief Program (TARP) under the Emergency Economic Stabilization Act of 2008 (EESA); or (3) is a successor entity.
Prescribes a procedure for appeal from such treatment.
(Sec. 118) Treats Council expenses as expenses of, and paid by, the Office of Financial Research.
(Sec. 119) Prescribes procedures for resolution by the Council of supervisory jurisdictional disputes among member agencies.
(Sec. 120) Authorizes the Council, in specified circumstances, to provide for more stringent regulation of a financial activity by issuing recommendations to primary financial regulatory agencies to apply new or heightened standards and safeguards for a financial activity or practice conducted by bank holding companies or nonbank financial companies.
Requires such primary agencies to impose the standards recommended by the Council.
(Sec. 121) Requires the Board to take mitigatory actions restricting the activities of bank holding companies with total consolidated assets of $50 billion or more, or Board-supervised nonbank financial companies, which pose a grave threat to U.S. financial stability, including: (1) limiting the company’s ability to become affiliated with another company; (2) restricting the company’s ability to offer a financial product or products; (3) requiring the company to terminate one or more activities; (4) imposing conditions on the manner in which the company conducts activities; or (5) requiring the company to transfer assets or off-balance-sheet items to unaffiliated entities.
(Sec. 122) Authorizes the Comptroller General (GAO) to audit Council activities.
(Sec. 123) Instructs the Council Chairperson to study and report to Congress on the economic impact of possible financial services regulatory limitations intended to reduce systemic risk.
Subtitle B: Office of Financial Research – (Sec. 152) Establishes within the Department of the Treasury the Office of Financial Research (OFR) to support the Council and member agencies in: (1) collecting and standardizing data collections; (2) performing applied research and essential long-term research; and (3) developing risk measurement and monitoring tools.
(Sec. 154) Establishes the Data Center and the Research and Analysis Center to carry out OFR programmatic responsibilities.
(Sec. 155) Establishes the Financial Research Fund in the Treasury as depository for funds and assessments designated for the OFR.
Subtitle C: Additional Board of Governors Authority for Certain Nonbank Financial Companies and Bank Holding Companies – (Sec. 161) Authorizes the Board to require a nonbank financial company under its supervision (and any subsidiary) to report under oath regarding its financial condition, its systems for monitoring and controlling risks, and the extent to which its activities and operations threaten U.S. financial stability.
Authorizes the Board to examine such companies regarding such matters.
(Sec. 162) Subjects a Board-supervised nonbank financial company (and any subsidiaries that are not depository institutions) to specified enforcement proceedings of the Federal Deposit Insurance Act (FDIA) in the same manner and to the same extent as if it were a bank holding company.
Authorizes the Board to recommend that primary financial regulatory agency initiate supervisory actions or enforcement proceedings against noncompliant depository institution or functionally regulated subsidiaries.
(Sec. 163) Treats a Board-supervised nonbank financial company as a statutory bank holding company for purposes of requirements governing bank acquisitions.
Requires a bank holding company with total consolidated assets of $50 billion or more or a Board-supervised nonbank financial company to notify the Board in writing in advance of any transaction in which it acquires direct or indirect ownership or control of voting shares of a company (other than an insured depository institution) which: (1) has total consolidated assets of $10 billion or more; and (2) is engaged in specified activities under the Bank Holding Company Act of 1956.
(Sec. 164) Treats a Board-supervised nonbank financial company as a bank holding company for purposes of the Depository Institutions Management Interlocks Act. Prohibits the Board, however, from permitting service by a management official of a Board-supervised nonbank financial company as a management official of any bank holding company with total consolidated assets of $50 billion or more, or any other Board-supervised nonaffiliated nonbank financial company (except to provide a temporary exemption for interlocks resulting from a merger, acquisition, or consolidation).
(Sec. 165) Requires the Board to establish, for Board-supervised nonbank financial companies and for bank holding companies with total consolidated assets of $50 billion or more, prudential standards addressing specified requirements that: (1) are more stringent than those for other nonbank financial companies and bank holding companies that do not present similar risks to the U.S. financial stability; and (2) increase in stringency, based upon specified considerations.
Authorizes the Board to require each Board-supervised nonbank financial company and bank holding companies with total consolidated assets of $50 billion or more to maintain a minimum amount of contingent capital convertible to equity in times of financial stress.
Directs the Board to require each Board-supervised nonbank financial company and such bank holding companies to report periodically: (1) their plans for rapid and orderly resolution in the event of material financial distress or failure; and (2) the nature and extent of their credit exposure.
Requires the Board to prescribe standards limiting the risks and credit exposure that failure of any individual company could pose to a Board-supervised nonbank financial company or to a bank holding company with total consolidated assets of $50 billion or more. Requires such regulations to prohibit credit exposure exceeding 25% of a company’s capital stock and surplus (or a lower amount, if necessary).
Authorizes the Board to prescribe a limit on the amount of short-term debt, including off-balance sheet exposures, that may be accumulated by bank holding companies with total consolidated assets of $50 billion or more or Board-supervised nonbank financial companies.
Directs the Board to require each publicly-traded Board-supervised nonbank financial company to establish a risk committee responsible for the oversight of the enterprise-wide risk management practices.
Requires the Board to conduct annual analyses in which Board-supervised nonbank financial companies and bank holding companies with total consolidated assets of $50 billion or more are subject to evaluation of whether such companies have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions (stress tests).
Directs the Board to require a bank holding company with total consolidated assets of $50 billion or more or a Board-supervised nonbank financial company (but not any federal home loan bank) to maintain a debt to equity ratio of no more than 15 to 1, upon Council determination that the company poses a grave threat to the U.S. financial stability and that this requirement is necessary to mitigate that risk.
Requires the computation of capital in such companies to take into account any off-balance-sheet activities for purposes of meeting their capital requirements.
(Sec. 166) Directs the Board to prescribe early remediation requirements to address the financial distress of a Board-supervised nonbank financial company or a bank holding company with total consolidated assets of $50 billion or more.
(Sec. 167) Authorizes the Board to require any nonbank financial company it supervises that conducts activities that are not financial in nature or incidental thereto under the Bank Holding Company Act of 1956 to establish and conduct all or a portion of such activities that are financial in nature or incidental thereto in or through an affiliated intermediate holding company.
Requires a company that directly or indirectly controls an intermediate holding company established under such affiliation procedures to serve as a source of strength to its subsidiary intermediate holding company.
(Sec. 170) Directs the Board to promulgate criteria for exempting from its supervision certain types or classes of U.S. nonbank financial companies or foreign nonbank financial companies.
(Sec. 171) Directs federal banking agencies to establish, on a consolidated basis, minimum leverage capital requirements and minimum risk-based capital requirements for insured depository institutions (except federal home loan banks), depository institution holding companies, and Board-supervised nonbank financial companies.
Directs the Comptroller General to study and report to Congress on access to capital by smaller insured depository institutions.
Requires the federal banking agencies to develop capital requirements for insured depository institutions, depository institution holding companies, and Board-supervised nonbank financial companies that address the risks their activities pose, including the risk to other public and private stakeholders in the event of adverse performance, disruption, or failure of the institution or the activity.
(Sec. 172) Amends the FDIA to subject Board-supervised nonbank financial companies and bank holding companies with total consolidated assets of $50 billion or more to examination and enforcement action for insurance and liquidation purposes whenever the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) determines that a special examination is necessary.
(Sec. 173) Amends the International Banking Act of 1978 to authorize the Board, when considering an application to establish in the United States a foreign bank that presents a risk to the stability of the U.S. financial system, to take into account whether the foreign bank’s home country has adopted, or is making demonstrable progress toward adopting, an appropriate system of regulation for its financial system to mitigate such risk.
Authorizes the Board to order a foreign bank which presents a risk to the stability of the U.S. financial system, and which operates a state branch or agency or commercial lending company subsidiary in the United States, to terminate the activities of that branch, agency, or subsidiary if the foreign bank’s home country has not adopted, or is not making demonstrable progress toward adopting, an appropriate system of regulation for its financial system to mitigate such risk.
Amends the Securities Exchange Act of 1934 to authorize the Securities and Exchange Commission (SEC), in determining whether to permit a foreign person or an affiliate to register as a U.S. broker or dealer, or succeed to the registration of a U.S. broker or dealer, to consider whether, for a foreign person or an affiliate that presents a risk to the stability of the U.S. financial system, the home country of the foreign person’s home country has adopted, or is making demonstrable progress toward adopting, an appropriate system of regulation for its financial system to mitigate such risk.
Authorizes the SEC to terminate the registration of such foreign person as a broker or dealer in the United States, if the foreign person’s home country has not adopted, or is not making demonstrable progress toward adopting, an appropriate system of regulation for its financial system to mitigate such risk.
(Sec. 174) Directs the Comptroller General to study and report to Congress on: (1) the use of hybrid capital instruments as a component of Tier 1 capital for banking institutions and bank holding companies; and (2) capital requirements applicable to U.S. intermediate holding companies of foreign banks that are bank holding companies or savings and loan holding companies.
(Sec. 175) Directs the President (or a designee) to coordinate through all available international policy channels policies similar to those found in U.S. law relating to limiting the scope, nature, size, scale, concentration, and interconnectedness of financial companies, in order to protect U.S. financial stability and the global economy.
Directs the Council Chairperson to consult regularly with the financial regulatory entities and other appropriate organizations of foreign governments or international organizations on matters relating to systemic risk to the international financial system.
Requires the Board and the Secretary to consult with their foreign counterparts and through appropriate multilateral organizations to encourage comprehensive and robust prudential supervision and regulation for all highly leveraged and interconnected financial companies.
Title II: Orderly Liquidation Authority – (Sec. 202) Prescribes jurisprudential procedures for orderly liquidation of financial entities, including petitions for U.S. district court review, three-year appointment of the FDIC as receiver, and appeals of district court final decisions.
Requires the Administrative Office of the United States Courts and the Comptroller General each to monitor and report to Congress on: (1) the activities of the U.S. District Court for the District of Columbia; and (2) the bankruptcy and orderly liquidation process for financial companies under the Bankruptcy Code.
Directs the Comptroller General to study and report to: (1) Congress regarding international coordination relating to the orderly liquidation of financial companies under the Bankruptcy Code; and (2) the Council regarding prompt corrective action implementation by the appropriate federal agencies.
(Sec. 203) Sets forth procedures by which the FDIC, the SEC, the Director of the Federal Insurance Office and the Board shall make written recommendations to the Secretary concerning the disposition of certain financial companies in danger of default, including brokers, dealers, insurance companies and their subsidiaries.
Requires the Secretary and the FDIC as receiver for a covered financial company, to report to Congress and the public on plans and actions to wind down a financial company which the Secretary and the President have determined is in default or in danger and its failure would have serious adverse effects on U.S. financial stability in the U.S. (covered financial company).
Directs the Comptroller General to review and report to Congress on any determination that results in the appointment of the FDIC as receiver.
(Sec. 204) Sets forth procedures for the FDIC to exercise its authorities, powers, and duties as receiver for a covered financial company.
(Sec. 205) Requires the FDIC to appoint, without need for court approval, the Securities Investor Protection Corporation (SIPC) to act as trustee for the liquidation of a covered broker or dealer. Sets forth SIPC powers and duties as well as mandatory terms and conditions for orderly liquidation actions.
(Sec. 207) Shields the members of the board of directors of a covered financial company (or body performing similar functions) from liability to company shareholders or creditors for acquiescing in or consenting in good faith to the appointment of the FDIC as receiver for the covered financial company.
(Sec. 208) Dismisses cases or proceedings against a covered financial company, upon proper notice, following appointment of either FDIC or SIPC as receiver and trustee, respectively.
Requires the assets of a covered financial company, upon appointment of the FDIC as receiver, to revest in it, to the extent they have vested in any entity other than the covered financial company as a result of any case or proceeding commenced under the Bankruptcy Code, the Securities Investor Protection Act of 1970, or any similar provision of applicable state liquidation or insolvency law.
(Sec. 210) Specifies the powers and duties of the FDIC as receiver for a covered financial company.
Prescribes liquidation procedures, including resolution of claims and statute of limitations.
Declares unenforceable any walkaway clauses in a qualified financial contract of a covered financial company in default.
Sets forth procedures to charter and establish bridge financial companies.
Prohibits the FDIC from entering into any agreement or approving any protective order which prohibits it from disclosing the settlement terms of any action for damages or restitution brought by the FDIC acting as receiver for a covered financial company.
Establishes in the Treasury the Orderly Liquidation Fund to: (1) enable the FDIC to implement its authorities in this Act; and (2) cover the cost of authorized actions, including the orderly liquidation of covered financial companies.
Requires the FDIC to charge risk-based assessments to pay in full obligations issued by the FDIC to the Secretary.
Directs the FDIC to prescribe regulations prohibiting the sale of assets of a covered financial company by the FDIC to specified persons, including convicted debtors.
Authorizes the FDIC, as receiver of a covered financial company, to recover from any current or former senior executive or director substantially responsible for the company’s failed condition any compensation received: (1) during the two-year period preceding the date on which it was appointed receiver; or (2) at any time in the case of fraud.
(Sec. 211) Sets forth the duties of the Inspectors General of the FDIC and of the Department of the Treasury, respectively, to conduct, supervise, and coordinate audits and investigations of actions taken by the FDIC as receiver and by the Secretary related to the liquidation of any covered financial company.
(Sec. 212) Requires the FDIC to take the action necessary to avoid any conflicts of interest that may arise in connection with multiple receiverships.
(Sec. 213) Authorizes either the Board or the FDIC to ban certain activities by senior executives and directors.
(Sec. 214) Requires the liquidation of all financial companies placed into receivership under this Act. Prohibits the use of taxpayer funds to prevent liquidation of any such companies.
Requires the recovery through assessments from the disposition of assets of a liquidated financial company, or from the financial sector, of any funds expended under this Act in the company’s liquidation.
(Sec. 215) Directs the Council to study and report to Congress on “secured creditor haircuts,” an evaluation of the importance of maximizing U.S. taxpayer protections and promoting market discipline with respect to the treatment of fully secured creditors in the utilization of the orderly liquidation authority authorized by this Act. (A “haircut” would treat a portion of the claims of secured creditors in liquidations as unsecured.)
(Sec. 216) Directs the Board to study and report to Congress on: (1) specified issues with respect to the resolution of financial companies under chapter 7 (Liquidation) or 11 (Reorganization) of the Bankruptcy Code; and (2) international coordination relating to the resolution of systemic financial companies under the Bankruptcy Code and applicable foreign law.
Title III: Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors – Enhancing Financial Institution Safety and Soundness Act of 2010 – Subtitle A: Transfer of Powers and Duties – (Sec. 312) Transfers to the Board, one year (or, at the Secretary’s discretion, no more than 18 months) after enactment of this Act, all functions and rulemaking authority of the Office of Thrift Supervision (OTS) relating to savings and loan holding companies.
Transfers to the Office of the Comptroller of the Currency all OTS functions relating to federal savings associations, and all rulemaking authority relating to savings associations.
Transfers to the FDIC all OTS functions relating to state savings associations.
(Sec. 313) Abolishes the OTS.
(Sec. 314) Amends the Revised Statutes of the United States to revise the general requirements for the Office of the Comptroller of the Currency to accord with this Act.
Requires the Comptroller of the Currency to designate a Deputy Comptroller, responsible for the supervision and examination of federal savings associations.
(Sec. 318) Authorizes the Comptroller of the Currency to collect assessments, fees, or other charges from national banking associations or federal branches or agencies of a foreign bank, and the FDIC to assess fees against depository institutions subject to its regular and special examinations.
Requires the Board to collect assessments, fees, or other charges from all: (1) bank holding companies and savings and loan holding companies having total consolidated assets of $50 billion or more; and (2) Board-supervised nonbank financial companies.
Subtitle B: Transitional Provisions – Sets forth transitional requirements and procedures for the orderly transfer of OTS functions, employees, funds and property to the Office of the Comptroller of the Currency, the FDIC, and the Board of Governors.
Subtitle C: Federal Deposit Insurance Corporation – (Sec. 331) Amends the FDIA to require the FDIC to: (1) revise the assessment base with respect to an insured depository institution; and (2) prescribe the method for declaration, calculation, distribution, and payment of dividends, with discretion to suspend or limit their declaration.
(Sec. 334) Replaces the 1.15% to 1.5% of estimated insured deposits range for reserve ratios which the FDIC Board may designate with a minimum reserve ratio of 1.35% of estimated insured deposits, or the comparable percentage of the assessment base.
(Sec. 335) Amends the FDIA and the Federal Credit Union Act (FCUA) to increase permanently the maximum federal deposit insurance and federal share insurance amount from $100,000 to $250,000. Makes such increase retroactive to January 1, 2008.
(Sec. 336) Replaces the Director of the Office of Thrift Supervision on the FDIC Board with the Director of the Consumer Financial Protection Bureau (CFPB).
Subtitle D: Other Matters – (Sec. 341) Permits a savings association that becomes a bank to: (1) continue to operate any branch or agency that it operated immediately before becoming a bank; and (2) establish, acquire, and operate additional branches and agencies at any location within any state in which it operated a branch immediately before it became a bank, if the law of the pertinent state would permit establishment of the branch by a state-chartered bank.
(Sec. 342) Requires each agency to establish an Office of Minority and Women Inclusion responsible for all matters of the agency relating to diversity in management, employment, and business activities. Requires the Director of each such Office to develop and implement procedures for inclusion and utilization of minorities, women, and minority- and women-owned businesses in all business and activities at all federal agency levels, including procurement, insurance, and contracts.
(Sec. 343) Amends the FDIA and the FCUA to require that a depositor’s net amount maintained at an insured depository institution in a noninterest-bearing transaction account is fully insured.
Subtitle E: Technical and Conforming Amendments – Sets forth technical and conforming amendments to specified Acts regarding banking, housing and securities.
Title IV: Regulation of Advisers to Hedge Funds and Others – Private Fund Investment Advisers Registration Act of 2010 – (Sec. 403) Amends the Investment Advisers Act of 1940 to repeal its exemption and apply registration requirements to a private fund investment adviser (but not to a foreign private investment adviser).
Exempts from such Act’s registration requirements: (1) an investment adviser who solely advises specified small business investment companies licensed under the Small Business Investment Act of 1958 or related entities; and (2) an investment adviser that is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and advises a private fund. Requires a CFTC-registered commodity trading advisor that advises a private fund to register with the SEC if the advisor’s business should become predominantly securities-related advice.
(Sec. 404) Subjects to SEC recordkeeping requirements, as well as periodic and special examinations, any registered investment adviser who advises private funds.
Requires the SEC to make such records, especially those relating to systemic risk, available to the Council.
Exempts from the Freedom of Information Act (FOIA) information that the SEC, the Council, and any other department, agency, or self-regulatory organization (SRO) receives from the SEC under this Act.
(Sec. 405) Adds the assessment of potential systemic risk as an exception to the prohibition against disclosure by an investment adviser of the identity, investments, or affairs of any client.
