aba summary of reg restructuring legis

8/6/2019 ABA Summary of Reg Restructuring Legis

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Summary

Of

The Restoring American Financial Stability Act of 2010(Regulatory Restructuring Legislation)

Passed by the Senate

On

May 20, 2010


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AMERICAN BANKERS ASSOCIATION 4

Table of Contents

Title I Financial Stability Page 4Title II Orderly Liquidation Authority Page 8Title III Transfer of Powers to the Comptroller of the Currency,

the Corporation, and the Board of Governors Page 11Title IV Regulation of Advisers to Hedge Funds and Others Page 13

Title V Insurance Page 14Title VI Improvements to Regulation of Bank and Savings AssociationHolding Companies and Depository Institutions Page 16

Title VII Improvements to Regulation of Over-the-Counter Derivatives Markets Page 19Title VIII Payment, Clearing, and Settlement Supervision Page 23Title IX Investor Protections and Improvements to the Regulation of Securities Page 24Title X Bureau of Consumer Financial Protection Page 28Title XI Federal Reserve System Provisions Page 34Title XII Improving Access to Mainstream Financial Institutions Page 35Title XIII Pay It Back Act Page 36Title XIV Miscellaneous Page 36Title XV Congo Conflict Minerals Page 36

TITLE I FINANCIAL STABILITY(Back to Table of Contents)

This title creates a new systemic risk regulator that would focus on identifying, monitoring, andaddressing systemic risks posed by large and complex bank and non-bank companies, as well as anysystemic risks posed by certain products and services.

A new provision, added as anamendmentby Sen. Susan Collins (R-ME) on the Senate floor, wouldimpose new capital requirements on banks, bank holding companies, and non-bank financial

companies that are subject to Federal Reserve Board (Fed) oversight. The provision would require thefollowing:

The banking agencies would have to adopt minimum leverage and risk-based capital standardsthat use the components of capital that are used by the agencies in the Prompt Corrective Actionrules. This would mean that certain forms of capital that are popular at the holding companylevel including trust preferred securities and the U.S. Treasurys investments in holdingcompanies under the Capital Purchase Program would no longer count as Tier 1 capital.

The Collins amendment would have the effect of eliminating the Feds Small Bank HoldingCompany Policy Statement, which currently provides flexibility for bank holding companies

under $500 million in consolidated assets to raise capital in ways that larger companies may not.

It may subject foreign banks that own U.S. banks to capital standards notwithstanding currentFed policy as stated in its SR 01-01.

The regulators would be required to develop capital standards that address the risks arisingfrom derivatives, securitized products, financial guarantees, securities borrowing and lending,repurchase agreements and reverse repurchase agreements; concentrations in assets for whichvalues are based on models rather than historical cost or prices deriving from deep and liquid
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higher capital, leverage, and liquidity requirements, as well as restrictions on growth, activities, andoperations. If the firm failed to submit an acceptable plan within two years, the Fed and FDIC couldorder the firm to divest assets or operations to facilitate an orderly resolution under the bankruptcycode. [Section 165(d)]

Credit Concentrations. Starting three years after enactment of the legislation, covered institutions

would be prohibited from having credit exposures to any unaffiliated company in amounts thatexceeded 25 percent of the institutions capital (or a lower threshold set by the Fed). Creditexposures would include loans, deposits, repo agreements, securities borrowing and lendingtransactions, guarantees, counterparty credit exposures, and similar transactions identified by the Fed.[Section 165(e)]

Risk Committees. All publicly traded non-bank financial companies supervised by the Fed, andpublicly traded BHCs with assets of $10 billion or more would be required to have risk committeesresponsible for enterprise-wide risk management. The Fed also could require publicly traded BHCswith assets of less than $10 billion to have risk committees. The Fed would have 1 year to adopt rulesimplementing this section. [Section 165(g)]

Enhanced Disclosures and Stress Tests. The Fed may require covered institutions to make enhancedpublic disclosures regarding risk profile, capital adequacy, and risk management. [Section 165(f)] It alsomay conduct stress tests on covered institutions to determine their capital adequacy. [Section 165(h)]

Early Remediation Requirements. The Fed would have to adopt regulations that establishrequirements to provide for the early remediation of covered institutions. The regulations wouldrequire these institutions to take a series of increasingly stringent steps to minimize the probability thatthe institutions will become insolvent. The bill explicitly states that nothing in the section in questionauthorizes the government to provide financial assistance. [Section 166]