(Sec. 406) Prohibits the SEC, with respect to certain prohibited fraudulent transactions by investment advisers, from defining “client” to include an investor in a private fund managed by an investment adviser, if the private fund has entered into an advisory contract with such adviser.
Instructs the SEC and the CFTC to promulgate joint rules for mandatory reports filed with them by certain registered investment advisers.
(Sec. 407) Exempts an investment adviser who advises solely venture capital funds from registration requirements with respect to the provision of investment advice relating to a venture capital fund.
Directs the SEC to require the latter advisers, however, to maintain records and make annual reports to the SEC.
(Sec. 408) Directs the SEC to exempt from registration requirements an investment adviser acting solely as an adviser to private funds and having assets under management in the United States of less than $150 million.
Directs the SEC, with respect to investment advisers acting as investment advisers to mid-sized private funds, to: (1) take into account the size, governance, and investment strategy of such funds to determine whether they pose systemic risk; and (2) provide for registration and examination procedures with respect to the investment advisers of such funds which reflect the level of systemic risk such funds pose.
(Sec. 409) Excludes any family office from the definition of “investment adviser,” as defined by the SEC according to specified criteria.
(Sec. 410) Sets forth criteria for the treatment of certain mid-sized investment advisers with assets under management of between $25 million and $100 million. Exempts from federal registration any state-registered mid-sized investment adviser that is not an adviser to a federally-registered investment company registered, or a business development company, unless it would be required to register with 15 or more states, in which case it may register under the Investment Company Act of 1940.
(Sec. 411) Requires an investment adviser to safeguard client assets held in the adviser’s custody, including by verification of such assets by an independent public accountant.
(Sec. 412) Directs the Comptroller General to study and report to specified congressional committees on: (1) the compliance costs of certain SEC rules concerning client funds or securities held by investment advisers; and (2) the additional costs if a certain portion of a rule relating to operational independence were eliminated
(Sec. 413) Directs the SEC in its rules to adjust the net worth standard for an accredited investor so that the individual net worth of any natural person, or joint net worth with the person’s spouse, at the time of purchase, is more than $1 million (excluding the value of the primary residence). Makes $1 million (excluding the value of the primary residence) the net worth standard during the four-year period beginning on the enactment of this Act.
Authorizes the SEC to: (1) review periodically the definition of “accredited investor” to determine whether its requirements should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy; and (2) make such adjustments as appropriate.
(Sec. 414) States that nothing in the Investment Advisers Act of 1940 shall relieve any person of any obligation or duty, or affect the availability of any right or remedy available to the CFTC or any private party, arising under the Commodity Exchange Act governing commodity pools, commodity pool operators, or commodity trading advisors.
(Sec. 415) Directs the Comptroller General to study and report on the appropriate criteria for determining the financial thresholds to qualify for accredited investor status and eligibility to invest in private funds and the feasibility of forming an SRO to oversee private funds.
(Sec. 417) Directs the SEC Division of Risk, Strategy, and Financial Innovation to study and report to Congress on: (1) the state of short selling on national securities exchanges and in the over-the-counter markets; (2) the feasibility, benefits, and costs of requiring reporting publicly, in real time, the short sale positions of publicly listed securities, or, in the alternative, reporting such short positions in real time only to the SEC and the Financial Industry Regulatory Authority (FINRA); and (3) a feasibility, benefits, and costs of conducting a voluntary pilot program for public companies to mark and report all trades in real time through the Consolidated Tape as “short,” “market maker short,” “buy,” “buy-to-cover,” or “long.”
(Sec. 418) Amends the Investment Advisers Act of 1940 with respect to SEC authority to exempt persons or transactions from specified investment advisory contract prohibitions and requirements if the contract is with any person that the SEC determines does not need the protection of such prohibitions and requirements. Declares that, with respect to any factor used in an SEC rule or regulation in making such a determination, if the SEC uses a dollar amount test in connection with such factor, such as a net asset threshold, it shall adjust every five years for the effects of inflation on such test.
Title V: Insurance – Subtitle A: Federal Insurance Office – Federal Insurance Office Act of 2010 – (Sec. 502) Establishes in the Treasury the Federal Insurance Office (FIO) authorized to: (1) monitor the insurance industry; (2) identify issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the U.S. financial system; (3) monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products covering all lines of insurance, except health insurance; (4) recommend to the Financial Stability Oversight Council that it designate an insurer, including its affiliates, as an entity subject to regulation as a nonbank financial company supervised by the Board of Governors; (5) assist in administering the Terrorism Insurance Program; and (6) coordinate federal efforts and develop federal policy on prudential aspects of international insurance matters.
Extends the authority of the Office to all lines of insurance except: (1) health insurance; (2) crop insurance; and (3) long-term care insurance (except long-term care insurance included with life or annuity insurance components).
Authorizes information-gathering from insurers and affiliates. Permits data or information obtained by the Office to be made available to state insurance regulators, individually or collectively, through an information-sharing agreement.
Grants the Director of the Office subpoena and enforcement powers.
Sets forth a limited preemption of state insurance measures.
Requires the Director of the Office to study and report on: (1) U.S. and global reinsurance markets; and (2) modernization and improvement of domestic insurance regulation.
Authorizes the Secretary and the U.S. Trade Representative (USTR), jointly, to negotiate and enter into bilateral or multilateral recognition agreements with foreign governments, authorities, or regulatory entities.
Subtitle B: State-Based Insurance Reform – Nonadmitted and Reinsurance Reform Act of 2010 – Part I: Nonadmitted Insurance – (Sec. 521) Prohibits any state other than the home state of an insured from requiring a premium tax payment for nonadmitted insurance.
Authorizes states to establish procedures to allocate among themselves the premium taxes paid to an insured’s home state.
Declares that Congress intends that each state adopt nationwide uniform requirements, forms, and procedures, such as an interstate compact, that provide for the reporting, payment, collection, and allocation of premium taxes for nonadmitted insurance consistent with this Act.
Allows an insured’s home state to require surplus lines brokers and certain insureds to file annual tax allocation reports detailing the portion of the nonadmitted insurance premiums attributable to properties, risks, or exposures located in each state.
(Sec. 522) Subjects nonadmitted insurance solely to the regulatory requirements of the insured’s home state.
Declares that only an insured’s home state may require a surplus lines broker to be licensed to conduct nonadmitted insurance business with respect to such insured.
Declares that state law, rule, or regulation that restricts the placement of workers’ compensation insurance or excess insurance for self-funded workers’ compensation plans with a nonadmitted insurer is not preempted.
(Sec. 523) Prohibits a state from collecting fees relating to licensure of a surplus lines broker in the state unless it has a regulatory mechanism in effect for participation in the national insurance producer database of the National Association of Insurance Commissioners (NAIC), or any other equivalent uniform national database.
(Sec. 524) Prohibits a state from establishing eligibility criteria for nonadmitted insurers domiciled in a U.S. jurisdiction except in conformance with the Non-Admitted Insurance Model Act, unless the state has adopted nationwide uniform requirements, forms, and procedures developed in accordance with this Act that include alternative nationwide uniform eligibility requirements.
Prohibits a state from prohibiting a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the United States and listed on the NAIC International Insurers Department Quarterly Listing of Alien Insurers.
(Sec. 525) Cites conditions with which a surplus lines broker seeking to procure or place nonadmitted insurance in a state for an exempt commercial purchaser must comply in order to win exemption from any state requirement to make a due diligence search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from admitted insurers.
(Sec. 526) Requires the Comptroller General to study and report to Congress on the nonadmitted insurance market in order to determine the effect of this title upon the size and market share of the nonadmitted insurance market for providing coverage typically provided by the admitted insurance market.
Part II: Reinsurance – (Sec. 531) Prohibits a state from denying credit for reinsurance for the insurer’s ceded risk if the domiciliary state of an insurer purchasing reinsurance (the ceding insurer) recognizes such credit and: (1) is either an NAIC-accredited state; or (2) has financial solvency requirements substantially similar to NAIC accreditation requirements.
Preempts the extraterritorial application of the laws, regulations, or other actions of a non-domiciliary state of a ceding insurer (except those related to taxes and assessments on insurance companies or insurance income) to the extent that they: (1) restrict or eliminate the rights of the ceding insurer or the assuming insurer to resolve disputes through contractual arbitration not inconsistent with federal law; (2) require that a certain state’s law shall govern the reinsurance contract, its requirements, or any disputes arising from it; (3) attempt to enforce a reinsurance contract on terms different from those set forth in it, if those terms are not inconsistent with this subtitle; or (4) otherwise apply the laws of the state to reinsurance agreements of ceding insurers not domiciled in that state.
(Sec. 532) Reserves to a reinsurer’s domiciliary state sole responsibility for regulating the reinsurer’s financial solvency if it is either NAIC-accredited or has financial solvency requirements substantially similar to NAIC.
Prohibits any other state from requiring a reinsurer to provide financial information in addition to that required by its NAIC-compliant domiciliary state.
Part III: Rule of Construction – Prohibits any construction of this Act to modify, impair, or supersede the application of the antitrust laws.
Title VI: Improvements to Regulation of Bank and Savings Association Holding Companies and Depository Institutions – Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010 – (Sec. 603) Prohibits the Federal Deposit Insurance Corporation (FDIC) from approving applications for deposit insurance received after November 23, 2009, for an industrial bank, a credit card bank, or a trust bank directly or indirectly owned or controlled by a commercial firm.
Defines a company as a commercial firm if the annual gross revenues derived by it and all of its affiliates from activities financial in nature and, if applicable, from the ownership or control of one or more insured depository institutions represent less than 15% of the company’s consolidated annual gross revenues.
Requires a federal banking agency to disapprove a change in control over such entities if the change would result in direct or indirect control by a commercial firm, unless in addition to obtaining all regulatory approvals the bank: (1) is in danger of default; (2) results from the bona fide merger or whole acquisition of a commercial firm by another commercial firm; or (3) results from an acquisition of voting shares of a publicly traded company that controls such a bank if, after acquisition, the acquiring shareholder (or group of shareholders acting in concert) holds less than 25% of any class of the company’s voting shares.
Directs the Comptroller General to study and report to Congress on whether it is necessary, in order to strengthen the U.S. financial system, to eliminate certain exceptions to the definition of a bank under the Bank Holding Company Act of 1956 (BHCA).
(Sec. 604) Amends the BHCA to revise requirements for reports and examinations which bank holding companies and savings and loan holding companies must submit to the Federal Reserve Board (Board). Requires the Board, to the fullest extent possible, to: (1) rely on the examination reports of other federal or state regulatory agencies, and other specified required reports, relating to a savings and loan holding company and any subsidiary; (2) coordinate with other federal and state regulators; and (3) avoid duplication of examination activities, reporting requirements, and requests for information.
Authorizes the Board to examine, in certain circumstances, functionally regulated subsidiaries of bank holding companies, including certain entities subject to regulatory oversight by the CFTC.
Repeals specified limitations on the rulemaking, prudential, supervisory, and enforcement authority of the Board.
Amends the BHCA to require the Board to take into consideration the extent to which a proposed bank acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the U.S. banking or financial system.
Requires a financial holding company to obtain prior Board approval to acquire a company whose total consolidated assets exceed $10 billion.
Requires the Board to consider, in connection with a proposed merger, acquisition or consolidation, the extent to which such action would result in greater or more concentrated risks to the stability of the U.S. Banking or financial system.
Amends the Home Owners’ Loan Act (HOLA) to require the Board, to the fullest extent possible, to: (1) rely on the examination reports of other federal or state regulatory agencies, and other specified required reports, relating to a savings and loan holding company and any subsidiary; (2) coordinate with other federal and state regulators; and (3) avoid duplication of examination activities, reporting requirements, and requests for information.
(Sec. 605) Amends the Federal Deposit Insurance Act to direct the Board to examine the activities of certain nondepository institution subsidiaries of a depository institution holding company that are permissible for the insured depository institution subsidiaries of the holding company.
Authorizes the appropriate federal agency for the lead insured depository institution to recommend to the Board to take enforcement action against such a nondepository institution subsidiary if its activities pose a material threat to the safety and soundness of any insured depository institution subsidiary of the depository institution holding company.
(Sec. 606) Amends the BHCA and HOLA to require financial holding companies and savings and loan holding companies to remain well capitalized and well managed, including their interstate acquisitions and mergers.
(Sec. 608) Amends the Federal Reserve Act (FRA) to cover such transactions as: (1) a purchase of assets subject to an agreement to repurchase; (2) a transaction with an affiliate that involves the borrowing or lending of securities, thus causing a member bank’s (or a subsidiary’s) credit exposure to the affiliate; and (3) a derivative transaction with an affiliate that causes a member bank’s (or a subsidiary’s) credit exposure to the affiliate.
Revises restrictions on bank transactions with affiliates to require that any credit exposure of a bank (or subsidiary) to an affiliate resulting from a securities borrowing or lending transaction, or a derivative transaction, be secured at all times.
Repeals the requirement that any collateral subsequently retired or amortized be replaced by additional eligible collateral where needed to keep the percentage of the collateral value relative to the amount of the outstanding loan or extension of credit, guarantee, acceptance, or letter of credit equal to the minimum percentage required at the transaction’s inception.
Declares unacceptable the use of a low-quality asset as collateral for credit exposure to an affiliate resulting from a bank’s (or subsidiary’s) securities borrowing or lending transaction, or derivative transaction. Revises exemptions to the restrictions on bank transactions with affiliates with respect to such credit exposure.
Cites circumstances under which the Comptroller of the Currency may exempt a national bank, the FDIC may exempt a state nonmember bank, and the Board may exempt a state member bank from restrictions on transactions with affiliates.
Amends HOLA to cite circumstances under which the Comptroller of the Currency may exempt a federal savings association from such restrictions.
(Sec. 609) Repeals the exemption of covered transactions between a bank and any of its individual financial subsidiaries from the requirement that the aggregate amount of the transaction not exceed 10% of the member bank’s capital stock and surplus.
Repeals also the exclusion of the financial subsidiary’s retained earnings from a bank’s investment in one of its individual financial subsidiaries.
(Sec. 610) Amends the Revised Statutes with respect to the limit of 15% of a national banking association’s unimpaired capital and unimpaired surplus on the total loans and extensions of credit it makes to a person outstanding at one time and not fully secured by collateral having a market value at least equal to the amount of the loan or extension of credit.
Includes among such loans and extensions of credit the credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the national banking association and a person. Defines derivative transaction as any transaction that is a contract, agreement, swap, warrant, note, or option based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
(Sec. 611) Amends the FDIA to allow a state bank to engage in a derivative transaction only if the law with respect to lending limits of the state in which it is chartered takes into consideration credit exposure to derivative transactions.
(Sec. 612) Amends the National Bank Consolidation and Merger Act, the Revised Statutes, and HOLA to prohibit certain conversions between national and state banks and savings associations by banks and thrifts subject to certain cease and desist or other formal enforcement orders. Cites conditions for exemption from such prohibition.
(Sec. 613) Amends the Revised Statutes and the FDIA to revise requirements for the state “opt-in” election to permit interstate branching through de novo branches. Specifies that the application of a national bank to establish a de novo branch in a state in which the bank does not maintain a branch may be approved if the law of the state where the branch is located, or is to be located, would permit establishment of the branch if the bank were a state bank chartered by such state.
(Sec. 614) Amends the FRA regarding limits on credit extensions to executive officers, directors, and principal shareholders of member banks (insiders) to declare that a member bank shall be deemed to have extended credit to a person if the member bank has credit exposure to the person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the member bank and the person.
(Sec. 615) Amends the FDIA to prohibit an insured depository institution from purchasing an asset from, or selling one to, its executive officers, directors, or principal shareholders unless the transaction is on market terms and, if the transaction represents more than 10% of the institution’s capital stock and surplus, the transaction has been approved in advance by a majority of the institution’s board of directors (with interested directors not participating).
(Sec. 616) Amends the BHCA, HOLA, and the International Lending Supervision Act of 1983 to authorize the appropriate federal banking agency to: (1) issue regulations relating to the capital requirements of bank holding companies and savings and loan holding companies, respectively; and (2) instruct such entities, in establishing capital requirements, to seek to make them countercyclical, so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction, consistent with the company’s safety and soundness.
Amends the FDIA to direct the appropriate federal banking agency for a bank holding company or savings and loan holding company to require such an entity to serve as a source of financial strength for any of its subsidiaries that is a depository institution.
Defines “source of financial strength” as the ability of a company that directly or indirectly owns or controls an insured depository institution to provide it with financial assistance if it experiences financial distress.
Directs the appropriate federal banking agency for an insured depository institution that is not the subsidiary of a bank holding company or savings and loan holding company to require any company that directly or indirectly controls it to serve as a source of financial strength for it.
(Sec. 617) Amends the Securities Exchange Act of 1934 to repeal the statutory framework under which certain investment bank holding companies may elect to become supervised by the Securities Exchange Commission (SEC).
(Sec. 618) Prescribes requirements for U.S. registration and supervision, including capital and risk management, of certain securities holding companies required by a foreign regulator or foreign law to be subject to comprehensive consolidated supervision.
(Sec. 619) Amends the BHCA to prohibit a banking entity from: (1) engaging in proprietary trading; or (2) acquiring or retaining any ownership interest in or sponsor a hedge fund or a private equity fund.
Subjects a Board-supervised nonbank financial company to additional capital requirements and quantitative limits if it engages in proprietary trading or maintains an ownership interest in, or sponsors, a hedge fund or a private equity fund.
Exempts certain permissible activities from such additional capital and additional quantitative limits, among them: (1) the purchase, sale, acquisition, or disposition of U.S. obligations or securities and specified other instruments; (2) risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity; (3) investments in one or more small business investment companies; (4) organization and offering of a private equity or hedge fund; (5) certain proprietary trading; or (6) the acquisition or retention of any equity, partnership, or other ownership interest in, or the sponsorship of, a hedge fund or a private equity fund by a banking entity solely outside of the United States.
Directs the Financial Stability Oversight Council to study and make recommendations on implementing these prohibitions.
Directs the appropriate federal banking agencies, the SEC, and the CFTC to adopt and coordinate implementing rules.
(Sec. 620) Directs the appropriate federal banking agencies to review jointly and report to Congress on the activities in which a banking entity may legally engage, including any financial, operational, managerial, or reputation risks associated with or presented as a result of such an activity, as well as risk mitigation activities.
(Sec. 621) Amends the Securities Act of 1933 to prohibit underwriters, placement agents, initial purchasers, or sponsors of an asset-backed security (or any affiliate or subsidiary), during the year after the first closing of the security’s sale, from engaging in any transaction that would involve or result in any material conflict of interest with respect to any investor in a related transaction. Exempts from such prohibition: (1) risk-mitigating hedging activities in connection with positions or holdings arising out of the underwriting, placement, initial purchase, or sponsorship of such a security; or (2) purchases or sales of such securities.
(Sec. 622) Amends the BHCA to prohibit a financial company from merging, consolidating with, or acquiring control of another company if the total consolidated liabilities of the acquiring financial company, upon consummation of the transaction, would exceed 10% of the aggregate consolidated liabilities of all financial companies at the end of the calendar year preceding the transaction. Exempts from such concentration limit an acquisition: (1) of a bank in default or in danger of default; (2) with respect to which assistance is provided by the FDIC; or (3) that would result only in a de minimis increase in the financial company’s liabilities.
Requires the Financial Stability Oversight Council to study and makes recommendations regarding the extent to which this concentration limit would affect financial stability, moral hazard in the financial system, the efficiency and competitiveness of domestic financial firms and financial markets, and the cost and availability of credit and other financial services to domestic households and businesses.
Directs the Board to issue final implementing regulations to reflect Council recommendations.
(Sec. 623) Amends the FDIA to prohibit the responsible agency (usually the FDIC) from approving an application for an interstate merger transaction if, upon consummation of the transaction, the resulting insured depository institution (including its affiliated insured depository institutions) would control more than 10% of the total amount of deposits of insured depository institutions in the United States. Exempts from this prohibition an interstate merger transaction that involves insured depository institutions in default or in danger of default, or with respect to which the FDIC provides specified assistance.
Amends the BHCA to prohibit the Board from approving a bank holding company’s application to acquire an insured depository institution if: (1) the institution’s home state is not the home state of the bank holding company; and (2) the applicant (including all affiliated insured depository institutions) control, or upon consummation of the transaction would control, more than 10% of the total amount of deposits of insured depository institutions in the United States. Exempts from this prohibition an acquisition that involves insured depository institutions in default or in danger of default, or with respect to which the FDIC provides specified assistance.
Amends the HOLA to prohibit acquisitions of insured depository institutions by a savings and loan holding company if : (1) the depository institution’s home state is not the home state of the savings and loan holding company; and (2) the applicant and all affiliated insured depository institutions control, or upon consummation of the transaction would control, more than 10% of the total amount of deposits of insured depository institutions in the United States; and (3) the acquisition does not involve an insured depository institution in default or in danger of default, or with respect to which the FDIC provides specified specified assistance.
(Sec. 624) Prohibits a savings association that fails to become or remain a qualified thrift lender from paying dividends, except those permissible for a national bank, necessary to meet the obligations of a controlling company, and specifically approved by the Comptroller of the Currency and the Board.
(Sec. 625) Sets forth requirements for treatment of dividends by certain savings association subsidiaries of mutual holding companies, including those for: (1) advance notice of dividend declarations; (2) invalidity of any dividends not announced before their declaration; (3) waiver by a mutual holding company of dividends declared by a subsidiary; and (4) federal banking agency valuations of waived dividends.
(Sec. 626) Authorizes the Board to require a grandfathered unitary savings and loan holding company which conducts non-financial activities to conduct its financial activities through an intermediate holding company that is a savings and loan holding company. Requires the Board to require the establishment of an intermediate holding company if that is necessary to supervise financial activities appropriately or to ensure that the Board does not supervise the non-financial activities. Declares that the internal financial activities of a grandfathered unitary savings and loan holding company shall not be required to be placed in an intermediate holding company.
Requires a grandfathered unitary savings and loan holding company that controls an intermediate holding company established under this Act to serve as a source of strength to its subsidiary intermediate holding company.
Requires the Board to establish criteria for determining whether to require a grandfathered unitary savings and loan holding company to establish an intermediate holding company.
(Sec. 627) Amends the FRA, HOLA, and FDIA to repeal the prohibition against the payment of interest on demand deposits.
(Sec. 628) Amends the BHCA to exclude from treatment as a bank certain institutions which do not engage in the business of making commercial loans, other than credit card loans made to businesses that meet the eligibility criteria for small business loans
Title VII: Wall Street Transparency and Accountability – Wall Street Transparency and Accountability Act of 2010 – Subtitle A: Regulation of Over-the-Counter Swaps Markets – Part I: Regulatory Authority – (Sec. 712) Directs the Commodity Futures Trading Commission (CFTC) and the SEC to consult and coordinate with one another and with the Prudential Regulators before commencing any rulemaking or issuing an order regarding swaps, swap dealers, major swap participants, swap repositories, persons associated with a swap dealer or major swap participant, eligible contract participants, or swap execution facilities.
Exempts from such requirement an order issued: (1) in connection with an actual or potential violation of either the Commodity Exchange Act (CEA) or the securities laws; or (2) in certain federal administrative proceedings conducted on the record.
Directs the CFTC and the SEC to prescribe joint implementing regulations regarding specified mixed swaps.
Denies jurisdiction to the CFTC and registered futures organizations over security-based swaps, and to the SEC and registered national securities associations over swaps, except as otherwise authorized by this title.
Retains the authority of a registered futures or national securities association, however, to examine for compliance with, and enforce, its rules on capital adequacy.
Prescribes a procedure for judicial review of final rules, regulations, or orders of either the CFTC or the SEC if the other objects on jurisdictional grounds.
Requires the Financial Stability Oversight Council to engage in dispute resolution if the CFTC and the SEC fail to prescribe such joint rules in a timely manner.
(Sec. 713) Amends the Securities Exchange Act of 1934 to authorize a registered broker or dealer also registered as a futures commission merchant to hold cash and securities in a portfolio margining account carried as a futures account subject to the Commodity Exchange Act.
Amends the Commodity Exchange Act to authorize a registered futures commission merchant that is also a registered securities broker or dealer to hold in a portfolio margining account carried as a securities account any contract for the purchase or sale of a commodity for future delivery (or an option on such a contract), and any money, securities or other property received from a customer to margin, guarantee, or secure such a contract, or accruing to a customer as the result of such a contract.
Directs the CFTC to exercise its authority to ensure that securities held in a portfolio margining account carried as a futures account are customer property and the owners of those accounts are customers for purposes of the Commodity Broker Liquidation requirements of federal bankruptcy law.
(Sec. 714) Authorizes the CFTC and the SEC to collect information concerning the markets for any types of swap or security-based swap and report on those detrimental to the stability of a financial market or of its participants.
(Sec. 715) Authorizes either the CFTC or the SEC to prohibit an entity domiciled in a foreign country from participating in the United States in any swap or security-based swap activities if the regulation of swaps or security-based swaps markets in that foreign country undermines the stability of the U.S. financial system.
(Sec. 716) Prohibits federal assistance to a swaps entity with respect to any swap, security-based swap, or other activity. Excludes from the definition of “swaps entity” any major swap participant or major security-based swap participant that is an insured depository institution.
Declares this prohibition against federal assistance to a swap entity inapplicable to certain Federal Reserve-supervised and insured depository institutions owning or establishing an affiliate which is a swaps entity in compliance with the Federal Reserve Act and CFTC or SEC requirements. Applies such prohibition to any insured depository institution, however, unless it limits its swap or security-based swap activities to: (1) hedging and other similar risk mitigating activities directly related to the institution’s activities; and (2) acting as a swaps entity for swaps or security-based swaps involving rates or reference assets that are permissible for investment by a national bank. Denies consideration as a bank permissible activity acting as a swaps entity for credit default swaps, including swaps or security-based swaps referencing the credit risk of asset-backed securities, unless such swaps or security-based swaps are cleared by a derivatives clearing organization (DCO) or a clearing agency that is registered, or exempt from registration, as a DCO under the Commodity Exchange Act or as a clearing agency under the Securities Exchange Act, respectively.
Requires liquidation (termination or transfer) of all swaps or security-based swap activities of swaps entities that are: (1) FDIC institutions that are put into receivership or declared insolvent as a result of such swaps or activities; or (2) institutions posing a systemic risk and subject to heightened prudential supervision that are put into receivership or declared insolvent as a result of such swaps or activities.
Prohibits the use of taxpayer funds or resources: (1) to prevent the receivership of any swap entity resulting from its swap or security-based swap activity; or (2) for the orderly liquidation of any swaps entities that are non-FDIC insured, non-systemically significant institutions not subject to heightened prudential supervision.
Requires recovery of all funds expended on the termination or transfer of the swap or security-based swap activity of a swaps entity from the disposition of the entity’s assets or through assessments, including assessments on the financial sector.
Prescribes rules for the conduct of swaps or security-based swap activities by a bank or bank holding company permitted to be or become a swap entity.
Authorizes the Financial Stability Oversight Council to determine that swaps entities may no longer access federal assistance with respect to any swaps or security-based swap activities whenever provisions established by this Act are insufficient to effectively mitigate systemic risk and protect taxpayers.
Requires an insured depository institution to comply with this Act’s prohibition against proprietary trading in derivatives.
(Sec. 717) Amends the CEA and the Securities Exchange Act of 1934 to: (1) prescribe a CFTC approval process for new products, including puts, calls, or other options on securities; and (2) deem a security any agreement, contract, or transaction (or class of such, including securities-related derivatives) exempted from restrictions on futures trading by the CTFC with the condition that the SEC exercise concurrent jurisdiction over the agreement, contract, or transaction (or class).
(Sec. 718) Sets forth a process for the CFTC or the SEC to determine the status of novel derivative products.
(Sec. 719) Requires the CFTC to study and report to Congress regarding the effects of the position limits imposed under this title on excessive speculation and on the movement of transactions from exchanges in the United States to trading venues outside the United States.
Instructs the Chairman of the CFTC to report biennially to Congress on the growth or decline of the derivatives markets in the United States and abroad.
Directs the CFTC and the SEC to study jointly and report to Congress on: (1) the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions to describe complex and standardized financial derivatives; (2) swap regulation as well as clearing house and clearing agency regulation in the United States, Asia, and Europe, comparing similar areas of regulation and other areas of regulation that could be harmonized; and (3) whether stable value contracts fall within the definition of a swap and if so, determine if an exemption from such definition for stable value contracts is appropriate and in the public interest.
(Sec. 720) Directs the CFTC and the Federal Energy Regulatory Commission (FERC) to negotiate and submit to Congress a memorandum of understanding to establish procedures for: (1) applying their respective authorities in a manner to ensure effective regulation in the public interest; (2) resolving conflicts concerning overlapping jurisdiction between the two agencies; (3) avoiding conflicting or duplicative regulation; and (4) sharing information where either Commission is investigating potential manipulation, fraud, or market power abuse in markets within its purview.
Part II: Regulation of Swap Markets – (Sec. 722) Amends the CEA with respect to CFTC exclusive jurisdiction over accounts, agreements and transactions involving swaps, and contracts of sale executed on a swaps execution facility. States that such CFTC jurisdiction limits neither the jurisdiction conferred by this Act upon the SEC with respect to security-based swap agreements and security-based swaps, nor SEC authority with respect to related agreements, contracts, or transactions.
Amends the CEA to prohibit a swap from being: (1) considered to be insurance; and (2) regulated as an insurance contract under state law.
Excludes from CFTC jurisdiction swaps activities outside the United States, unless they: (1) have a direct, significant connection with activities in, or effect upon, U.S. commerce; or (2) contravene CFTC regulations.
Denies CFTC jurisdiction regarding any security other than a security-based swap.
States that CFTC jurisdiction does not limit or affect the authority of FERC or a state regulatory authority with respect to an agreement, contract, or transaction entered into pursuant to a FERC- or state-approved tariff or rate schedule that is not executed, traded, or cleared on a registered entity or trading facility, or on one owned or operated by a regional transmission organization or independent system operator.
Retains certain existing enforcement authority of FERC under the Federal Power Act and the Natural Gas Act.
Requires the Secretary of the Treasury to take specified factors into consideration when determining whether to exempt foreign exchange swaps and foreign exchange forwards from the definition of swap (and U.S. regulation).
(Sec. 723) Repeals the exclusion from regulation of certain derivative transactions, electronic trading facilities, swap transactions; and transactions in exempt commodities.
States that it shall be unlawful for any person, other than an eligible contract participant, to enter into a swap unless the swap is entered into, on, or subject to the rules of a board of trade designated as a contract market under the CEA.
Prescribes clearing requirements for swaps. Makes it unlawful for any person to engage in a swap without submitting it for clearing to a DCO that is either registered under this Act or exempt from such registration, if the swap is required to be cleared.
Requires the CFTC to review on an ongoing basis each swap, or any group, category, type, or class of swaps to determine whether it should be required to be cleared. Requires a DCO to submit to the CFTC each swap, group, category, type, or class it plans to accept for clearing. Authorizes the CFTC to stay a clearing requirement. Requires the CFTC to: (1) prescribe rules to prevent evasions of clearing requirements; and (2) investigate swaps subject to clearing but which have not been listed for clearing by a DCO.
Authorizes the CFTC, pursuant to such an investigation, to require that parties to swaps retain adequate margin or capital levels.
(Sec. 724) Declares that it is unlawful for any person who is not registered with the CFTC as a futures commission merchant to accept money, securities, or property (or to extend credit in lieu of them) from, for, or on behalf of a swaps customer to margin, guarantee, or secure a swap cleared by or through a DCO (including money, securities, or property accruing to the customer as the result of such a swap).
Requires a futures commission merchant to treat as belonging to the swaps customer, and deal as such, with all money, securities, and property of any swaps customer received to margin, guarantee, or secure a swap cleared by or though a DCO.
Prohibits the commingling of such assets with the futures commission merchant’s own funds or their use to margin, secure, or guarantee any trades or contracts of any swaps customer or person other than the person for whom they are held. Allows the commingling of such assets, however, and their deposit in the same account or accounts with any bank or trust company or with a DCO, as well as their withdrawal for specified business purposes.
Deems a swap cleared by or through a DCO to be a commodity contract with regard to all money, securities, and property of any swaps customer received by a futures commission merchant or a DCO to margin, guarantee, or secure the swap (including money, securities, or property accruing to the customer as the result of the swap).
Declares it unlawful for any recipient of money, securities, or property for deposit in certain separate accounts to hold, dispose of, or use such assets as belonging to any person other than the swaps customer of the futures commission merchant.
Prescribes: (1) bankruptcy treatment of cleared swaps; and (2) segregation requirements for uncleared swaps.
(Sec. 725) Modifies registration requirements governing DCOs, including governing core principles, risk management, and reporting requirements. Requires each DCO to designate an individual to serve as a compliance officer. Revises requirements for system safeguards and public disclosure of certain information, including contract terms, fees, margin-setting methodology and daily settlement prices of cleared contracts. Prescribes standards for governance fitness and mitigation of conflicts of interest.
Directs the CFTC to adopt data collection and maintenance requirements for swaps cleared by DCOs that are comparable to the corresponding requirements for: (1) swaps data reported to swap data repositories; and (2) swaps traded on swap execution facilities.
Amends the Legal Certainty for Bank Products Act of 2000 to revise the exclusion of identified banking products from the application of the CEA and from CFTC jurisdiction. Allows an exception to this exclusion for swaps or security-based swaps (thus subjecting them to federal banking agency regulation).
Amends the CEA to declare that, in order to minimize systemic risk, under no circumstances shall a DCO be compelled to accept the counterparty credit risk of another clearing organization.
(Sec. 726) Requires the CFTC to adopt conflict of interest rules which may include numerical limits on the control of, or the voting rights with respect to, any DCO that clears swaps, or swap execution facility or board of trade designated as a contract market that posts swaps or makes swaps available for trading, by a bank holding company with total consolidated assets of $50 billion or more, a nonbank financial company supervised by the Board, an affiliate of such a bank holding company or nonbank financial company, a swap dealer, major swap participant, or associated person of a swap dealer or major swap participant.
(Sec. 727) Amends the CEA to require the CFTC to make swap transaction and pricing data available to the public in order to enhance price discovery. Authorizes the CFTC to require registered entities to publicly disseminate the swap transaction and pricing data required to be reported.
Requires: (1) each swap to be reported to a registered swap data repository; and (2) public reporting on a semiannual and annual basis of aggregate swap data.
(Sec. 728) Requires a person to register with the CFTC as a swap data repository regardless of whether the person is also licensed as a bank or registered with the SEC as a swap data repository. Allows a DCO to register as a swap data repository. Prescribes requirements and duties for swap data repositories, including designation of a chief compliance officer.
(Sec. 729) Sets forth reporting and recordkeeping rules for uncleared swaps.
(Sec. 730) Amends the CEA to set forth: (1) circumstances under which it is unlawful to enter into any swap that the CFTC determines performs a significant price discovery function with respect to registered entities; (2) requirements for the registration and regulation of swap dealers and major swap participants (including maintenance of daily trading records); and (3) special requirements for swap dealers acting either as advisors or as counterparties to special entities (federal, state, or local agencies, employee benefit plans or governmental benefit plans, or certain endowments).
(Sec. 732) Directs the CFTC to require that futures commission merchants and introducing brokers implement specified conflict-of-interest systems and structural and institutional safeguards to avert conflicts of interest.
(Sec. 733) Requires a swaps trading or processing facility to: (1) be registered as either a swap execution facility or as a designated contract market; and (2) maintain a risk analysis and oversight program. Prescribes core principles for swap execution facilities.
(Sec. 734) Amends the CEA to repeal requirements for derivatives transaction execution facilities and an election for registration by exempt boards of trade.
(Sec. 735) Revises requirements for a board of trade which has been designated as a contract market. Prescribes core principles for contract markets.
Requires such a board of trade to: (1) establish a program of risk analysis and oversight to identify and minimize sources of operational risk; (2) establish and enforce disciplinary procedures; (3) establish emergency procedures, backup facilities, and a plan for disaster recovery; (4) conduct periodic tests to verify that back-up resources are sufficient to ensure continued order processing and trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail; and (5) have adequate financial, operational, and managerial resources to discharge contract market responsibilities.
Requires the board of directors of a publicly traded board of trade to recruit individuals from a broad and culturally diverse pool of qualified candidates.
(Sec. 736) Authorizes the CFTC to regulate the setting of levels of margin for an registered entity.
(Sec. 737) Directs the CFTC to establish position limits on: (1) trading or positions held by any group or class of traders; and (2) positions (other than bona fide hedge positions) that may be held by any person with respect to either contracts of sale for future delivery, or options on contracts or commodities traded on or subject to the rules of a designated contract market.
(Sec. 738) Authorizes the CFTC to require a foreign board of trade to register with the CFTC if it provides its members or other participants located in the United States with direct access to the electronic trading and order matching system of the foreign board of trade.
(Sec. 739) Revises the denial of voidability of hybrid instruments, transactions, and contracts based solely on any failure to comply with CFTC terms or conditions. Extends such denial to the voidability of agreement, contract, or transaction between eligible contract participants (or persons reasonably believed to be such) based solely on the failure of the agreement, contract, or transaction to meet the CFTC definition of a swap.
(Sec. 740) Amends the Federal Deposit Insurance Corporation Improvement Act of 1991 to repeal its coverage of multilateral clearing organizations.
(Sec. 741) Grants the CFTC exclusive enforcement authority over swap markets. Grants the Prudential Regulators exclusive authority to enforce certain prudential requirements with respect to swap dealers or major swap participants. Authorizes the CFTC and the Prudential Regulators to: (1) refer noncompliance with the other’s requirements to the other; and (2) initiate an enforcement proceeding if the other does not.