Acquisition of Large Non-Bank Companies. As a general rule, covered institutions would have to

give the Fed prior written notice to acquire control of any company (other than a bank) that is engagedin activities that are financial in nature and that have total assets of $10 billion or more. The Fed coulddisapprove a notice if the proposed acquisition would result in more concentrated risks. [Section 163]

Additional Authority over Non-Bank Financial Companies. The Fed would be authorized toexamine non-bank financial companies (and subsidiaries of these companies, including insureddepository subsidiaries) and to require the firms to submit reports to the Fed. In both cases, the Fedwould have to use existing disclosures and exam reports as much as possible. The Fed would haveenforcement authorities over non-bank financial companies (and all of their subsidiaries except insureddepository institutions) that are not functionally regulated as if the entities were BHCs. If a subsidiaryof a covered non-bank financial company is an insured depository institution or otherwise functionally

regulated, and if such entity did not comply with the Feds orders or otherwise posed a systemic threat,the Fed could recommend that the primary regulator take action. If that regulator did not initiate anaction within 60 days, the Fed would have the authority to take the recommended action as if thesubsidiary were a bank holding company. [Sections 161 and 162]

Non-bank financial companies supervised by the Fed would be treated like BHCs for purposes of bankacquisitions (meaning they would require the Feds permission to acquire more than 5 percent of thevoting shares of any bank). [Section 163]

Non-bank financial companies supervised by the Fed would not be required to comply with the


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TITLE III TRANSFER OF POWERS TO THE COMPTROLLER OF THE CURRENCY,

THE CORPORATION, AND THE BOARD OF GOVERNORS(Back to Table of Contents)

This title significantly changes the regulatory structure for federal and state banks and thrifts (includingmutual institutions).

A. Thrift CharterBeginning on the date of enactment no new federal thrift charters would be granted. After the transferdate,3

B.

the OTS would be abolished, and the current functions of the OTS would be divided up amongthe surviving agencies as indicated below. [Sections 311, 312, 313, 341]

A thrift that becomes a bank would be able to continue to operate any branch that it operated before itbecame a bank. [Section 342]

The Director of the CFPB would replace the OTS on the FDIC Board. [Section 332]

Agency Oversight Responsibilities After Transfer Date

The Senate bill as approved by the Banking Committee would have removed Federal Reserve Boardsupervisory authority over state member banks and over bank holding companies with less than $50billion in assets. Anamendmentby Sen. Kay Bailey Hutchison (R-TX) adopted on the Senate floorrestored the Feds authority over all state member banks and their holding companies, regardless ofsize.

As modified by the Hutchison amendment, the Senate bill provides for the following division ofsupervisory responsibilities:

Federal Reserve Board

Retains supervisory and regulatory authority (rule-writing authority) over all bank holdingcompanies.

Retains supervisory and regulatory authority over all state-member banks.

Gains supervision and regulatory authority over all savings and loan holding companies.

Rulemaking authority for inter-affiliate transactions and insider lending relating to savingsassociations.

OCC

Retains supervision and regulation of national banks.

Gains supervision of federal savings associations.

Gains regulatory authority over both federal and state savings associations.

3 One year after enactment, unless extended for an additional six months. [Section 311]
http://www.aba.com/aba/documents/Grassroots/RegulatoryRestructuringTalkingPoints/HutchisonKlobuchar_StateMemberBanks_AmendmentText.pdfhttp://www.aba.com/aba/documents/Grassroots/RegulatoryRestructuringTalkingPoints/HutchisonKlobuchar_StateMemberBanks_AmendmentText.pdfhttp://www.aba.com/aba/documents/Grassroots/RegulatoryRestructuringTalkingPoints/HutchisonKlobuchar_StateMemberBanks_AmendmentText.pdfhttp://www.aba.com/aba/documents/Grassroots/RegulatoryRestructuringTalkingPoints/HutchisonKlobuchar_StateMemberBanks_AmendmentText.pdf


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TITLE IV REGULATION OF ADVISERS TO HEDGE FUNDS AND OTHERS(Back to Table of Contents)

This title would generally amend the Investment Advisers Act of 1940 to expand SEC oversight overhedge fund advisers and others. In general, advisers to hedge funds worth over $100 million would berequired to register with the SEC as investment advisers and to disclose financial data for systemic riskpurposes.

A.The SEC would be able to issue regulations requiring independent public accountants to perform assetverification examinations on registered investment advisers who have custody of client assets. [Section411]

Investment Adviser Custody of Client Assets

B.The net worth standard for an accredited investor under the Securities Act of 1933 is set at $1 million,excluding the investors primary residence, for the first four years after enactment. After the first fouryears, the SEC may adjust the threshold every four years as needed for the protection of investors, inthe public interest, and in light of the economy. [Section 412]

Adjusting the Accredited Investor Standard

C.Hedge fund and other advisers would be subject to SEC registration and regulation. In particular:

Registration and Regulation of Certain Advisers

The exemption from SEC registration and regulation would be removed for advisers of less than 15clients and advisers to private funds (i.e., 3(c) (1) or 3(c) (7) funds) are explicitly required toregister with the SEC. However, banks that advise private funds would continue to be exempt fromregistration, because banks are excluded from the definition of investment advisers. [Section 403]

Advisers to venture capital funds would be excluded from registration and regulation, and familyoffices would be excluded from the definition of investment adviser. [Sections 407 and 409]

The threshold for investment adviser registration with the SEC would be raised from $25million to $100 million in assets under management. Advisers with less under managementcould be subject to state registration requirements. [Section 410]

Private fund advisers would be required by the SEC to submit and maintain reports and records forthe assessment of systemic risk by the Financial Stability Oversight Council. These reports wouldinclude: (1) Amount of assets under management; (2) Use of leverage; (3) Counterparty credit riskexposures; (4) Trading and investment positions; and (5) Trading practices. [Section 404]

D.The provisions in this title would become effective one year after the date of enactment of the Act.[Section 416]

Effective Date


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standards relating to liquidity and duration risk;

Consumer protection for insurance products and practices, including regulatory gaps in stateregulation;

The degree of national uniformity of state insurance regulation;

The regulation of insurance companies and affiliates on a consolidated basis; and

International coordination of insurance regulation.

The ONI would be directed to examine additional factors pertinent to the federal regulation ofinsurance. Those factors are:

The costs and benefits of potential federal regulation of insurance across various lines ofinsurance, excluding health insurance;

The feasibility of regulating certain lines of insurance at the federal level, while leaving other

lines of insurance to be regulated at the state level;

The ability of any potential federal regulation or federal regulators to eliminate or minimizeregulatory arbitrage;

The impact that developments in the regulation of insurance in foreign jurisdictions might haveon the potential federal regulation of insurance;

The ability of any potential federal regulation or federal regulator to provide robust consumerprotection for policyholders; and

Any other factors the ONI deems appropriate.

B. State Based Insurance ReformThe ONI would have responsibility for implementing non-admitted insurance (also known as surpluslines) and reinsurance reform

5

Only an insureds home state would be allowed to require a surplus lines broker to be licensed toconduct non-admitted insurance business and to require a broker to provide certain financialinformation; other states would be prohibited from collecting fees relating to licensure. The three-declination requirement that currently must be met before it is permissible to access the surplus lines

. [Subtitle B, Sections 521-533]

Part I Non-admitted Insurance

Any state other than the home state of an insured would be prohibited from requiring a premium taxpayment for non-admitted insurance. States would be permitted to establish procedures to allocateamong themselves the premium taxes paid to an insureds home state and would require surplus lines

brokers and certain insureds to file annual tax-allocation reports.

5 Subtitle B substantially resembles H.R. 2571, the Non-Admitted and Reinsurance Reform Act of 2009, passed by theHouse of Representatives September 9, 2009.


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market also would be eliminated.

The Government Accountability Office (GAO) would be required to conduct a study of the non-admitted insurance market to determine the effect of the enactment of these surplus lines reforms onthe size and market share of the non-admitted insurance market for providing coverage typicallyprovided by the admitted insurance market. The GAO would be directed to consult with the NationalAssociation of Insurance Commissioners (NAIC).

Part II - Reinsurance

A state would be prohibited from denying credit for reinsurance if the state of domicile of an insurerpurchasing reinsurance (ceding insurer) recognizes credit for reinsurance for the insureds ceded risk,and the state is either an NAIC-accredited state or has financial solvency requirements substantiallysimilar to NAIC accreditation requirements.

The state of domicile of a reinsurer would have sole responsibility for regulating the reinsurersfinancial solvency, so long as the state is NAIC-accredited or has financial solvency requirementssubstantially similar to the NAIC. A non-domiciliary state would be prohibited from requiring a

reinsurer to provide financial information other than that required to be filed with the insurers NAIC-compliant domiciliary state.