Amends the CEA to declare it unlawful for any person, in connection with any contract of sale of any commodity for future delivery (or option on such a contract), or any swap, on a group or index of securities to: (1) employ any device, scheme, or artifice to defraud; (2) make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Grants the CFTC jurisdiction over certain accounts or pooled investment vehicles that are offered for the purpose of trading, or that trade, any agreement, contract, or transaction in foreign currency.
Makes liable for certain double civil money penalties any DCO, swap dealer, or major swap participant that knowingly or recklessly evades, or participates in or facilitates an evasion of, specified requirements for certain transactions in exempt commodities.
(Sec. 742) Amends the CEA to: (1) grant the CFTC jurisdiction over specified retail commodity transactions; (2) require large swap traders to make specified reports and disclosures to the CFTC; and (3) require segregation of a counterparty’s assets to be held as collateral in over-the-counter swap transactions not submitted for clearing to a DCO.
(Sec. 744) Authorizes the CFTC to seek, and the court to impose, equitable remedies, including restitution and disgorgement of gains, for violations of the CEA.
(Sec. 745) Allows an CFTC interpretation of an acceptable business practice with respect to significant price discovery contracts to provide the exclusive means for complying with the CEA.
Revises requirements for certification of new rules or rule amendments which registered entities may elect to approve and implement.
(Sec. 746) Prohibits: (1) insider trading by any federal employee or agent who, by virtue of such status, acquires information that may affect price of any commodity in interstate commerce, or for future delivery, or any swap; (2) certain disruptive practices in trading, practice, or conduct subject to the rules of a registered entity, including “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution); and (3) use of swaps to defraud.
(Sec. 748) Directs the CFTC to pay an award (of 10%-30% of monetary sanctions collected) to commodity whistleblowers who voluntarily provide original information leading to the successful enforcement of a covered judicial, administrative, or related action brought by the CFTC that results in monetary sanctions exceeding $1 million.
Establishes the Commodity Futures Trading Commission Customer Protection Fund for: (1) the payment of whistleblower awards; and (2) the funding of education initiatives to help customers protect themselves against violations of the CEA.
Prohibits specified acts of retaliation against whistleblowers. Includes job reinstatement and back pay as well as compensation for special damages as relief for an individual prevailing in a whistleblower action. Prescribes prohibitions and requirements for whistleblower confidentiality.
Instructs the CFTC Inspector General to study and report to Congress on whether a specified exemption under the FOIA aids whistleblowers in disclosing information to the CFTC.
Declares nonenforceable: (1) the waiver of whistleblower rights and remedies provided by this Act; and (2) any predispute arbitration agreement requiring arbitration of a dispute arising under the whistleblower protections of this Act.
(Sec. 750) Establishes an interagency working group to study and report to Congress on the oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets.
(Sec. 751) Amends the CEA to establish the Energy and Environmental Markets Advisory Committee to serve as a vehicle for discussion and communication on matters of concern to exchanges, firms, end users, and regulators regarding energy and environmental markets, and their regulation by the CFTC.
(Sec. 752) Requires the CFTC, the SEC, and the Prudential Regulators to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards for the regulation of swaps, security-based swaps, swap entities, and security-based swap entities.
Authorizes the CFTC, the SEC, and the Prudential Regulators to agree to information-sharing arrangements necessary or appropriate in the public interest or for the protection of investors, swap counterparties, and security-based swap counterparties.
Requires the CFTC to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation of contracts of sale of a commodity for future delivery (or options on them).
Authorizes the CFTC to agree with foreign regulatory authorities on information-sharing arrangements necessary or appropriate in the public interest for the protection users of contracts of sale of a commodity for future delivery.
(Sec. 753) Prohibits: (1) acts of manipulation and false or misleading information in connection with any swap, or a contract of sale of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, and (2) any manipulative or deceptive device or contrivance in contravention of CFTC rules and regulations.
Declares it unlawful for any person to make any false or misleading statement of a material fact to the CFTC. Subjects violations to a civil penalty.
Prescribes enforcement actions, including private rights of action.
Subtitle B: Regulation of Security-Based Swap Markets – (Sec. 762) Amends the Gramm-Leach-Bliley Act to repeal the prohibition against regulation of a security-based swap agreement.
(Sec. 763) Amends the Securities Exchange Act of 1934 to prescribe requirements for clearing procedures and execution of security-based swaps, including requirements for: (1) swap execution facilities; (2) segregation of assets held as collateral in security-based swap transactions; and (3) position limits and accountability for security-based swaps and large trader reporting.
Requires a clearing agency to submit and the SEC to review each security-based swap, or any group, category, type or class of security-based swaps to determine whether it should be required to be cleared. Excepts a security-based swap from clearing requirements if one of its counterparties is not a financial entity, is using such swaps to hedge or mitigate commercial risk, and notifies the SEC how it generally meets its financial obligations associated with entering into non-cleared security-based swaps. Leaves the application of such exception solely to the discretion of such a counterparty.
Directs the SEC to consider whether to exempt from clearing requirements small banks, savings associations, farm credit system institutions, credit unions, and depository institutions with total assets of $10 billion or less.
Grants the sole right to select the clearing agency at which a security-based swap will be cleared to a person that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant but is counterparty to such a swap that is subject to the mandatory clearing requirement and entered into by a security-based swap dealer or a major security-based swap participant.
Authorizes such a counterparty to any security-based swap that is not subject to the mandatory clearing requirement to elect to require clearing of the swap. Grants such a counterparty also the sole right to select the clearing agency.
Requires each registered clearing agency to designate a chief compliance officer.
Requires a clearing agency that performs its functions with respect to security-based swaps to register with the SEC.
Requires the SEC to adopt rules governing such agencies. Authorizes the SEC to exempt a clearing agency from registration for the clearing of security-based swaps if it is subject to comparable oversight by either the CFTC or governmental authorities in the agency’s home country.
Sets forth registration and oversight requirements governing security-based swap execution facilities. Allows dual registration with the CFTC. Permits trading by such facilities only in security-based swaps that are not readily susceptible to manipulation.
Requires such facility to: (1) monitor trading and trade processing in security-based swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process (including methods for conducting real-time monitoring of trading and accurate trade reconstructions); (2) make public timely information on price, trading volume, and other trading data on security-based swaps; (3) have adequate financial, operational, and managerial resources to discharge its responsibilities; and (4) maintain a risk analysis and oversight program to identify and minimize sources of operational risk through the development of controls and procedures, and automated systems.
Sets forth a registration requirement for any person who accepts money, securities, or property (or extends credit in lieu of such assets) from, for, or on behalf of a security-based swaps customer to margin, guarantee, or secure a security-based swap cleared by or through a clearing agency.
Requires a broker, dealer, or security-based swap dealer to treat as belonging to the security-based swaps customer all assets received from such customer to execute a margin or guarantee, or to secure a security-based swap cleared by or though a clearing agency.
Requires a separate accounting of the assets of such customer. Prohibits commingling of such assets with the funds of the broker, dealer, or security-based swap dealer, or their use to margin, secure, or guarantee any trades or contracts of any person other than the one for whom such assets are held.
Prescribes segregation requirements for uncleared security-based swaps.
Requires security-based swap transactions with or for a person that is not an eligible contract participant to be executed on a registered national securities exchange.
Directs the SEC to establish limits (including related hedge exemption provisions) on the size of positions in any security-based swap that any person may hold. Authorizes the SEC to direct an SRO to adopt rules regarding the size of positions in any security-based swap.
Authorizes the SEC to make security-based swap transaction and pricing data available to the public in a form and at such times as appropriate to enhance price discovery.
Requires the SEC to report semiannually and annually to the public information on: (1) the trading and clearing in the major security-based swap categories; and (2) the market participants and developments in new products.
Makes it unlawful for any person, unless registered with the SEC, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a security-based swap data repository. Prescribes requirements for such repositories.
(Sec. 764) Prescribes requirements for: (1) registration with and regulation by the SEC of security-based swap dealers and major security-based swap participants (which may also be registered with the CFTC); and (2) reporting and recordkeeping, including daily trading recordkeeping, by them.
Directs the prudential regulators to issue minimum capital requirements and minimum initial and variation margin requirements for security-based swap dealers and major security-based swap participants that are banks. Requires the SEC to do the same for those dealers and participants that are not banks.
Directs the SEC to adopt business conduct requirements for security-based swap dealer or major security-based swap participant that acts as an advisor to a special entity (a federal, state, or local agency, or an employee benefit plan, a governmental benefit plan, or a charitable endowment). Requires such dealers or participants that offer to or enter into a security-based swap with a special entity to comply with any duties established by the SEC with respect to a counterparty that is an eligible contract participant.
Specifies general duties for registered security-based swap dealers and major security-based swap participants.
(Sec. 765) Directs the SEC to adopt conflict of interest rules with respect to security-based swaps clearing agencies, security-based swap execution facilities, national securities exchanges that post or make security-based swaps available for trading, bank holding companies with total consolidated assets of $50 billion or more, nonbank financial companies supervised by the Federal Reserve Board, and affiliates of such a bank holding company or nonbank financial company, a security-based swap dealer, major security-based swap participant, or person associated with a security-based swap dealer or major security-based swap participant.
(Sec. 766) Prescribes requirements for reporting and recordkeeping for certain security-based swaps.
(Sec. 767) Extends the preemption of state gaming and bucket shop laws to prohibit their invalidation of security-based swaps between eligible contract participants or effected on a registered national securities exchange.
(Sec. 768) Makes technical and conforming amendments regarding security-based swaps to the Securities Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940.
(Sec. 772) Prescribes general exemptive authority of the SEC with respect to security-based swaps and specific prohibitions against the grant of exemptions from certain requirements.
(Sec. 773) Subjects a clearing agency and security-based swap dealer or major security-based swap participant to a civil money penalty in twice the amount otherwise available for knowing or reckless evasion, participation in, or facilitation of specified violations.
Title VIII: Payment, Clearing, and Settlement Supervision – Payment, Clearing, and Settlement Supervision Act of 2010 – (Sec. 803) Defines “systemically important” and “systemic importance”‘ as referring to a situation where the failure of or a disruption to the functioning of a financial market utility or the conduct of a payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system.
(Sec. 804) Directs the Financial Stability Oversight Council (Council) to designate those financial market utilities or payment, clearing, or settlement activities which are, or are likely to become, systemically important. Requires the Council to rescind such a designation if the utility or activity no longer meets the standards for systemic importance.
(Sec. 805) Requires the Board to prescribe risk management standards governing: (1) operations related to payment, clearing, and settlement activities of designated financial market utilities; and (2) the conduct of designated activities by financial institutions.
Authorizes the CFTC and the SEC, subject to review and challenge by the Board and the Council, to prescribe risk management standards for the respective designated clearing entities and financial institutions engaged in designated activities for which each is the Supervisory Agency or the appropriate financial regulator.
(Sec. 806) Authorizes the Board to authorize a Federal Reserve Bank to: (1) establish an account for a designated financial market utility and provide certain services; and (2) provide to a designated financial market utility discount and borrowing privileges, but only in unusual or exigent circumstances.
Authorizes a Federal Reserve Bank to pay earnings on balances maintained by or on behalf of a designated financial market utility.
Authorizes the Board to exempt a designated financial market utility from, or modify, any reserve requirements.
Permits a designated financial market utility to implement a change that would otherwise require advance notice if it determines that: (1) an emergency exists; and (2) immediate implementation of the change is necessary for the utility to continue to provide its services in a safe and sound manner.
(Sec. 807) Prescribes examination and enforcement actions taken by a Supervisory Agency, the Board, and the Council with respect to designated financial market utilities.
Authorizes a Supervisory Agency to determine, whenever another entity performs a service integral to the operation of a designated financial market utility, whether such service is indeed in compliance with regulations and standards to the same extent as if the utility were performing the services on its own premises.
Grants the Board authority to recommend to the proper Supervisory Agency or itself take emergency enforcement actions against a designated financial market utility in the event of imminent risk of substantial harm.
(Sec. 808) Prescribes examination and enforcement actions by the Board against financial institutions subject to standards for designated activities.
(Sec. 809) Authorizes the Council to require any financial market utility and/or financial institution engaged in payment, clearing, or settlement activities to submit information it may require for the sole purpose of assessing whether that utility is systemically important, but only if the Council has reasonable cause to believe that the utility meets the standards for systemic importance.
Authorizes the Board and the Council to: (1) require financial institutions and designated financial market utilities to submit prescribed reports and data; and (2) share information of material concerns with the appropriate financial regulator and any Supervisory Agency. Grants such information sharing a specified exemption from FOIA disclosure requirements.
(Sec. 813) Requires the CFTC and the SEC to coordinate with the Board to develop jointly risk management supervision programs for designated clearing entities.
Title IX: Investor Protections and Improvements to the Regulation of Securities – Investor Protection and Securities Reform Act of 2010 – Subtitle A: Increasing Investor Protection – (Sec. 911) Amends the Securities Exchange Act of 1934 to establish the Investor Advisory Committee (Committee) to advise the SEC on: (1) regulatory priorities and issues relating to regulation of securities products, trading strategies, fee structures, and the effectiveness of disclosures; (2) initiatives to protect investor interest; (3) initiatives to promote investor confidence and the integrity of the securities marketplace; and (4) any recommended legislative changes.
(Sec. 912) Authorizes the SEC to: (1) gather information from and communicate with investors or other members of the public; (2) engage in temporary investor testing programs in the public interest; and (3) consult with academics and consultants.
(Sec. 913) Requires the SEC to study and report to Congress on: (1) the effectiveness of existing federal legal or regulatory standards of care (including those set by a national securities association) for brokers, dealers, investment advisers, and associated persons for providing personalized investment advice and recommendations about securities to retail customers; and (2) whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to such standards of care that should be addressed by rule or statute.
Authorizes the SEC to commence a rulemaking to address such standards of care.
Amends the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 to authorize the SEC to establish a standard of conduct (fiduciary duty) for brokers, dealers, and investment advisers, without regard to their financial or other interests, to act in the customer’s best interest when providing a retail customer with personalized investment advice about securities.
Directs the SEC to: (1) facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest; and (2) promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers deemed contrary to the public interest and the protection of investors.
(Sec. 914) Directs the SEC to study and report to Congress on the need for enhanced examination and reinforcement resources for investment advisers.
(Sec. 915) Amends the Securities Act of 1934 to establish the Office of the Investor Advocate to: (1) assist retail investors in resolving significant problems with the SEC or with SROs; (2) identify areas in which investors would benefit from changes in the regulations of the SEC or the rules of an SRO; (3) identify problems that investors have with financial service providers and investment products; (4) analyze the potential impact on investors of proposed SEC regulations or SRO rules; and (5) recommend changes to SEC regulations or orders and to federal law appropriate to mitigate all such problems.
(Sec. 916) Modifies procedures for SEC approval or disapproval of proposed SRO rule changes.
(Sec. 917) Directs the SEC to study and report to Congress regarding financial literacy among retail investors; and (2) complete a study on ways to improve investor access to information (including disciplinary actions, regulatory, judicial, and arbitration proceedings) on investment advisers, brokers, dealers and associated persons on the Central Registration Depository and Investment Adviser Registration Depository systems.
(Sec. 918) Directs the Comptroller General to study and report to Congress regarding: (1) mutual fund advertising; (2) potential conflicts of interest that exist between the staffs of the investment banking and equity and fixed income securities analyst functions within the same firm; and (3) the effectiveness of state and federal regulations to protect investors and other consumers from individuals who hold themselves out as financial planners through the use of misleading titles, designations, or marketing materials.
(Sec. 919D) Requires the Investor Advocate to appoint an Ombudsman to: (1) act as a liaison between the SEC and any retail investor in resolving problems that retail investors may have with the SEC or with SROs; (2) encourage persons to present questions to the Investor Advocate regarding compliance with the securities laws; and (3) establish safeguards to maintain the confidentiality of communications between such persons and the Ombudsman.
Subtitle B: Increasing Regulatory Enforcement and Remedies – (Sec. 921) Amends the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 to authorize the SEC to restrict or prohibit mandatory pre-dispute arbitration affecting customers or clients of brokers and dealers, including municipal securities dealers.
(Sec. 922) Amends the Securities Exchange Act of 1934 to set forth monetary incentives and protection for whistleblowers, including an award to whistleblowers who voluntarily provided original information to the SEC that led to the successful enforcement of a covered judicial or administrative action brought by the SEC under the securities laws that results in monetary sanctions exceeding $1 million. Allows such an award in an aggregate amount of between 10% and 30% of the monetary sanctions collected.
Establishes in the Treasury the Securities and Exchange Commission Investor Protection Fund to: (1) pay awards to whistleblowers; and (2) fund specified activities of the SEC Inspector General.
Prohibits acts of retaliation against an employee for providing information to the SEC.
Instructs the SEC Inspector General to study and report to Congress and the public on the whistleblower protection program.
(Sec. 925) Amends the Securities Exchange Act of 1934 with respect to the registration and regulation of brokers, dealers, municipal securities dealers, and transfer agents, and the Investment Advisers Act of 1940 with respect to registration of investment advisers, to revise requirements for collateral bars or suspensions in the case of persons associated, or seeking to be associated, with any of them who is subject to penalties for specified offenses.
(Sec. 926) Requires the SEC to issue rules that disqualify any offering or sale of securities by a person subject to a final order of a state or federal regulatory body that bars the person from: (1) association with an entity regulated by body; (2) engaging in the business of securities, insurance, or banking; (3) engaging in savings association or credit union activities; or (4) has been convicted of any felony or misdemeanor in connection with the purchase or sale of any security or involving the making of any false filing with the SEC. Extends such disqualification to a person: (1) subject to a final order based upon fraudulent, manipulative, or deceptive conduct within the ten-year period before the date of the offer or sale, or (2) has been convicted of any felony or misdemeanor in connection with the purchase or sale of any security or involving a false filing with the SEC.
(Sec. 928) Amends the Investment Advisers Act of 1940 to exempt state-registered investment advisers from certain restrictions on investment advisory contracts.
(Sec. 929) Revises the prohibition against unlawful credit extension (margin lending) to customers.
(Sec. 929A) Modifies federal criminal law granting whistleblower protections for employees of publicly traded companies to prohibit subsidiaries and affiliates of an issuer from engaging in specified acts of discrimination or retaliation.
(Sec. 929B) Modifies the procedure under which civil penalties obtained by the SEC shall be added to and become part of a disgorgement fund established for the relief of victims of the violation. Requires the amount of any settlement of a judicial or administrative action to be added to the disgorgement fund.
(Sec. 929C) Amends the Securities Investor Protection Act of 1970 (SIPA) to increase the borrowing limit on Treasury loans.
(Sec. 929D) Amends the Securities Exchange Act of 1934 regarding manipulative and deceptive devices to revise requirements for the reporting of lost and stolen securities to include canceled securities.
(Sec. 929E) Amends the Securities Exchange Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 to expand SEC enforcement and remedies to include: (1) nationwide service of subpoenas; (2) enforcement authority over any person who at the time of the alleged violation or abuse is or was a member or employee of specified bodies (formerly associated persons); and (3) authority to impose civil penalties in cease and desist proceedings. Grants federal district courts extraterritorial jurisdiction over the antifraud provisions of federal securities laws.
(Sec. 929G) Applies certain requirements for SEC appointments to positions in the competitive service to any competitive service position at the SEC that requires specialized knowledge of financial and capital market formation or regulation, financial market structures or surveillance, or information technology.
(Sec. 929H) Amends the Securities Investor Protection Act of 1970 (SIPA) to increase the standard maximum cash advance for each customer (including an inflation adjustment).
Prohibits a SIPC member that has a customer from entering into an insolvency, receivership, or bankruptcy proceeding, under federal or state law, without the specific consent of SIPC, except as provided in this Act.
(Sec. 929I) Amends the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 to prohibit the SEC from being compelled to disclose certain records or information obtained under the Acts if they have been obtained for use in furtherance of certain purposes, including surveillance, risk assessments, or other regulatory and oversight activities.
(Sec. 929J) Revises requirements for the production of audit work papers by a foreign public accounting firm or a registered public accounting firm that relies upon the work of the foreign firm.
Requires a foreign public accounting firm to produce its audit work papers and all other documents to the SEC or the Public Company Accounting Oversight Board (PCAOB) upon request if the firm issues an audit report, performs audit work, or conducts interim reviews upon which a registered public accounting firm relies in the conduct of an audit or interim review. (Continues to require a registered public accounting firm relying upon the work of a foreign public accounting firm to produce the foreign firm’s work papers upon SEC or PCAOB request.)
(Sec. 929L) Applies anti-fraud provisions to any security that is not a government security.
(Sec. 929M) Amends the Securities Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 to subject to liability for prosecution and penalties persons who aid and abet violations of such Acts.
(Sec. 929O) Amends the Securities Act of 1934 to add recklessness as an element of the aiding and abetting standard of knowledge.
(Sec. 929P) Expands SEC enforcement and remedies, including: (1) imposition of civil money penalties in cease and desist proceedings; and (2) SEC extraterritorial jurisdiction with respect to antifraud activities.
(Sec. 929Q) Amends the Investment Company Act of 1940 to prescribe recordkeeping requirements for each person with custody or use of a registered investment company’s securities, deposits, or credits.
(Sec. 929R) Amends the Securities Exchange Act of 1934 to revise SEC requirements for beneficial ownership and short-swing profit reporting.
(Sec. 929S) Amends the Securities Exchange Act of 1934 to require fingerprinting of partners, directors, officers, and employees of registered securities information processors, national securities exchanges, and national securities associations.
(Sec. 929T) Declares void any condition, stipulation, or provision binding any person to waive compliance with SRO rules.
(Sec. 929U) Prescribes deadlines and procedures for completing compliance examinations, inspections, and enforcement actions for violations of securities laws.
(Sec. 929V) Amends the Securities Investor Protection Act of 1970 (SIPA) to increase: (1) the minimum assessment paid by Securities Investor Protection Corporation (SIPC) members; and (2) the fine for certain prohibited acts, including misrepresentation of SIPC membership or protection.
(Sec. 929W) Requires the SEC to revise its regulations to require due diligence on the part of brokers and dealers and other specified paying agents to search for lost security holders who have been sent checks for dividends, interest, and other valuable property which have not yet been negotiated.
(Sec. 929X) Directs the SEC to prescribe rules requiring monthly public disclosure of specified information about short sales of each security, including their number.
Makes it unlawful to effect manipulative short sales of securities.
Requires registered brokers or dealers to notify customers that: (1) they may elect not to allow their fully paid securities to be used in connection with short sales; and (2) the broker or dealer may receive compensation in connection with lending the customer’s securities.
(Sec. 929Y) Directs the SEC to study and report to Congress on the extent to which private rights of action under the antifraud provisions of the Securities and Exchange Act of 1934 should be extended to cover conduct occurring: (1) within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; and (2) outside the United States that has a foreseeable substantial effect within the United States.
(Sec. 929Z) Directs the Comptroller General to study and report to Congress on the impact of authorizing a private right of action against any person who aids or abets another person in violation of the securities laws.
Subtitle C: Improvements to the Regulation of Credit Rating Agencies – (Sec. 932) Amends the Securities Act of 1934 to require each nationally recognized statistical rating organization (NRSRO) to establish, enforce, and document an effective internal control structure governing policies, procedures, and methodologies for determining credit ratings.
Directs the SEC to prescribe rules requiring each NRSRO to submit to the SEC a specified annual internal controls report assessing the effectiveness of its internal control structure, with an attestation of its chief executive officer, or an equivalent individual.
Authorizes the SEC to either suspend temporarily, or to revoke permanently the registration of a NRSRO with respect to a particular class or subclass of securities, if it finds that the NRSRO does not have adequate financial and managerial resources consistently to produce credit ratings with integrity.
Instructs the SEC to issue rules to prevent the sales and marketing considerations of an NRSRO from influencing its production of ratings.
Requires each NRSRO to establish policies and procedures to ensure a look-back review to determine whether a conflict of interest exists in any case in which an employee of a person subject to an NRSRO credit rating, or of the issuer, underwriter, or sponsor of a security or money market instrument subject to an NRSRO credit rating, was employed by the NRSRO and participated in determining credit ratings for the person or the securities or money market instruments during the one-year period preceding the date an action was taken with respect to the credit rating. Requires the NRSRO to revise the rating if appropriate.
Requires an NRSRO to report to the SEC any case where it can reasonably be expected to know that a person associated with it within the previous five years as a senior officer or as a participant in determining the credit ratings in question subsequently obtained employment with any issuer, underwriter, or sponsor of an instrument for which the NRSRO had issued such a credit rating during the 12-month period before such employment.
Prohibits the designated compliance officer of an NRSRO from: (1) performing credit ratings; (2) participate in the development of ratings methodologies or models; (3) perform marketing or sales functions; or (4) participate in establishing compensation levels, other than for the compliance officer’s employees. Authorizes the SEC to exempt a small NRSRO from these limitations if it finds that compliance with them would impose an unreasonable burden.
Directs the SEC to: (1) establish an Office of Credit Ratings to administer its rules with respect to NRSRO practices in determining ratings, for the protection of users of credit ratings and in the public interest; (2) require each NRSRO to disclose publicly information on the initial credit ratings it has determined for each type of obligor, security, and money market instrument, and any subsequent changes to such ratings, in order to allow users of credit ratings to evaluate their accuracy and compare the performance of ratings by different NRSROs; and (3) prescribe rules, for the protection of investors and in the public interest, regarding the procedures and methodologies, including qualitative and quantitative data and models, used by NRSROs.
Requires the issuer or underwriter of any asset-backed security to make publicly available the findings and conclusions of any third-party due diligence report it has obtained.
Requires at least half, but not fewer than two of the members of an NRSRO’s board of directors to be independent of the NRSRO agency. Requires a portion of the independent directors to include users of ratings from a NRSRO. Prescribes criteria to determine such independence.
(Sec. 933) Declares that in private actions against an NRSRO it shall be sufficient for pleading any required state of mind that the complaint state with particularity facts giving rise to a strong inference that the NRSRO knowingly or recklessly failed to: (1) conduct a reasonable investigation of the rated security with respect to the factual elements relied upon by its own methodology for evaluating credit risk; or (2) obtain reasonable verification of such factual elements (by audit or even by a sampling technique) from other sources that the credit rating agency considered to be competent and that were independent of the issuer and underwriter.
(Sec. 934) Amends the Securities Exchange Act of 1934 to require each NRSRO to refer to the appropriate law enforcement or regulatory authorities any information that it receives from a third party and finds credible that alleges that an issuer of securities rated by the NRSRO has committed or is committing a material violation of law that has not been adjudicated by a federal or state court.
(Sec. 935) Requires an NRSRO, in producing a credit rating, to consider information which it finds credible that it has, or receives about an issuer from a source other than the issuer or underwriter, and which it finds potentially significant to a rating decision.
(Sec. 936) Directs the SEC to: (1) prescribe qualification standards to ensure the accuracy of securities ratings issued by credit rating analysts; (2) require each NRSRO to establish and enforce written policies and procedures that assess the probability that an issuer of a security or money market instrument will fail to make payments to investors in accordance with the terms of such instrument; and ( 3) define clearly and disclose the meaning of any symbol used by the NRSRO to denote a credit rating, and apply it in a consistent manner for all types of instruments for which it is used.
(Sec. 939) Amends the FDIA, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, the Investment Company Act of 1940, the Revised Statutes, and the Securities Exchange Act of 1934 to remove references to credit ratings to reflect the provisions of this Act.
Directs the SEC to study and report to Congress on ratings standardization.
(Sec. 939A) Requires federal agencies to: (1) review any of their regulations that require the use of an assessment of the credit-worthiness of a security or money market instrument; (2) remove any requirement of reliance on credit ratings and substitute a standard of credit-worthiness deemed appropriate by the agency; and (3) report to Congress any modification of any regulation such agency has made.
(Sec. 939B) Requires the SEC to revise Regulation FD (general rule regarding selective disclosure by an issuer of material nonpublic information regarding that issuer or its securities) to remove the exemption from it for NRSROs and other credit rating agencies.
(Sec. 939C) Directs the SEC to study and report to Congress on the independence of NRSROs and how it affects the ratings they issue.
(Sec. 939D) Directs the Comptroller to study and report to Congress on: (1) alternative means for compensating NRSROs in order to create incentives for more accurate credit ratings; and (2) the feasibility and merits of creating an independent professional organization for NRSRO rating analysts responsible for establishing independent professional standards and a code of ethical conduct, as well as overseeing the profession.
(Sec. 939F) Directs the SEC to study and report to Congress on: (1) the credit rating process for structured finance products and the conflicts of interest associated with the issuer-pay and the subscriber-pay models; (2) the feasibility of establishing a system in which a public or private utility or an SRO assigns NRSROs to determine the credit ratings of such products; and (3) alternative means for compensating NRSROs that would create incentives for accurate credit ratings.
(Sec. 939G) Declares without force or effect Rule 436(g) promulgated by the SEC under the Securities Act of 1933. (Rule 436(g) exempts credit ratings provided by NRSROs from being considered a part of the registration statement prepared or certified by a person under such Act.)
(Sec. 939H) Expresses the sense of Congress that the SEC should exercise rulemaking authority to prevent improper conflicts of interest arising from employees of NRSROs providing services to issuers of securities that are unrelated to the issuance of credit ratings, including consulting, advisory, and other services.
Subtitle D: Improvements to the Asset-Backed Securitization Process – (Sec. 941) Amends the Securities Act of 1934 to direct the federal banking agencies and the SEC to jointly prescribe regulations to require any securitizer to retain an economic interest in a portion of the credit risk for any asset the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party.
Requires federal banking agencies, the SEC, the HUD Secretary, and the Federal Housing Finance Agency (FHFA), to jointly prescribe regulations similarly requiring a securitizer to retain an economic interest in a portion of the credit risk for any residential mortgage asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party. Prescribes regulation standards, including a requirement to establish asset classes with separate rules for securitizers of different classes of assets, including residential mortgages, commercial mortgages, commercial loans, auto loans, and any other appropriate class of assets.
Directs the federal banking agencies and the SEC to jointly adopt or issue exemptions, exceptions, and adjustments to such rules. Exempts specifically any loans or financial assets made, insured, guaranteed, or purchased by any institution that is subject to the supervision of the Farm Credit Administration, including the Federal Agricultural Mortgage Corporation. Exempts also any residential, multifamily, or health care facility mortgage loan asset, or securitization based directly or indirectly on such an asset, which is insured or guaranteed by the United States or a U.S. agency (not including the Federal National Mortgage Association [Fannie Mae], the Federal Home Loan Mortgage Corporation [Freddie Mac], and the federal home loan banks). Makes additional exemptions from such rules for qualified residential mortgages, subject to certain conditions.
Requires the Chairperson of the Financial Stability Oversight Council to coordinate all joint rulemaking.
Requires the Federal Reserve Board to study the combined impact on each individual class of asset-backed security of: (1) the new credit risk retention requirements of this subtitle, including the effect credit risk retention requirements have on increasing the market for federally subsidized loans; and (2) the Financial Accounting Statements 166 and 167 issued by the Financial Accounting Standards Board (FASB).
(Sec. 942) Amends the Securities Exchange Act of 1934 to authorize the SEC to: (1) provide for the suspension or termination of the duty to file for any class of issuer of asset-backed security; and (2) classify issuers and prescribe requirements appropriate for each class of issuer of asset-backed security.
Amends the Securities Act of 1933 to direct the SEC to adopt regulations requiring each issuer of an asset-backed security to disclose, for each tranche or class of security, information regarding the assets backing that security.
(Sec. 943) Directs the SEC to prescribe regulations on the use of representations and warranties in the market for asset-backed securities that: (1) require each NRSRO to describe in any report accompanying a credit rating the representations, warranties, and enforcement mechanisms available to investors and how they differ from those in issuances of similar securities; and (2) require any securitizer to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by the securitizer, so that investors may identify asset originators with clear underwriting deficiencies.
(Sec. 944) Amends the Securities Act of 1933 to repeal the exemption from prohibitions and requirements relating to interstate commerce and the mails that is granted to certain transactions involving offers or sales of promissory notes secured by a first lien on real estate upon which is located a residential or commercial structure.
(Sec. 945) Directs the SEC to issue rules requiring any issuer of an asset-backed security to review the assets underlying the security, and disclose the nature of the review.
(Sec. 946) Requires the Chairman of the Financial Services Oversight Council to study the macroeconomic effects of the risk retention requirements under this subtitle, emphasizing the potential beneficial effects with respect to stabilizing the real estate market.
Subtitle E: Accountability and Executive Compensation – (Sec. 951) Amends the Securities Exchange Act of 1934 to require that a proxy or consent or authorization for a shareholders meeting for which SEC proxy solicitation rules require compensation disclosures include a separate resolution, subject to shareholder vote, to approve the compensation of executives.
Requires the person making a proxy or consent solicitation at a shareholders meeting to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all, or substantially all, of an issuer’s assets, to disclose in the related material any agreements or understandings that such person has with any named executive officers of the issuer, or of the acquiring issuer, regarding: (1) all compensation based upon, or relating to, such asset disposition; and (2) the aggregate total of all such compensation that may be paid or become payable to or on behalf of such executive officer (golden parachute compensation).
Declares that the shareholder vote shall not be binding on either the issuer or its board of directors, nor may it be construed: (1) as overruling a decision by the issuer or board of directors; (2) to create or imply any change or addition to the fiduciary duties of the issuer or board of directors; or (3) to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation.
Authorizes the SEC to exempt an issuer or class of issuers from such shareholder approval requirements, taking into account whether the requirements disproportionately burden small issuers.
(Sec. 952) Requires the SEC to direct the national securities exchanges and associations to prohibit the listing of any class of equity security of an issuer that is not in compliance with specified SEC standards governing compensation committees, including: (1) the independence of such committees; (2) independence standards for compensation consultants and other committee advisors; and (3) compensation committee authority relating to compensation consultants.
Exempts from such a prohibition any issuer that is a controlled company, limited partnership, company in bankruptcy proceedings, open-ended management investment company registered under the Investment Company Act of 1940, or a foreign private issuer that discloses annually to shareholders the reasons that it does not have an independent compensation committee.
(Sec. 953) Directs the SEC to require each issuer to disclose in any proxy or consent solicitation material for an annual shareholder meeting a clear description of any mandatory compensation disclosures, including the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock, dividends and distributions.
Directs the SEC also to require each issuer to disclose in any filing: (1) the median of the annual total compensation of all employees of the issuer, except the chief executive officer; (2) the annual total compensation of the chief executive officer; and (3) the ratio of the first amount to the second.
(Sec. 954) Requires the SEC to direct the national securities exchanges and associations to prohibit the listing of any security of an issuer that is not in compliance with SEC requirements governing the recovery of erroneously awarded compensation.
Directs the SEC to require each issuer to develop and implement a policy providing: (1) disclosure of the issuer’s policy on incentive-based compensation that is based on financial information required reported by the securities laws; and (2) that, if the issuer is required to prepare an accounting restatement owing to its material noncompliance with financial reporting requirements, the issuer will recover from any current or former executive officer who received incentive-based compensation during the preceding three-year period, based on the erroneous data, in excess of what would have been paid to the executive officer under a required accounting restatement.
(Sec. 955) Directs the SEC to require each issuer to disclose, in any proxy or consent solicitation material for an shareholders’ annual meeting, whether any employee or member of the board of directors, including designees, is permitted to purchase financial instruments designed to hedge or offset any decrease in the market value of equity securities granted as part of a compensation package, or held by them.
(Sec. 956) Directs federal regulators to jointly prescribe regulations requiring depository institutions or depository institution holding companies to disclose the structures of all incentive-based compensation arrangements in order to determine whether such structure: (1) provides excessive compensation, fees, or benefits to an executive officer, employee, director, or principal shareholder; or (2) could lead to material financial loss to such institutions.
Directs federal regulators to jointly prescribe regulations prohibiting incentive-based payment arrangements that the regulators determine encourage inappropriate risks by such institutions by providing an executive officer, employee, director, or principal shareholder with excessive compensation, fees, or benefits, or that could lead to material financial loss to the institution.
Exempts financial institutions with assets of less than $1 billion from such compensation restrictions.
(Sec. 957) Prohibits registration as a national securities exchange unless the rules of the exchange prohibit any member that is not the beneficial owner of a specified registered security from granting a proxy to vote in connection with a certain shareholder vote unless the security’s beneficial owner has instructed the member to vote the proxy in accordance with the owner’s voting instructions.
Subtitle F: Improvements to the Management of the Securities and Exchange Commission – (Sec. 961) Requires the SEC to report annually to Congress on its examinations of registered entities, enforcement investigations, and corporate financial securities filings. Requires the Directors of the Division of Enforcement, the Division of Corporation Finance, and the Office of Compliance Inspections and Examinations to certify in such report that the SEC has adequate internal supervisory controls to carry out its examination, enforcement and review duties.
Directs the Comptroller to report triennially to such congressional committees on: (1) the adequacy and effectiveness of the internal supervisory control structure and procedures; and (2) the quality of SEC personnel management.
(Sec. 963) Directs the SEC and the Comptroller General to assess, in separate annual reports to Congress, the effectiveness of SEC internal control structure and procedures for financial reporting.
(Sec. 964) Directs the Comptroller to evaluate triennially SEC oversight of national securities associations.
(Sec. 965) Requires the SEC Divisions of Trading and Markets and of Investment Management to each retain a staff of examiners who perform compliance inspections and examinations.
(Sec. 966) Directs the SEC Inspector General to establish a telephone hotline or other electronic means for SEC employee: (1) suggestions for improvements in work performance and use of the resources; and (2) allegations of waste, abuse, misconduct, or mismanagement within the SEC.