TITLE VI IMPROVEMENTS TO REGULATION OF BANK AND SAVINGS

ASSOCIATION HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS(Back to Table of Contents)

A.For three years after the date of enactment, the FDIC would not be able to approve an application for

deposit insurance received after November 10, 2009, for a credit card bank, industrial bank, or trustbank that is controlled, directly or indirectly, by a commercial firm. [Section 603]

Moratorium Relating to Credit Card Banks, Industrial Loan Companies (ILCs), and

Trust Banks

The appropriate federal banking agencies must disapprove a request for a change in control if acommercial firm would have direct or indirect control of a credit card bank, industrial bank, ortrust bank.

A commercial firm is defined as a company that derives 15 percent or more of consolidatedgross revenue from non-financial activities.

The GAO is to conduct a study relating to the other depository institution exceptions in theBank Holding Company Act, including the exception for savings associations.

B.Regulatory authority to examine and require reports from functionally regulated subsidiaries of bothbank and savings and loan holding companies would be expanded. [Sections 604-607]

Financial Stability Factor. The agencies would be explicitly required to consider financial stabilitywhen reviewing proposed acquisitions, mergers, and consolidations, including acquisitions of non-banking companies.

Reports and Examinations of Holding Companies


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Prior Approval for Certain Acquisitions. Prior regulatory approval would be required for theacquisition of a non-banking company that has $25 billion or more in assets.

Lead Agency Supervision. The lead agency for a bank or savings and loan holding company wouldbe responsible for the examination of the non-depository subsidiaries of that holding company. Thelead agency would be determined by looking at the type of depository institutions holding the most

assets. If the Fed is supervising the holding company, the lead agency may recommend that the Boardtake an enforcement action. It is not clear how this section will interact with the provisions in TitleIII that would authorize the Federal Reserve Board to be the supervisory agency for all bank andsavings and loan holding companies.

C.Section 23A of the Federal Reserve Act (FRA) is amended to include as a covered transaction anytransaction with an affiliate that involves credit exposures arising from repurchases and reverserepurchases, borrowing or lending of securities, or derivatives transactions. Transactions withaffiliates would have to be backed by sufficient capital at all times. Exemptions from 23A could be

granted by the primary supervisor with the concurrence of the Fed, but only if the FDIC does notobject. Transactions between a national bank and its financial subsidiary cannot exceed 10 percent ofthe banks capital. [Sections 608 and 610]

The treatment of derivatives would be changed for purposes of Section 23A affiliate transactions.Currently derivatives are subject to Section 23B, which means that they must be at arms length.Derivatives, as well as securities borrowing and lending transactions, would be treated as coveredtransactions under Section 23A but exempt from the numerical limits of Section 23A if they arecollateralized by US government and agency securities. The Fed would also be given authority toconsider netting arrangements in connection with determining the amount of the covered transaction andwhether the transaction is fully secured and, thus, exempt. [Section 608]

Transactions with Affiliates

D.

The national bank lending limit would be applicable to all insured institutions, including statechartered banks. The limit would be amended to include credit exposures arising from derivativetransactions and securities lending. [Section 611]

Lending Limits

E.Banks that are subject to an enforcement order or Memorandum of Understanding (MOU) would notbe allowed to convert their charter. [Section 612]

Restrictions on Conversions

F.The remaining restrictions on de novo interstate branching are removed. [Section 613]

De Novo Branching

G. Capital Level for Holding Companies/Source of StrengthSpecific authority would be provided to the appropriate federal regulatory agency for the bank orsavings and loan holding company (or to the appropriate regulatory agency for a bank, such as an ILC,that is owned by a company that is not considered to be a bank or thrift holding company) to establishminimum capital requirements for holding companies, and for the source of strength doctrine. Thesource of strength doctrine would be applied to non-financial companies that control depository


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institutions, such as industrial loan companies (ILCs), requiring those non-financial companies to be asource of strength to an ILC in financial trouble. [Section 616]

H.The investment bank holding company option for securities firms would be eliminated. An entity thatcontrols a securities firm, but not a depository institution, could be regulated by the Fed as a securities

holding company if the company seeks to have a comprehensive consolidated supervisor, for example,in order to engage in financial services activities abroad. [Section 618]

Securities Holding Companies

I.Proprietary Trading. Subject to the recommendations of the Oversight Council, depository institutionsand their holding companies would not be able to engage in proprietary trading of securities, includingbonds, equities, derivatives, options, commodities or other financial instruments. Depository institutionsand their holding companies would not be able to sponsor or invest in hedge funds or private equityfunds. [Section 619]

The prohibition on proprietary trading would not apply to investments in U.S. Government securities,

GNMA, FNMA and FHLMC instruments, and state and municipal bonds. Investments on behalf ofcustomers, as part of market making activities or otherwise in facilitation of customer relationships, oras risk mitigation or hedging activities, would be exempt.