(Sec. 967) Requires the SEC to hire an independent consultant to examine and report to the SEC and Congress on SEC internal operations, structure, funding, and the need for comprehensive reform, including the SEC’s relationship with and reliance upon self-regulatory organizations and other entities under SEC oversight relevant to the regulation of securities and the protection of investors.
(Sec. 968) Directs the Comptroller to study and report to Congress on SEC employees who leave the agency to work for financial institutions regulated by the SEC.
Subtitle G: Strengthening Corporate Governance – (Sec. 971) Extends SEC rulemaking authority to prescribe rules on proxy access, especially inclusion in a solicitation of proxy, consent, or authorization of a shareholder nominee to serve on the issuer’s board of directors.
(Sec. 972) Instructs the SEC to issue rules requiring an issuer to disclose in the annual proxy sent to investors the reasons why the issuer has chosen the same person or different individuals to serve as chairman of the board of directors and chief executive officer (or equivalent positions).
Subtitle H: Municipal Securities – (Sec. 975) Amends the Securities Exchange Act of 1934 to require the registration of municipal advisors who either: (1) provide advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities; or (2) undertake a solicitation of a municipal entity or obligated person.
Revises the distribution of independent and associated members of the Municipal Securities Rulemaking Board, their eligibility standards, and their duties. Deems a municipal advisor and any associated person to have a fiduciary duty to any municipal entity for whom such advisor acts as a municipal advisor. Prohibits a municipal advisor from engaging in any act, practice, or course of business inconsistent with such fiduciary duty, or in contravention of any rule of the Board.
Revises registration prerequisites governing an affiliated securities association to require that its rules provide that it shall: (1) request guidance from the Municipal Securities Rulemaking Board when interpreting Board rules; and (2) inform the Board about certain enforcement actions and examinations so that the Board may assist in them and evaluate the ongoing effectiveness of its rules.
(Sec. 976) Directs the Comptroller to study: (1) mandatory disclosures by municipal securities issuers; (2) the municipal securities markets; and (3) the role and importance of the Governmental Accounting Standards Board (GASB) in the municipal securities markets and its funding levels.
(Sec. 978) Amends the Securities Act of 1933 to authorize the SEC to require a registered national securities association to establish: (1) a reasonable annual accounting support fee to fund the annual budget of the GASB; and (2) rules and procedures to provide for the allocation, assessment, and collection of such a fee from association members, as well as for remittance of such fees to the Financial Accounting Foundation.
Directs the Comptroller General to evaluate: (1) the role and importance of the GASB in the municipal securities markets; and (2) the manner and the level at which the GASB has been funded.
(Sec. 979) Establishes within the SEC the Office of Municipal Securities to administer SEC rules governing the practices of municipal securities brokers and dealers, municipal securities advisors, municipal securities investors, and municipal securities issuers; and (2) coordinate with the Municipal Securities Rulemaking Board for rulemaking and enforcement actions.
Subtitle I: Public Company Accounting Oversight Board, Portfolio Margining, and Other Matters – (Sec. 981) Amends the Sarbanes-Oxley Act of 2002 to authorize the PCAOB to provide to a foreign auditor oversight authority all information relating to a public accounting firm within the foreign oversight authority’s jurisdiction.
(Sec. 982) Extends coverage of PCAOB auditing authority to all companies subject to the securities laws, not only public companies, and to brokers and dealers as well. Extends the registration requirement to public accounting firms that audit brokers and dealers, and authorizes the PCAOB to require an inspection program for them.
Requires each broker or dealer to pay the PCAOB its allocated annual accounting support fee.
Authorizes the PCAOB to refer to an SRO an investigation concerning an audit report for a broker or dealer under the SRO’s jurisdiction.
(Sec. 983) Amends the Securities Investor Protection Act of 1970 with respect to a customer’s portfolio margining account carried as a securities account pursuant to a portfolio margining program approved by the SEC.
(Sec. 984) Amends the Securities Act of 1934 regarding manipulative and deceptive devices to: (1) make it unlawful for any person to effect, accept, or facilitate a transaction involving the loan or borrowing of securities in contravention of SEC rules and regulations; and (2) direct the SEC to promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities.
(Sec. 989) Instructs the Comptroller General to study risks and conflicts associated with proprietary trading by and within depository institutions and bank and financial holding companies.
(Sec. 989A) Requires the Office of Financial Literacy of the CFPB, established by title X below) to establish a grants program for states or eligible entities to: (1) investigate and prosecute misleading and fraudulent marketing practices; (2) fund technology, equipment, and training for regulators, prosecutors, and law enforcement officers to identify salespersons and advisers who target seniors through the use of misleading designations and to increase their successful prosecution; (3) provide educational materials and training to seniors to increase awareness and understanding of misleading or fraudulent marketing; (4) develop comprehensive plans to combat misleading or fraudulent marketing of financial products to seniors; and (5) enhance provisions of state law to provide protection for seniors against misleading or fraudulent marketing.
(Sec. 989B) Amends the Inspector General Act of 1978 regarding: (1) the independence of Inspectors General of designated federal entities; (2) Inspector General accountability; and (3) removal of Inspectors General of designated federal entities.
(Sec. 989E) Establishes the Council of Inspectors General on Financial Oversight.
Authorizes the Council to convene a Council of Inspectors General Working Group to evaluate the Council’s effectiveness and internal operations.
(Sec. 989F) Directs the Comptroller to study person to person lending to determine the optimal federal regulatory structure.
(Sec. 989G) Amends the Sarbanes-Oxley Act of 2002 to exempt smaller securities issuers that are neither large accelerated filers nor accelerated filers from the requirement that a registered public accounting firm that prepares or issues the issuer’s audit report attest to, and report on, the assessment made by the issuer’s management.
Directs the SEC to study and report to Congress on how it could reduce the burden for certain companies (whose market capitalization is between $75 million and $250 million for the relevant reporting period) of complying with such requirement while maintaining investor protections for such companies.
(Sec. 989H) Requires the heads of designated federal agencies, including the Federal Reserve Board, the CFTC, and the SEC, to each: (1) take action to address deficiencies identified by a report or investigation of the agency Inspector General; or (2) certify to both Houses of Congress that no action is necessary or appropriate in connection with such deficiencies.
(Sec. 989I) Requires the Comptroller General to study the exemption granted by this Act to smaller issuers that are nonaccelerated filers under the Sarbanes-Oxley Act of 2002 from the requirement for an evaluation by a registered public accounting firm of a securities issuer’s internal control structure and procedures for financial reporting.
(Sec. 989J) Directs the SEC to treat as securities exempt from the coverage of the Securities Act of 1933 certain insurance or endowment policies or annuity contracts or optional annuity contract issued on and after June 16, 2013, whose value does not vary according to the performance of a separate account, and which meet other specified criteria.
Subtitle J: Securities and Exchange Commission Match Funding – (Sec. 991) Amends the Securities Exchange Act of 1934 to direct the SEC to collect transaction fees and assessments designed to recover the costs to the government of the annual appropriation to the SEC by Congress.
Amends the Securities Act of 1933 to revise requirements for annual and mid-year adjustments to transaction fees to replace the target offsetting collection amount for a fiscal year as goal of an adjustment with the regular appropriation to the SEC by Congress for such fiscal year. Specifies increased target offsetting collection amounts for FY2012-FY2021 and beyond in the calculation of securities registration fees.
Amends the Securities Exchange Act of 1934 to reauthorize the SEC through FY2015.
Requires the SEC to submit a budget annually to the President or the Office of Management and Budget (OMB), and copies concurrently to specified congressional committees.
Establishes in the Treasury the Securities and Exchange Commission Reserve Fund as the depository for an annual aggregate of up to $50 million in registration fees under the securities laws. Limits the balance in the Fund to $100 million. Requires deposit of any fees in excess of such amounts in the General Fund, and prohibits their availability for SEC obligation.
Title X: Bureau of Consumer Financial Protection – Consumer Financial Protection Act of 2010 – Subtitle A: Bureau of Consumer Financial Protection – (Sec. 1011) Establishes an independent Bureau of Consumer Financial Protection in the Federal Reserve System, headed by a Director nominated by the President and confirmed by the Senate, to regulate consumer financial products or services under federal consumer financial laws.
(Sec. 1012) Authorizes the Federal Reserve Board to delegate to the Bureau the authorities to examine persons subject to Board jurisdiction for compliance with federal consumer financial laws.
Prohibits the Board from (1) intervening in any matter or proceeding before the Director, including examinations or enforcement actions, unless otherwise specifically provided by law; (2) appointing, directing, or removing any officer or employee of the Bureau; or (3) merging or consolidating the Bureau, including its functions or responsibilities, with any division or office of the Board or the federal reserve banks.
Precludes from Board approval or review any rule or order of the Bureau. Prohibits the Board from delaying or preventing the issuance of any rule or order of the Bureau.
(Sec. 1013) Requires the Bureau to appoint an ombudsman to act as a liaison between the Bureau and any affected person with respect to any problem the person may have in dealing with the Bureau, resulting from its regulatory activities.
Requires the Director to establish: (1) specified functional research units; (2) information and technical assistance regarding the offering and provision of consumer financial products or services to traditionally underserved consumers and communities; (3) a unit to collect and track complaints regarding consumer financial products or services; (4) the Office of Fair Lending and Equal Opportunity; (5) the Office of Financial Education, which shall develop a strategy to improve the financial literacy of consumers; (6) the Office of Service Member Affairs; (7) the Office of Financial Protection for Older Americans; and (8) a Consumer Advisory Board.
Instructs the Comptroller General to study: (1) the feasibility of certifying persons conducting financial literacy programs or activities; (2) technological resources intended to collect, analyze, evaluate, or promote financial literacy and counseling programs; (3) effective methods, tools, and strategies intended to educate and empower consumers about personal finance management; and (4) recommendations to encourage development of programs that improve financial education outcomes.
(Sec. 1017) Establishes in the Federal Reserve: (1) the Bureau of Consumer Financial Protection Fund to pay the expenses of the Bureau; and (2) the Consumer Financial Civil Penalty Fund for payments to victims of activities for which civil penalties have been imposed under federal consumer financial laws.
Subtitle B: General Powers of the Bureau – (Sec. 1021) Requires the CFPB to implement and enforce federal consumer financial law to ensure that all consumers have access to fair, transparent, and competitive markets for consumer financial products and services.
(Sec. 1022) Grants the CFPB exclusive rulemaking authority to the extent that a federal consumer financial law authorizes the Bureau and another federal agency to issue regulations to assure compliance with such law.
States that the deference that a court affords to the CFPB regarding the meaning or interpretation of any federal consumer financial law shall be applied as if the Bureau were the only agency authorized to apply, enforce, interpret, or administer such law.
Directs the CFPB to monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for them.
Grants the CFPB access to any report of examination or financial condition made by a federal agency having jurisdiction over a covered person or service provider.
Authorizes the CFPB to prescribe registration requirements for covered persons other than an insured depository institution, insured credit union, or related person.
(Sec. 1023) Authorizes the Financial Stability Oversight Council, on the petition of one of its member agencies, to set aside a final CFPB regulation, or any of its provisions, if the Council decides, in accordance with a specified procedure, that the regulation or provision would put the safety and soundness of the U.S. Banking system or the stability of the U.S. financial system at risk.
(Sec. 1024) Prescribes requirements for CFPB supervision and rulemaking affecting certain nondepository covered persons, including those who offer or provide origination, brokerage, or servicing of loans secured by real estate for use by consumers primarily for personal, family, or household purposes, or loan modification or foreclosure relief services in connection with such loans, including private education and payday loans.
Subjects service providers of certain consumer real estate loans to Bureau supervision and enforcement authority.
(Sec. 1025) Grants the CFPB, in order to assess compliance with federal consumer financial laws, exclusive authority to require reports and conduct periodic examinations of insured depository institutions and insured credit unions whose total assets exceed $10 billion (including their affiliates). Grants the CFPB primary authority to enforce such laws to the extent that the CFPB and another federal agency are authorized to enforce them.
(Sec. 1026) Subjects insured depository institutions and insured credit unions with total assets of $10 billion or less (including their service providers) to examination and reporting requirements of the CFPB Director.
(Sec. 1027) Prohibits the CFPB from exercising its authority with respect to sellers of nonfinancial goods, except to the extent that they are engaged in offering or providing any consumer financial product or service.
Excludes from CFPB supervisory or rulemaking authority: (1) real estate brokers; (2) retailers of manufactured and modular homes; (3) certified public accountants and tax preparers; (4) attorneys; (5) persons regulated by state insurance regulators or state securities commissions; (6) employee benefit and compensation plans and certain other arrangements; (7) persons regulated by the SEC, the CFTC, or the Farm Credit Administration; (8) activities related to charitable contributions; and (9) auto dealers.
(Sec. 1028) Requires the CFPB to report to Congress on the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.
Authorizes the CFPB to prohibit or restrict the use of mandatory pre-dispute arbitration clauses governing a a consumer financial product or service.
Subtitle C: Specific Bureau Authorities – (Sec. 1031) Authorizes the CFPB to: (1) prohibit unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for, or the offering of, a consumer financial product or service; and (2) promulgate regulations to prevent such practices. Subjects such CFPB authority to specified conditions.
(Sec. 1032) Authorizes the CFPB to prescribe rules to ensure that the features of any consumer financial product or service are fully, accurately, and effectively disclosed so as to permit consumers to understand the associated costs, benefits, and risks.
Directs the CFPB to propose for public comment rules and model disclosures that combine specified disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974, into a single, integrated disclosure for mortgage loan transactions covered by those laws.
(Sec. 1035) Instructs the Secretary to designate a Private Education Loan Ombudsman to provide timely assistance to borrowers of private education loans.
(Sec. 1036) Specifies prohibited acts related to: (1) violations of federal consumer financial law or otherwise engage in any unfair, deceptive, or abusive act or practice; (2) failure or refusal to establish or maintain records, permit access to or copying of them, or provide information to the CFPB; and (3) knowing or reckless assistance to others in violation of the requirements of this subtitle.
Subtitle D: Preservation of State Law – (Sec. 1041) Declares that this Act shall not be construed as annulling, altering, or affecting, or exempting any person subject to this title from complying with state law, except to the extent of any inconsistency with this Act.
Declares that state law and regulations that afford consumers greater protection than that provided under this Act are not inconsistent with this Act.
Requires the CFPB to: (1) issue a notice of proposed rulemaking whenever a majority of the states has enacted a resolution in support of the establishment or modification of a consumer protection regulation by the Agency; and (2) take specified considerations into account before prescribing a final regulation based upon such notice (including whether the proposed regulation would afford greater protection to consumers than any existing regulation).
(Sec. 1042) Authorizes a state attorney general to bring a civil action in the name of the state (including, but only in certain circumstances, against a national bank or federal savings association) in federal or state court to enforce and secure remedies under this Act.
Authorizes a state attorney general bring a civil action in the name of such state against a national bank or federal savings association in any federal district court or state court that is located in that state having jurisdiction over the defendant to enforce a regulation prescribed by the CFPB under this title and to secure remedies under this title or remedies otherwise provided under other law.
Affirms the authority of: (1) state securities regulators and state insurance regulators to take action with respect to a person they regulate; and (2) the Comptroller of the Currency and the Director of the Office of Thrift Supervision (OTS) regarding the applicability of state law under federal banking law to existing contracts entered into by the national banks and federal savings associations they regulate and supervise.
(Sec. 1044) Amends the Revised Statutes and the HOLA to prescribe state law preemption standards and visitorial standards for national banks, federal savings associations, and nondepository institution subsidiaries.
Requires the Comptroller of the Currency to report to Congress concerning whether the agency intends to continue, rescind, or propose to amend any determination that a provision of federal law preempts a state consumer financial law and the reasons for doing so.
Subtitle E: Enforcement Powers – Sets forth enforcement powers, including those for investigations, adjudication, and litigation authority.
Subtitle F: Transfer of Functions and Personnel; Transitional Provisions – (Sec. 1061) Transfers from the following entities to the Director certain consumer financial protection functions: (1) the Federal Reserve Board; (2) the Comptroller of the Currency; (3) the OTS Director; (4) the FDIC; (5) the Federal Trade Commission (FTC); (6) NCUA; (7) the HUD Secretary (relating to the Real Estate Settlement Procedures Act of 1974 and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008); and (8) the Prudential Regulators.
(Sec. 1064) Provides for the transfer of affected personnel.
Subtitle G: Regulatory Improvements – (Sec. 1071) Amends the Equal Credit Opportunity Act to require each financial institution, in the case of an application for credit for either a small business, a women-owned, or a minority-owned business, to: (1) inquire whether the business is a women- or minority-owned, or a small business, business; and (2) maintain a separate record of the responses to such inquiry. Restricts access to such information by loan underwriters or other financial institution employees. Requires such information to be compiled and maintained by each financial institution and submitted annually to the CFPB, which shall make it available for public disclosure.
(Sec. 1072) Amends the Housing and Economic Recovery Act of 2008 to include economically vulnerable individuals and families among the groups targeted for financial education and counseling.
(Sec. 1073) Amends the Electronic Fund Transfer Act to prescribe mandatory disclosures for remittance transfers. Directs the Federal Reserve Board to work with the federal reserve banks and the Department of the Treasury to expand the use of the automated clearinghouse system and other payment mechanisms for remittance transfers to foreign countries. Instructs the Director to report to the President and Congress on the feasibility of and impediments to use of remittance history in calculation of a consumer’s credit score.
(Sec. 1074) Directs the Secretary of the Treasury to study specified options for ending the conservatorship of Fannie Mae and Freddie Mac, while minimizing the cost to taxpayers.
(Sec. 1075) Amends the Electronic Fund Transfer Act to authorize the Federal Reserve Board to prescribe regulations: (1) for interchange transaction (swipe) fees that an issuer may receive or charge with respect to an electronic debit transaction (EDT); and (2) to prevent circumvention or evasion of swipe fees. Requires a swipe fee to be reasonable and proportional to the issuer’s cost with respect to an EDT, but allows adjustments for fraud prevention costs. Prescribes considerations affecting such rulemaking.
Exempts from such requirements: (1) small issuers whose assets are less than $10 billion; and (2) government-administered payment programs and reloadable prepaid cards.
Authorizes the Board to prescribe regulations to prevent the use of network fees to compensate an issuer with respect to an EDT or to circumvent or evade the restrictions of this subtitle.
Requires the Board to prescribe regulations prohibiting a payment card network from: (1) restricting the number of payment card networks on which an EDT may be processed to one or to two or more owned or controlled by affiliates (exclusivity arrangements); (2) inhibiting the ability of any person who accepts debit cards to direct the routing of EDTs for processing over any payment card network; (3) inhibiting the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards; or (2) restricting transaction minimums or maximums.
(Sec. 1076) Directs the CFPB to study reverse mortgage transactions and prescribe related regulations.
(Sec 1077) Requires the Director and the Secretary of Education to report to Congress on specified aspects of private education loans and private educational lenders.
(Sec. 1078) Directs the CFPB to study: (1) the nature, range, and size of variations between the credit scores sold to creditors and those sold to consumers by nationwide consumer reporting agencies; and (2) whether such variations disadvantage consumers.
(Sec. 1079) Requires the Director to: (1) review all federal laws and regulations relating to the protection of consumers who use exchange facilitators for transactions primarily for personal, family, or household purposes; and (2) recommend measures to ensure protection of consumers who use such exchange facilitators.
Defines an exchange facilitator as a person that maintains an office or advertises services to facilitates, for a fee, an exchange of like kind property by entering into an agreement with a taxpayer by which the exchange facilitator: (1) acquires contractual rights to sell the taxpayer’s relinquished property and transfers to the taxpayer, as a qualified intermediary, a replacement property; (2) takes title to a property as an exchange accommodation titleholder; or (3) acts as a qualified trustee or qualified escrow holder.
(Sec. 1079A) Requires the U.S. Sentencing Commission to review and, if appropriate, amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of: (1) offenses relating to securities fraud, in order to reflect the intent of Congress that penalties for the offenses appropriately account for their potential and actual harm to the public and the financial markets; and (2) fraud offenses relating to financial institutions or federally related mortgage loans, to reflect the intent of Congress that the penalties for the offenses ensure appropriate terms of imprisonment for offenders involved in substantial bank frauds or other frauds relating to financial institutions.
Amends federal criminal law to set the statute of limitations for securities fraud violations at six years after the commission of the offense.
Subtitle H: Conforming Amendments – Makes conforming amendments to specified Acts to reflect the provisions of this Act.
Title XI: Federal Reserve System Provisions – (Sec. 1101) Amends the Federal Reserve Act (FRA) to modify the Federal Reserve Board’s emergency lending authorities.
Requires the Board to establish, by regulation, the policies and procedures governing emergency lending, to ensure that any emergency lending program or facility is for the purpose of providing liquidity to the financial system, and not to aid a failing financial company, and that the security for emergency loans is sufficient to protect taxpayers from losses and that any such program is terminated in a timely and orderly fashion.
Requires the Board to establish procedures to prohibit borrowing programs and facilities by insolvent borrowers.
Prohibits the Board from establishing any program or facility without the prior approval of the Secretary of the Treasury.
Prescribes a detailed report which the Board must present to Congress regarding the amount and terms of financial assistance granted to a financial entity.
(Sec. 1102). Authorizes the Comptroller General to conduct audits and onsite examinations, if appropriate, of the Federal Reserve Board, a federal reserve bank, or a credit facility, solely for the purposes of assessing: (1) the operational integrity, accounting, financial reporting, and internal controls governing special Federal Reserve credit facilities or a covered transaction (any open market transaction or discount window advance); (2) the effectiveness of the security and collateral policies established for the facility or covered transaction in mitigating risk to the Federal Reserve bank and taxpayers; (3) whether the credit facility or the conduct of a covered transaction inappropriately favors one or more specific participants over other institutions eligible to utilize the facility; and (4) the policies governing the use, selection, or payment of third-party contractors by or for any credit facility or to conduct any covered transaction. Requires the Comptroller to report to Congress on each such audit.
Declares certain nondisclosure obligations inapplicable to the credit facilities Maiden Lane, Maiden Lane II, and Maiden Lane III.
(Sec. 1103) Amends the FRA to direct the Federal Reserve Board to make accessible to the public: (1) a web page serving as a repository of information for at least six months following release of certain financial reports (including reports relating to emergency lending authority); and (2) information concerning borrowers and counterparties participating in emergency credit facilities, discount window lending programs, and open market operations authorized or conducted by the Board or a federal reserve bank.
Directs the Inspector General of the Board to study the impact that the FOIA exemption for information concerning such borrowers and counterparties has had on the ability of the public to access information about Federal Reserve Board administration of emergency credit facilities, discount window lending programs, and open market operations.
(Sec. 1104) Authorizes the Secretary of the Treasury to request the FDIC and the Board to determine whether a liquidity event exists that warrants use of a widely available program to guarantee obligations of solvent insured depository institutions or solvent depository institution holding companies during times of severe economic distress.
(Sec. 1105) Directs the FDIC, upon its determination together with the Board, to create such a program. Prohibits such a guarantee of obligations, however, from including the provision of equity in any form.
Prescribes procedures for creation of such a program, as well as a fast track legislative process for adoption of a request for guarantees.
Requires the FDIC to charge fees and other assessments to all program participants.
(Sec. 1106) Requires the FDIC, upon default of an insured depository institution or depository institution holding company participant in either the emergency financial stabilization program, or in a statutory debt guarantee program, to: (1) appoint itself as receiver for such institution; and (2) with respect to any other participant in default that is not an insured depository institution, to require a bankruptcy process for resolving the company.
(Sec. 1107) Requires the president of a Federal Reserve Bank to be appointed by its Class B and Class C directors, with the Board’s approval.
(Sec. 1108) Amends the FRA to require the President to designate two Vice Chairmen of the Federal Reserve Board (currently only one). Establishes the position of Vice Chairman for Supervision to: (1) develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board; and (2) oversee the supervision and regulation of such firms.
Prohibits the Board from delegating to a Federal Reserve Bank its functions for the establishment of policies for the supervision and regulation of depository institution holding companies and other financial firms supervised by the Board.
(Sec. 1109) Directs the Comptroller General to conduct a one-time audit of, and report to Congress on, all financial assistance provided between December 1, 2007, and the date of enactment of this Act by either the Board or a Federal Reserve Bank under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Term Asset-Backed Securities Loan Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Term Securities Lending Facility, the Term Auction Facility, Maiden Lane, Maiden Lane II, Maiden Lane III, the agency Mortgage-Backed Securities program, foreign currency liquidity swap lines, and certain other programs. Requires the Board to publish on its website specified information about such assistance and its recipients.
Directs the Comptroller General to audit and report to Congress on the governance of the Federal Reserve Bank System.
Title XII: Improving Access to Mainstream Financial Institutions – Improving Access to Mainstream Financial Institutions Act of 2010 – (Sec. 1202) Authorizes the Secretary to establish a multiyear program of grants, cooperative agreements, and financial agency agreements to: (1) promote initiatives that enable low- and moderate-income individuals to establish accounts in a federally insured depository institution and improve access to the provision of accounts on reasonable terms; and (2) provide low-cost, small loans to consumers as alternatives to more costly small dollar loans.
Authorizes the Secretary also to implement measures or programs designed to expanded access to financial literacy and education opportunities for individuals who obtain loans, including counseling services, educational courses, or wealth building programs.
(Sec. 1206) Amends the Community Development Banking and Financial Institutions Act of 1994 to require the Community Development Financial Institutions Fund (Fund in this title) to make grants to community development financial institutions to: (1) enable them to establish a loan-loss reserve fund in order to defray the costs of establishing a small dollar loan program; and (2) help them maintain a small dollar loan program.
Prescribes a 50% matching requirement and the uses of Fund grants. Prohibits a recipient institution from providing direct loans to consumers.
Title XIII: Pay It Back Act – Pay It Back Act – (Sec. 1302) Amends the Emergency Economic Stabilization Act of 2008 (EESA) to reduce to $472 billion the authority of the Secretary of the Treasury to purchase troubled assets under the Troubled Asset Relief Program (TARP).
Prohibits reducing the amount of authority considered to be exercised by the Secretary by: (1) any amounts received by the Secretary from repayment of the principal of financial assistance by a recipient under any EESA program; (2) any amounts committed for any TARP guarantee that became or become uncommitted; or (3) any losses realized by the Secretary.
Prohibits using EESA authority to incur any obligation for a program or initiative that was not initiated before June 25, 2010.
(Sec. 1303) Requires the Secretary to report to Congress every six months on transfer to the Treasury’s General Fund for reduction of the public debt of revenues of, and proceeds from the sale of troubled assets purchased under TARP, or from the sale, exercise, or surrender of warrants or senior debt instruments acquired under TARP.
(Sec. 1304) Amends the Federal National Mortgage Association Charter Act, the Federal Home Loan Mortgage Corporation Act, and the Federal Home Loan Bank Act to require the Secretary to deposit in the Treasury solely for debt reduction any amounts received by the Secretary for the sale of any obligation or security acquired from Fannie Mae, Freddie Mac, or a Federal Home Loan Bank for secondary market operations. Prohibits the use of any such amounts as an offset for other spending increases or revenue reductions.
Requires deposit in the Treasury solely for debt reduction of any periodic commitment fee or any other fee or assessment paid to the Secretary by Fannie Mae or Freddie Mac as a result of any preferred stock purchase agreement, mortgage-backed security purchase program, or any other program or activity under the Housing and Economic Recovery Act of 2008.
(Sec. 1305) Requires the Director of the Federal Housing Finance Agency (FHFA) to report to Congress on FHFA plans to continue to support the nation’s vital housing industry, while at the same time guaranteeing that the American taxpayer will not suffer unnecessary losses.
(Sec. 1306) Amends the American Recovery and Reinvestment Act of 2009 (ARRA) to require: (1) rescission of any ARRA (stimulus) funds offered to but not accepted by the governor or legislature of a state; and (2) their deposit in the Treasury solely for debt reduction. Requires the same treatment for any funds withdrawn or recaptured by an executive agency head which have not been obligated by a state to a local government or for a specific project.
Rescinds for deposit in the Treasury solely for debt reduction specified discretionary appropriations that have not been obligated as of December 31, 2012.
Authorizes the President to waive repayment of unobligated funds if the President determines that it is not in the best interest of the Nation to rescind a specific unobligated amount after December 31, 2012.
Title XIV: Mortgage Reform and Anti-Predatory Lending Act – Mortgage Reform and Anti-Predatory Lending Act – Designates specified subtitles and sections of title XIV as enumerated consumer law falling within the purview of the CFPB for purposes of title X of this Act.
Subtitle A: Residential Mortgage Loan Origination Standards – (Sec. 1402) Amends the Truth in Lending Act (TILA) to prescribe fiduciary standards applicable to originators of residential mortgages.
Instructs the Federal Reserve Board to prescribe regulations requiring depository institutions to establish procedures to assure and monitor compliance with this Act.
(Sec. 1403) Prohibits: (1) steering incentives in connection with residential mortgage loan origination;and (2) restructuring of a financing origination fee, except in certain circumstances.
Directs the Board to prohibit specified mortgage origination practices, including steering a consumer to a residential mortgage loan that: (1) the consumer lacks a reasonable ability to repay; or (2) has predatory characteristics or effects (such as equity stripping, excessive fees, or abusive terms).
(Sec. 1404) Sets forth the maximum liability of a mortgage originator to a consumer for violation of the residential mortgage loan origination requirements of this title, in addition to court costs and attorney fees, at the greater of: (1) actual damages; or (2) three times the total amount of direct and indirect compensation or gain accruing to the originator in connection with the loan involved.
(Sec. 1405) Requires the Board to prohibit or condition terms, acts, or practices relating to residential mortgage loans that are found to be either: (1) abusive, unfair, deceptive, predatory; or (2) necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in a manner consistent with Board-prescribed minimum standards for residential mortgage loans to prevent their circumvention or evasion or to facilitate compliance with them; or (3) not in the borrower’s interest.
(Sec. 1406) Requires the HUD Secretary to study regulatory requirements that would provide: (1) widespread use of shared appreciation mortgages to strengthen local housing markets; (2) new opportunities for affordable home ownership; and (3) homeowners at risk of foreclosure with the ability to refinance or modify their mortgages.
Subtitle B: Minimum Standards for Mortgages – (Sec. 1411) Prescribes minimum standards for residential mortgage loans, including a requirement that a residential mortgage loan creditor: (1) make a reasonable and good faith determination based upon verified and documented information that the consumer has a reasonable ability to repay all loans on the same dwelling and applicable taxes, insurance (including mortgage guarantee insurance), and assessments; (2) use a fully amortizing repayment schedule for purposes of determining a consumer’s ability to repay a variable rate loan that defers repayment of principal or interest; and (3) verify amounts of income or assets upon which such creditor relies to determine repayment ability by reviewing the consumer’s tax withholding form, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets.
Exempts from the income verification requirement under certain conditions: (1) streamlined refinancings made by certain federal departments or agencies, and (2) reverse mortgages and bridge loans,.
(Sec. 1412) Authorizes any creditor or assignee subject to liability under this Act with respect to any residential mortgage loan to presume that it has met the minimum standards for such a loan if it is a qualified mortgage meeting specified criteria that does not result in a balloon payment.
Authorizes the Board by regulation to include as a qualified mortgage any balloon loan meeting the same specified criteria if it meets certain other criteria as well, including that it is extended by a creditor operating predominantly in rural or underserved areas.
(Sec. 1413) Authorizes a consumer, in a foreclosure proceeding on a residential mortgage loan, to assert as a matter of defense by recoupment or set off without regard for the time limit on a private action for damages under TILA, that the foreclosure-initiating creditor, assignee, or other holder of the mortgage: (1) violated the prohibition against certain steering incentives, or (2) failed to make a reasonable and good faith determination that the consumer had a reasonable ability to repay the mortgage.
(Sec. 1414) Prohibits specified practices, including: (1) certain prepayment penalties on specified mortgage loans; (2) single premium credit insurance; (3) mandatory arbitration or other nonjudicial procedure (except for reverse mortgages); (4) residential mortgage loan terms that waive a statutory cause of action by the consumer; and (5) mortgages with negative amortization (except, again, for reverse mortgages), unless certain disclosures are made and a first-time borrower receives home ownership counseling.
Excludes from the meaning of qualified mortgage for these purposes any residential mortgage loan with: (1) an adjustable rate; or (2) an annual percentage rate (APR) exceeding the average prime offer rate for a comparable transaction, as of the date the interest rate is set according to a specified formula. Requires publication of average prime offer rates and APR thresholds.
Requires a creditor or mortgage originator, before loan consummation or loan refinancing, to disclose the protection provided by a state anti-deficiency law and its significance for the consumer upon the loss of that protection. (A state anti-deficiency law shields a consumer mortgagor from liability for any deficiency between a foreclosure sale price and the outstanding balance of the mortgage.)
Requires a residential mortgage loan creditor to disclose before settlement: (1) the creditor’s policy regarding partial payments and their application to the mortgage, and (2) whether partial payments will be placed in escrow.
(Sec. 1416) Doubles civil money penalties for certain violations.
(Sec. 1417) Shields a creditor, assignee, or securitizer from liability and rescission in the case of a borrower convicted of obtaining residential mortgage loan by fraud or deception.
(Sec. 1418) Requires a six-month notice period before a hybrid adjustable rate mortgage is reset.
(Sec. 1419) Prescribes creditor disclosures for: (1) variable rate residential mortgage loans for which an escrow or impound account will be established to pay taxes, insurance, and assessments; and (2) periodic statements for residential mortgage loans.
(Sec. 1421) Directs the Comptroller General to study the effects that enactment of this Act will have upon the availability and affordability of credit for consumers, small businesses, home buyers, and mortgage lending, including the effect upon: (1) the mortgage market for mortgages that are not within the safe harbor provided in this Act; (2) the ability of prospective home buyers to obtain financing; and (3) the refinance ability of homeowners facing resets or adjustments.
(Sec. 1422) Authorizes state attorneys general to bring an action to enforce the requirements of subtitle A (residential mortgage loan origination) and subtitle B (minimum standards for residential mortgage loans).
Subtitle C: High-Cost Mortgages – (Sec. 1431) Prescribes standards for points and fees related to: (1) high-cost mortgages; (2) open-end consumer credit plans; and (3) bona fide discount points and prepayment penalties.
(Sec. 1432) Repeals the allowance of prepayment penalties for certain mortgages.
Prohibits a high-cost mortgage from containing a scheduled payment that is more than twice as large (balloon payment) as the average of earlier scheduled payments.
(Sec. 1433) Prescribes additional requirements for certain mortgages.
Prohibits a creditor from: (1) recommending default on an existing debt prior to and in connection with the closing of a high-cost mortgage that refinances any portion of such debt; (2) imposing late payment fees in connection with a high-cost mortgage except in compliance with specified requirements; (3) accelerating debt on a high-cost mortgage (except in certain circumstances); or (4) financing, in connection with any high-cost mortgage, either a prepayment fee or penalty payable by the consumer if the creditor is the note holder of the note being refinanced.
Prohibits the creditor of a high-cost mortgage from implementing certain evasions, structured transactions, and reciprocal arrangements.
Prohibits a creditor from charging a consumer any fee to modify, renew, extend, or amend a high-cost mortgage, or to defer any payment due under such mortgage.
Prohibits any fee for payoff statements other than a processing fee.
Requires a creditor, as a prerequisite to extending consumer credit under a high-cost mortgage, to receive certification from a HUD-approved counselor that the consumer has received counseling on the advisability of the mortgage.
Prescribes a procedure by which a high cost loan creditor or assignee that, acting in good faith, commits an unintentional violation of these prohibitions and other requirements may make timely corrections and avoid liability for the violation.
Subtitle D: Office of Housing Counseling – Expand and Preserve Home Ownership Through Counseling Act – (Sec. 1442) Amends the Department of Housing and Urban Development Act to establish within HUD the Office of Housing Counseling, whose Director shall have primary responsibility for all activities and matters relating to both home ownership and rental housing counseling.
(Sec. 1443) Amends the Housing and Urban Development Act of 1968 to require the HUD Secretary to: (1) prescribe counseling procedures for home ownership and rental counseling; and (2) provide for certification of computer software programs for consumers to evaluate different residential mortgage loan proposals.
Requires the Director to: (1) develop and conduct national public service multimedia campaigns promoting housing counseling; and (2) use specified funds to conduct foreclosure rescue education programs, with emphasis upon retirement and low-income minority communities. Authorizes appropriations for FY2009-FY2011.
(Sec. 1444) Requires the HUD Secretary to provide financial assistance (grants) to HUD-approved housing counseling agencies and state housing finance agencies that offer home ownership and rental counseling.
Reauthorizes through FY2012: (1) the Office of Housing Counseling; (2) the Director of Housing Counseling; and (3) assistance to entities providing home ownership and rental counseling.
(Sec. 1445) Requires an organization that receives federal assistance for counseling activities to be HUD-certified.
(Sec. 1446) Directs the HUD Secretary to study and report to Congress on: (1) the root causes of home loan defaults and foreclosures, including the role of escrow accounts in helping prime and nonprime borrowers to avoid defaults and foreclosures; and (2) the role of computer registries of mortgages, including those used for trading mortgage loans.
(Sec. 1447) Directs the HUD Secretary and the CFPB Director to establish on a census tract basis a default and foreclosure database on mortgage loans for one- to four-unit residential properties, and to make such information publicly available.
(Sec. 1449) Directs the Secretary to develop a funds-tracking system, including accountability and transparency criteria, to ensure that grant recipients use all amounts of financial assistance in accordance with specified requirements.