Insured depository institutions and their holding companies that serve as an investment manager orinvestment adviser to a hedge fund or private equity fund would not be able to enter into a coveredtransaction (e.g. extension of credit, purchase of assets, etc.) with the fund. Any allowed transactionwould have to be on an arms-length basis.

Non-Banks. Non-bank companies subject to the Federal Reserve Boards supervision would berequired to hold additional capital and would be subject to additional restrictions if they engage in

proprietary trading or sponsor or invest in a hedge fund or private equity fund.

Effective Date. These provisions would not go into effect until the Oversight Council completes astudy, and then recommends that implementing regulations be issued. The study would have to becompleted within six months after the date of enactment, and regulations must be promulgated withinnine months of the studys recommendations. If regulations are issued, they would have to providethat all insured depository institutions and their holding companies no longer retain impermissibleinvestments two years after the date the regulations are issued. The deadline could be extended for upto three additional years by order of the appropriate federal banking agency if the agency were todetermine that it would not be detrimental to the public interest.

Volcker Rule

J.Subject to the recommendations of the Oversight Council, a financial company would not be able toacquire or merge with another company if the total consolidated liabilities would exceed 10 percent ofthe aggregate consolidated liabilities of all financial companies. The Fed may grant an exception forcompanies that are in danger of default or if the acquisition is assisted by the FDIC.

The Oversight Council would be required to conduct a study and issue recommendations that must beincluded in the Feds implementation. The recommendations may include modifications to theconcentration limit. [Section 620]

Concentration Limits


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TITLE VII IMPROVEMENTS TO REGULATION OF OVER-THE-COUNTER

DERIVATIVES MARKETS(Back to Table of Contents)

This title reflects an agreement between Banking Committee Chairman Chris Dodd (D-CT) andAgriculture Committee Chairman Blanche Lincoln (D-AR) that combines some of the strongestprovisions from the Banking Committee and Agriculture Committee bills. As a result, this title

contains very broad definitions of swap dealers and major swap participants and essentiallyeliminates the ability of banks of all sizes to regularly engage in the purchase or sale of swaps in theordinary course of business. It also would require mandatory clearing and exchange trading for mostderivatives, impose tough capital and margin requirements, and mandate significant recordkeeping andreal-time trade reporting obligations.

This title also would add business conduct standards for derivatives dealers, including imposing afiduciary duty on swap dealers in their swap dealings with municipalities, pension plans, endowments,and retirement plans. Foreign exchange swaps and foreign exchange forwards would be under CFTCsjurisdiction unless the Treasury Department were to make a written determination to exclude suchtransactions from regulation as swaps. Regulators would have the authority to impose margin and/or

capital requirements for an existing swap contract and even allow certain counterparties the ability tochange the terms of existing contracts by calling for margin on demand, even if such calls wouldincrease systemic risk. These provisions would create a more regulated, burdensome, and costlyenvironment for participants in the other-the-counter (OTC) derivatives markets.

If enacted and broadly interpreted, this title would negatively affect all banks, including regional andcommunity banks that make use of derivatives, including interest rate swaps. U.S. banks couldeffectively be put out of the derivatives business and corporate end-users will look to foreign banks orless-regulated entities to serve their hedging and risk mitigation needs.

A.Federal assistance (including advances from any Federal Reserve credit facility, discount window, or13(3) lending, FDIC insurance, or guarantees) may not be provided to any swaps entity (whichincludes swap dealers, major swap participants, clearing houses and exchanges) for the purpose ofmaking any loan or purchasing any stock, equity interest or debt obligation of a swaps entity,purchasing the assets of any swaps entity, guaranteeing any loan or debt issuance of any swaps entityor entering into any assistance arrangement (including tax breaks), loss sharing or profit sharing withany swaps entity. This provision, commonly referred to as the swap push-out provision wouldpreclude all banks from engaging in derivatives activities, including entering into interest rate swapsfor their small business clients. [Section 716]

Prohibition on Federal Assistance

B.

Depending on whether a derivative is security-based or non-security based, either the SEC or theCFTC would oversee the regulation of derivative dealers, participants, exchanges and clearinghouses.

SEC and CFTC Oversight

Foreign exchange swaps and foreign exchange forwards would be under the CFTCsjurisdiction unless Treasury makes a written determination that such transactions should not beregulated as swaps, and are not structured to evade the bill. Cleared, exchange traded and swapexecution facility traded foreign exchange swaps and foreign exchange forwards cannot be


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Swap clearing organizations would be required to register with either the CFTC or SEC andsubmit for prior approval any group, category, type, or class of swaps that the clearingorganization wants to accept for clearing. In addition, the CFTC and SEC would be required topromulgate rules identifying other groups, categories, types or classes of swaps that arerequired to be cleared. These rules do not require notice or comment periods. Swaps enteredinto before either the date of enactment or application of the clearing requirement would beexempt from clearing if the counterparties timely report the swap to a registered swaprepository or the relevant Commission. [Sections 723 and 763].

Swaps that are subject to the clearing requirement would have to be executed on an exchange, aboard of trade designated as a contract market, or on a swap execution facility, unless nonemakes the swap available for trading. [Sections 723 and 764]

Swaps entered into prior to enactment would be exempt from the clearing requirement.[Section 739]

E. Transparency Any swap or security based swap that is not cleared would have to be reported to a swap repository

or, if there is no repository that would accept the swap, to the SEC or the CFTC. With respect to aswap or security based swap where one party is a dealer and the other a major swap participant, thedealer will report the transaction. With respect to a transaction in which only one party is a swapdealer or a major swap participant, the swap dealer or major swap participant will report thetransaction. With respect to a transaction where neither party is a dealer or major swap participant,the counterparties will agree as to which party will report the transaction. [Sections 729 and 766]

Swaps entered into prior to enactment of the bill that have not expired would have to be reported to swap repository or the relevant Commission. [Sections 729 and 766]

Information related to a swap, whether cleared or reported to a swap repository, would have tobe made available to the public as soon as technologically practicable after the execution of thetrade. The SEC and CFTC would be required to promulgate rules (i) to ensure that informationdoes not identify participants; (ii) to specify the criteria for determining what constitutes a blocktrade for particular markets and contracts; (iii) to specify the appropriate time delay forreporting block trades to the public; and (iv) to take into account whether the public disclosurewill materially reduce market liquidity. In addition, information about derivatives reported to aswap repository will be available to the public in a manner that does not disclose (i) the businesstransactions and market positions of any person; (ii) aggregate data on such swap or security-based swap trading volume; and (iii) positions. [Section 727]

F. Strengthening Capital and Margin Requirements The appropriate Federal banking agencies, and for non-depository institutions, the CFTC or

SEC, would be required to impose both initial and variation margin requirements on all swapsthat are not cleared with certain limited exemptions that will not include banks. The initial andvariation margin requirements will apply to swaps entered into before the enactment of thelegislation. Non-cash collateral with respect to swaps will be permitted only with the consentof the SEC and CFTC. [Sections 731 and 764]


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B.It would require a vote of two-thirds of the Council, plus the Chairman, to include or remove acompany from FMU status. The Council would draft the implementing regulations but they would beenforced by the institutions primary supervisory agency. The Fed retains back-up examinationauthority. [Sections 804, 805, 807, and 808]

Council of Regulators

C.FMUs would be required to meet risk management standards prescribed by the Council in order topromote robust risk management, promote safety and soundness, reduce systemic risks, and supportthe stability of the broader financial system. FMUs would be required to submit reports and data todemonstrate their compliance with the standards set by the Council. Financial institutions that are notdesignated as FMUs would also be required to provide information that is requested by the Council inorder to determine if the financial institution should be designated as an FMU. [Section 809]

Oversight of FMUs

TITLE IX INVESTOR PROTECTIONS AND IMPROVEMENTS TO THE REGULATION

OF SECURITIES(Back to Table of Contents)

This title addresses several investor protection, securities enforcement, corporate governance, creditrating agency, securitization, and municipal securities issues that come within the jurisdiction of theSEC. It also contains provisions affecting executive compensation.

A.A new Office of the Investor Advocate would be established in the SEC headed by the InvestorAdvocate who reports directly to the Chairman. The Investor Advocate would be authorized to hire

counsel, research staff and service staff as he/she deems necessary, and would be required to reportannually without SEC review to the relevant committees of the House and Senate. The SEC mustformally respond within three months to recommendations of the Investor Advocate.