(Sec. 1450) Amends the Real Estate Settlement Procedures Act of 1974 (RESPA) to require the CFPB Director to: (1) prepare, at least once every five years, a booklet to help federally related mortgage loan applicants of different ethnic and cultural backgrounds to understand the nature and costs of real estate settlement services; and (2) distribute to all lenders that make federally related mortgage loans both the booklets and lists of HUD-certified home ownership counselors.
(Sec. 1451) Requires the HUD Secretary to take necessary steps to inform potential home buyers, through FHA-approved mortgage lenders, of the availability and importance of obtaining an independent home inspection.
(Sec. 1452) Allocates specified funds to the Neighborhood Reinvestment Corporation for activities to make borrowers who are delinquent on certain loans aware of the dangers of fraudulent activities associated with foreclosure.
Subtitle E: Mortgage Servicing – (Sec. 1461) Amends TILA to require a creditor in a non-credit card consumer credit transaction secured by a first lien on the principal dwelling (other than a reverse mortgage) to establish an escrow or impound account for mandatory periodic payments or premiums (including taxes, insurance, and ground rents). Allows exemptions from this requirement for creditors that operate predominantly in rural or underserved areas and retain their mortgage originations in portfolio.
Prohibits making an escrow or impound account a condition of a real property sale contract or a loan secured by a first deed of trust or mortgage on the consumer’s principal dwelling unless specified circumstances exist.
Requires such escrow or impound account to remain in existence for at least five years until sufficient equity exists so that private mortgage insurance is no longer required, or unless the underlying mortgage is terminated.
States that: (1) escrow accounts need not be established for loans secured by shares in a cooperative; and (2) insurance premiums need not be included in escrow accounts for loans secured by condominium units if the condominium association has an obligation to unit owners to maintain a master insurance policy.
Requires: (1) escrow accounts to be established in a federally insured depository institution or credit union; and (2) each creditor to pay interest on the amount held in such accounts as required by state or federal law.
Requires specified consumer disclosures regarding a mandatory escrow or impound account before consummation of the credit transaction giving rise to such account.
(Sec. 1462) Requires creditors to provide specified disclosures for consumers who waive escrow services.
(Sec. 1463) Amends RESPA to prohibit the servicer of a federally related mortgage from engaging in certain practices, including obtaining force-placed hazard insurance, unless there is reason to believe the borrower has failed to comply with the loan contract requirements. (Force-placed hazard insurance is coverage obtained by the servicer when the borrower has failed to comply with hazard insurance requirements under the terms of the mortgage.)
Prescribes notice and borrower non-response requirements for loan servicers to obtain force-placed insurance.
Doubles the penalties for loan servicer noncompliance with RESPA disclosure requirements.
Reduces from 20 days to 5 the time within which loan servicers are required to respond to borrower inquiries.
Requires any remaining escrow balance that is within the control of the loan servicer at the time the loan is paid off to be: (1) promptly returned to the borrower within 20 business days; or (2) credited to a similar account for a new mortgage loan to the borrower with the same lender.
(Sec. 1464) Amends TILA to prohibit a loan servicer, except in a specified circumstance, from failing to credit a payment to the consumer’s account as of the date of receipt.
Requires a creditor or servicer of a home loan to send an accurate payoff balance no later than seven business days after receipt of a written request for it.
(Sec. 1465) Requires repayment disclosures regarding a first mortgage- or lien-secured consumer credit transaction to take into account the amount of monthly escrow payments, including: (1) the taxable assessed value of the real property securing the transaction after consummation of the transaction, (2) the value of any improvements on the property or to be constructed on it, and (3) the replacement costs of the property for hazard insurance in the initial year after the transaction.
Subtitle F: Appraisal Activities – (Sec. 1471) Amends TILA to set forth property appraisal requirements for a creditor who extends higher-risk mortgage credit to a consumer, including: (1) a written appraisal performed by a certified or licensed appraiser who conducts a physical property visit of the interior of the mortgaged property; (2) a free copy of such appraisal to the applicant before the transaction closing date; and (3) a statement by the creditor at the time of the initial mortgage application that the appraisal is for its sole use, and that the applicant, at its own expense, may choose to have a separate appraisal.
Requires a creditor to obtain a second appraisal from a different certified or licensed appraiser if the purpose of a higher-risk mortgage (other than a HUD-insured reverse mortgage) is to finance the purchase or acquisition of the mortgaged property from a person within 180 days of the purchase or acquisition of such property by that person at a price lower than the current sale price of the property.
(Sec. 1472) Prescribes appraisal independence requirements. Declares unlawful specified acts or practices that violate such requirements in connection with a consumer credit transaction secured by the consumer’s principal dwelling.
Includes among unfair and deceptive practices any appraisal of a property offered as security in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person conducting or involved in the appraisal.
Includes, in addition, among such practices: (1) mischaracterizing, or suborning mischaracterization of, the appraised value of the property securing the extension of the credit; (2) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the transaction; and (3) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered.
Prohibits a certified or licensed appraiser or appraisal management company from having an interest, financial or otherwise, in the property or transaction involving the appraisal.
Authorizes the Board, the CFPB, and designated federal agencies to jointly issue regulations addressing the issue of appraisal report portability, including regulations that ensure such portability between lenders for a consumer credit transaction secured by a 1-4 unit single family residence that is the principal dwelling of the consumer, or mortgage brokerage services for such a transaction.
Subjects to civil penalties violations of appraisal independence requirements.
Declares that the deference that a court accords to the CFPB with respect to its determination of the meaning or interpretation of any TILA provisions (except property appraisal requirements) shall be applied as if the CFPB were the only agency authorized to apply, enforce, interpret, or administer such provisions.
(Sec. 1473) Amends the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to condition the establishment by a federal financial institutions regulatory agency and the Resolution Trust Corporation of a threshold level at or below which a certified or licensed appraiser is not required to perform appraisals in connection with federally related transactions on the agency’s receiving concurrence from the CFPB that such threshold level provides reasonable protection for consumers who purchase 1-4 unit single-family residences.
Directs the Appraisal Subcommittee of the Federal Financial Institutions Examination Council (FFIEC) to detail in its annual report to Congress: (1) the results of all audits of state appraiser regulatory agencies; and (2) an accounting of disapproved actions and warnings taken in the previous year, including the conditions causing the disapproval and the actions taken to achieve compliance.
Requires Subcommittee meetings to be open to the public, but authorizes the closing of certain portions related to personnel and review of preliminary state audit reports.
Requires the Subcommittee to: (1) monitor state requirements for the registration and supervision of an appraisal management company; and (2) maintain a national registry of appraisal management companies that either are registered with and subject to supervision of a state appraiser certifying and licensing agency or are operating subsidiaries of a federally regulated financial institution.
Directs designated federal financial regulatory agencies, including the Federal Reserve Board and the CFPB, to jointly establish, by rule, minimum requirements a state must apply in the registration of appraisal management companies. Applies these same requirements to, and exempts from any state registration requirement, an appraisal management company that is a subsidiary owned and controlled by a financial institution and regulated by a federal financial institution regulatory agency.
Sets forth: (1) registration limitations; (2) additional state agency reporting requirements; and (3) revised registry fees.
Authorizes the Subcommittee to award grants to state appraiser certifying and licensing agencies in order to support their compliance with this Act.
Requires the criteria for state licensing of an appraiser to meet or exceed the minimum criteria issued by the Appraisal Qualifications Board of The Appraisal Foundation for the licensing of real estate appraisers.
Requires the Subcommittee to monitor whether each state appraiser certifying and licensing agency: (1) processes complaints and completes investigations in a reasonable time period; (2) appropriately disciplines sanctioned appraisers and appraisal management companies; (3) maintains an effective regulatory program; and (4) reports complaints and disciplinary actions on a timely basis to the national registries on appraisers and appraisal management companies.
Authorizes the Subcommittee to: (1) remove a state licensed or certified appraiser or a registered appraisal management company from a national registry on an interim basis pending state agency action on licensing, certification, registration, and disciplinary proceedings; (2) impose sanctions against a state agency that fails to have an effective appraiser regulatory program; and (3) impose interim actions and suspensions against a state agency as an alternative to, or in advance of, derecognition of a state agency.
Prohibits appraisal of a federally related transaction by a state- certified or -licensed appraiser unless the state appraiser certifying or licensing agency has in place a policy of issuing a reciprocal certification or license for an individual from another state who meets certain state licensure standards.
Requires the Subcommittee to monitor each state appraiser certifying and licensing agency to determine whether: (1) its policies, practices, and procedures are consistent with maintaining appraiser independence; and (2) such state has effective regulations, and policies regarding the maintenance of appraiser independence.
Requires the Subcommittee to establish and operate an Appraisal Complaint National Hotline, including a toll-free telephone number and an email address.
Requires designated federal financial institution regulatory agencies, including the CFPB and the Subcommittee,to promulgate regulations to implement quality control standards governing automated valuation models (computerized models used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured by a consumer’s principal dwelling).
Prohibits the use of broker price opinions as the primary basis to evaluate property for loan origination in connection with a residential mortgage loan secured by such property. (Defines broker price opinion as an estimate prepared by a real estate broker, agent, or sales person that: (1) details the probable selling price of a particular piece of real estate property; and (2) provides a varying level of detail about the property’s condition, market, and neighborhood, and information on comparable sales; but (3) does not include an automated valuation model.)
Amends the Federal Financial Institutions Examination Council Act of 1978 to require that at all times at least one member of the Appraisal Subcommittee have demonstrated knowledge and competence through licensure, certification, or professional designation within the appraisal profession.
(Sec. 1474) Amends the Equal Credit Opportunity Act (ECOA) to revise requirements that creditors provide loan applicants a copy of the appraisal report used in connection with the loan application secured by a lien on residential real property. Repeals the condition that the loan applicant request the copy. Requires a creditor to furnish the applicant with a copy of all written appraisals and valuations within three days after the closing of the loan.
(Sec. 1475) Amends RESPA to permit the standard real estate settlement form to disclose, in the case of an appraisal coordinated by an appraisal management company, the fee paid directly by the company to the appraiser and the company’s administration fee.
(Sec. 1476) Instructs GAO to study: (1) the effectiveness and impact of certain appraisal methods, models, and distribution channels; (2) the Home Valuation Code of Conduct (HVCC); and (3) certain Appraisal Subcommittee functions, including its ability to monitor and enforce state and federal certification requirements and standards.
Subtitle G: Mortgage Resolution and Modification – (Sec. 1481) Directs the HUD Secretary to develop a program to ensure protection of current and future tenants and at-risk multifamily properties.
Denies persons convicted within the last 10 years of specified crimes involving a mortgage or real estate transaction any eligibility for mortgage assistance from the Making Home Affordable Program authorized or funded by the Emergency Economic Stabilization Act of 2008.
(Sec. 1482) Instructs the Secretary of the Treasury to revise the supplemental directives and other guidelines for the Home Affordable Modification Program (HAMP) of the Making Home Affordable initiative to require each mortgage servicer participating in HAMP to provide each borrower denied a mortgage modification with all borrower-related and mortgage-related input data used in any net present value (NPV) analyses performed in connection with the mortgage.
Directs the Secretary to establish a public website that provides: (1) a calculator for NPV analyses of a mortgage, based on the Secretary’s methodology for calculating such value, that mortgagors can use to enter information regarding their own mortgages; and (2) a determination after entering such information of whether such mortgage would be accepted or rejected for modification under the Program.
(Sec. 1483) Directs the Secretary of the Treasury to revise the HAMP guidelines to make public the data being collected from each participating mortgage servicer and lender.
(Sec. 1484) Amends the Protecting Tenants at Foreclosure Act with respect to the requirement that any immediate successor in interest in residential real property pursuant to foreclosure of a federally-related mortgage loan assume that interest subject to certain conditions. Deems the date of a notice of such a foreclosure to be the date upon which complete title to a property is transferred to a successor entity or person as a result of a court order or pursuant to provisions in a mortgage, deed of trust, or security deed.
Subtitle H: Miscellaneous Provisions – (Sec. 1491) Expresses the sense of Congress that efforts to enhance the terms of residential mortgage credit and practices would be incomplete without enactment of meaningful structural reforms of Fannie Mae and Freddie Mac.
(Sec. 1492) Directs the Comptroller General to study certain interagency efforts to crackdown on mortgage foreclosure rescue scams and loan modification fraud in order to advise Congress on the risks and vulnerabilities of emerging schemes in the loan modification arena.
(Sec. 1493) Amends the Helping Families Save Their Homes Act of 2009 to require each state to report certain mortgage data.
(Sec. 1494) Directs the HUD Secretary to study the effect upon residential mortgage loan foreclosures of: (1) the presence of drywall imported from China between 2004 and the end of 2007; and (2) the availability of property insurance for residential structures in which such drywall is present.
(Sec. 1496) Makes necessary sums available to the HUD Secretary to provide $1 billion in emergency mortgage assistance through the Emergency Homeowners’ Relief Fund for such purpose.
Amends the Emergency Housing Act of 1975 to permit emergency mortgage assistance if the mortgagor has incurred a substantial reduction in income as a result of involuntary unemployment or underemployment due to medical conditions.
Revises requirements for emergency mortgage assistance to replace the maximum amount of $250 per month with an amount determined reasonably necessary to supplement what the homeowner is capable of contributing toward the mortgage payment. Caps the aggregate amount of such assistance to any homeowner at $50,000.
Makes the interest rate fixed for the life of an insured loan or credit advance. Limits the interest rate to that generally charged for HUD-insured mortgages on single-family housing. Prohibits the charging of any interest on deferred interest on such a loan or credit advance. Requires the Secretary, in establishing rates, terms, and conditions for loans or advances of credit, to take into account a homeowner’s ability to repay such loan or credit advance.
Authorizes any eligible homeowner who receives such a grant or credit advance to repay the loan in full, without penalty, by lump sum or by installment payments at any time before it becomes due and payable.
Repeals the 40% cap on the total amount of loans and credit advances by a financial institution that may be insured, and the 90% cap on the payment of any single loss claim that may be paid out.
Increases from $1.5 billion to $3 billion the cap on the aggregate amount of insured loans and advances, but includes emergency mortgage relief payments in such amount.
Directs the Secretary to establish underwriting guidelines or procedures to allocate amounts made available for incurred loans and advances and for emergency relief payments, based on the likelihood that a mortgagor will be able to resume mortgage payments.
Repeals the authorization for the emergency mortgage relief program, but extends through FY2011 the authority to insure loans and credit advances under the program and to make emergency mortgage relief payments.
Repeals the authority of each federal supervisory agency to waive or relax limitations pertaining to their operations with respect to mortgage delinquencies in order to cause or encourage forbearance in residential mortgage loan foreclosures. Repeals certain reporting requirements as well as the authority of the FDIC to make credit advances to insured banks to facilitate their participation in the emergency mortgage relief program.
(Sec. 1497) Makes $1 billion available to the HUD Secretary for assistance to state and local governments for the redevelopment of abandoned and foreclosed homes.
(Sec. 1498) Directs the HUD Secretary to establish a grants program to provide a full range of foreclosure legal assistance to low- and moderate-income homeowners and tenants related to home ownership preservation, home foreclosure prevention, and tenancy associated with home foreclosure.
Title XV: Miscellaneous Provisions – (Sec. 1501) Amends the Bretton Woods Agreements Act to direct the Secretary of the Treasury to instruct the U.S. Executive Director at the International Monetary Fund (IMF) to: (1) evaluate, before consideration by the IMF Board of Executive Directors, any proposal to make a loan to a country whose public debt exceeds its gross domestic product if that country is not eligible for assistance from the International Development Association; and (2) oppose the proposal if such evaluation indicates the proposed loan is unlikely to be repaid in full.
Directs the Secretary to assess annually the likelihood that loans made pursuant to such proposals will be repaid in full.
(Sec. 1502) Expresses the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo (DRC) helps finance conflict characterized by extreme levels of violence in the eastern DRC , particularly sexual- and gender-based violence, and contributes to an emergency humanitarian situation therein, warranting certain disclosures under the Securities Exchange Act of 1934.
Amends the Securities Exchange Act of 1934 to direct the SEC to issue regulations requiring persons for which conflict minerals are necessary to the functionality or production of a product manufactured by that person to make annual disclosures of whether any such conflict minerals originated in the DRC or an adjoining country. Requires the report, regarding any minerals that did originate in the DRC or an adjoining country, to describe: (1) due diligence measures taken on the source and chain of custody of such minerals; and (2) the products manufactured, or contracted to be manufactured, that are not DRC conflict free. Defines “DRC conflict free” as products that do not contain minerals that directly or indirectly finance or benefit armed groups in the DRC or an adjoining country.
Instructs the Secretary of State to: (1) submit to Congress a strategy to address the linkages between human rights abuses, armed groups, mining of conflict minerals, and commercial products; (2) produce and update periodically a map of mineral-rich zones, trade routes, and areas under the control of armed groups in the DRC and adjoining countries (“Conflict Minerals Map”); and (3) publish in the Federal Register a notice of intent to declare a mineral a conflict mineral.
Directs the Comptroller General to assess: (1) the rate of sexual- and gender-based violence in war-torn areas of the DRC and adjoining countries; and (2) the effectiveness of these newly required reports in promoting peace and security in such countries.
Requires the Secretary of Commerce to assess the accuracy of independent private sector audits and other due diligence processes.
(Sec. 1503) Requires securities issuers required to report to the SEC that are coal or other mine operators, or that have subsidiaries that are mine operators, to include in periodic reports to the SEC, among other things, the total number per mine of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard for which the operator received a citation from the Mine Safety and Health Administration. Requires reports, also, of imminent danger orders and written notices of patterns of violations of such standards, or the potential to have such a pattern.
(Sec. 1504) Amends the Securities Exchange Act of 1934 to direct the SEC to: (1) promulgate final rules requiring each resource extraction issuer to include in its annual report information, in an interactive data format, detailing any payment made by the issuer, a subsidiary, or an entity under its control to a foreign government or the federal government for the purpose of the commercial development of oil, natural gas, or minerals; and (2) make a compilation of such information publicly accessible online.
(Sec. 1505) Directs the Comptroller General to assess: (1) the relative independence, effectiveness, and expertise of presidentially appointed inspectors general and inspectors general of designated federal entities; and (2) the effects on independence of the amendments to the Inspector General Act of 1978 made by this Act.
(Sec. 1506) Directs the FDIC to evaluate: (1) the definition of core deposits for the purpose of calculating the insurance premiums of banks; (2) the potential impact on the Deposit Insurance Fund of revising the definitions of brokered deposits and core deposits to better distinguish between them; (3) the differences between core deposits and brokered deposits and their role in the economy and the domestic banking sector; (4) the potential stimulative effect on local economies of redefining core deposits; and (5) the competitive parity between large institutions and community banks that could result from redefining core deposits.
Title XVI: Section 1256 Contracts – Amends the Internal Revenue Code to exclude from the definition of a Section 1256 contract any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement. (Thus shields such instruments from treatment as sold for its fair market value [marked to market] on the last business day of the taxable year for capital gains or loss taxation purposes).