An Investor Advisory Committee would also be established in the SEC to advise on regulatory prioritiesof the SEC and initiatives to protect investor interests and the integrity of the markets. [Sections 911, 914]

Investor Advocacy

B.The SEC would conduct a study to evaluate whether brokers, dealers and investment advisers shouldbe subject to the same fiduciary standard of care. [Section 913]

Broker-Dealer Fiduciary Standard of Conduct

C.There would be two studies: financial literacy of investors by the SEC and mutual fund advertising bythe Comptroller General. [Sections 916 and 917]

The SEC would be authorized to require point-of-sale disclosures for mutual fund investors. Banksand bank affiliates that offer customers access to mutual funds, including money market mutual funds,could be impacted by these provisions. [Section 918]

Mutual Funds


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D.GAO would be required to conduct a study of financial planners (including bank employees whomeet its definition) and how they are regulated, as well as the use of other financial designations.[Sections 921]

Financial Planners and Use of Financial Designations

E.A new Office of Credit Rating Agencies, reporting directly to the SEC Chairman, would be established atthe SEC. It would be authorized to issue new rules for internal controls, independence, transparency, andpenalties for non-compliance. [Sections 931-937]

Credit Rating Agencies

The Office would have its own staff and would be required to examine Nationally RecognizedStatistical Ratings Organizations (NRSROs) at least once a year. Findings would be made public.

NRSROs would be required to disclose their methodologies, use of third parties for duediligence, and their ratings track record.

The SEC would be required to issue rules to ensure that analysts meet educational standardsnecessary to produce accurate ratings and are tested for knowledge of the credit rating process.

To deal with the conflicts of interest inherent in the issuer-paid business model, the SEC wouldbe required to issue rules to prevent the sale and marketing considerations of NRSROs frominfluencing their ratings. In addition, the SEC would be required to issue rules to prohibitNRSRO compliance officers from performing ratings, participating in development ofmethodologies or models, performing marketing or sales functions, or participating inestablishing compensation levels.

Anamendmentby Sen. Al Franken (D-MN) adopted on the Senate floor is intended to address

conflicts of interest with respect to asset-backed securities by establishing a Credit RatingAgency Board that would determine which qualified NRSRO would perform the initial rating onsuch transactions, thereby eliminating the ratings shopping that occurred prior to the financialcrisis.

Anamendmentby Sen. George LeMieux (R-FL) adopted on the Senate floor would, effectiveone year after enactment, eliminate references to investment grade or similar requirements inthe National Banking Act, the Federal Deposit Insurance Act, the Investment Company Act, theSecurities Exchange Act of 1934, and the Federal Housing Enterprises Financial Safety andSoundness Act.

Investors would be able to bring private actions against NRSROs.

F.The term securitizer includes the issuer or sponsor/pooler of the transaction. The term originatoris limited to a person who sells an asset to a securitizer, and thus does not cover every sale of anasset that is ultimately securitized.

Securitization Process

Credit Risk Retention. There is a general requirement that securitizers retain some portion of thecredit risk for any asset that is transferred, sold, or conveyed through an asset-backed security (ABS).
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or the SEC for non-depository securitizers. [Section 941]

G.Say on Pay. All public companies would be required to provide shareholders with a non-binding voteregarding executive compensation. [Section 951]

Executive Compensation and Corporate Governance

The vote would be limited to the compensation paid to the top five senior executive officersand would be applicable to all public companies whether or not they are traded on an exchange.

The SEC would not be authorized to exempt smaller reporting issuers.

Compensation Committee. All companies listed on an exchange would be required to have acompensation committee composed solely of independent directors.

The exchanges would have authority to exempt particular relationships from theindependence requirements.

In addition, compensation committees would have the authority to hire independent compensationconsultants and legal counsel. The company would have the responsibility to disclose in theproxy whether the compensation committee had retained an independent consultant. Funding forthese advisers is to be provided by the company. Certain categories of companies could beexempted from these compensation committee requirements where appropriate and inconsideration of the potential impact on smaller reporting issuers. [Section 952]

Public Companies. Public companies would be required to disclose, through narrative and graphics,the relationship between executive compensation and company performance and whether companyemployees are permitted to hedge their equity holdings in the company. [Section 953]

In addition, every public company would be required to implement a claw-back policy forcertain accounting restatements. [Section 954]

The SEC would adopt rules for all public companies to require companies to include in theirproxy statements shareholder nominated directors. They would also have to disclose why therole of Chairman and CEO has or has not been separated. Listed companies would be requiredto adopt majority voting for uncontested elections. [Sections 971 973]

H.Municipal advisors to issuers of municipal securities would be required to register with the MunicipalSecurities Rulemaking Board (MSRB) and comply with the agencys rules. The 15-member board of

the MSRB would be reconstituted to include eight members who are not regulated by the MSRB andseven members that are, with a minimum of one bank broker representative, one non-bank brokerrepresentative, and one municipal advisor representative.

The head of the SECs Office of Municipal Securities would be a director and would report to theChairman of the SEC, thus elevating the importance and visibility of this office. GAO is to study (1)the costs and benefits to issuers of requiring additional financial disclosure, and (2) study the municipalmarket in general and make recommendations on improvements in transparency. [Sections 975-978]

Municipal Securities


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This transfer is not to exceed 10 percent of the total operating expenses of the System in fiscal year 2011,11 percent in 2012, and 12 percent thereafter. There are no provisions for assessments by the CFPB oncovered persons. A Civil Penalty Fund also would be established. [Section 1017]

B.Subject to specific exclusions similar to those in the House bill, any entity that is engaged in selling orproviding a financial product or service is a covered person. [Section 1002]

The following entities specifically would be exempt to the extent that they are not engaging in anyenumerated financial activity or otherwise subject to any federal consumer financial law: [Section 1027]

Covered Persons

Merchants, retailers, and other sellers of non-financial products. Real estate brokers. Manufactured and modular home retailers. Accountants and tax preparers. Attorneys.

Persons regulated by a state insurance regulator, a state securities commission, or the CFTC.

The Senate adopted anamendmentby Sen. Olympia Snowe (R-ME) that would limit further theCFPBs rulemaking and supervisory authority over merchants, retailers, and other sellers of non-financial goods or services by excluding those entities that fall within the relevantindustry sizethresholdof the Small Business Act.

Much like the House bill, the Senate bill would preserve the Farm Credit Administrations authorityand exempts Farm Credit System institutions from CFPB oversight and enforcement. [Section 1027]

Qualified retirement or eligible deferred compensation plans and arrangements are also excluded.However, bank trust operations appear to be subject to CFPB oversight. [Section 1027]

Finally, there is a new exclusion for activities relating to charitable contributions. [Section 1027]

C.Supervision. There would be three categories of supervision by the CFPB with respect to coveredinstitutions: non-depository covered persons, very large depository institutions, and other depositoryinstitutions. [Sections 1024, 1025, 1026]

Supervision and Regulation

Non-depository covered persons include (i) originators, brokers, or servicers of real estatesecured loans and (ii) larger participants of a market for other consumer financial products asdefined by the CFPB within one year and after consultation with the Federal Trade

Commission (FTC). [Section 1024]

Those not designated as larger participants would be left to oversight by the FTC with itslimited existing authorities. There is no requirement that non-depository covered personscompeting with similarly situated depository institutions should be included within the CFPBssupervision if they are not subject to comparable supervision as that imposed on the depositoryinstitution by its prudential regulator.

The CFPB would be required to establish a risk-based supervision program and to establish
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registration requirements for non-banks. The factors for evaluating such risk focus on the riskposed to consumers created by products and services and do not include the examination frequencyor risk-based standards imposed on similarly situated bank competitors. [Section1024 (b) (2)]

For institutions with assets greater than $10 billion, the CFPB would require reports andconduct examinations on a periodic basis. [Section 1025] Coordination with both federal andstate agencies in the conduct of the exam process would be required. The CFPB and the federalbanking agencies would have to share each draft exam report and allow 30 days for review.An unwieldy appeal process would be established for conflicts between supervisory authorities.It would be initiated by a covered person by making a request for a joint statement ofcoordinated supervisory action.

For depository institutions with assets of less than $10 billion, the prudential regulator wouldhave examination authority, but the CFPB could send examiners to participate in an exam on asampling basis, and the prudential regulator shall consider the input of the Bureauconcerning the scope and conduct of the exam and the contents of the examination report.Finally, as necessary to support its rulemaking function, the CFPB may require reports fromdepository institutions with less than $10 billion in assets. [Section 1026]

Rule-making Authority. The CFPB would have rule-making authority over all covered persons andany other entities covered by the enumerated consumer laws. [Section 1022]

Several enumerated consumer laws would be explicitly transferred to the CFPB, including:TILA, TISA, EFTA, HOEPA, RESPA, SAFE, ECOA, HMDA, and FDCPA

6

. ExpeditedFunds Availability Act regulatory authority would be shared between the Fed and the CFPB.

The Community Reinvestment Act (CRA) would not be transferred to the CFPB.

The CFPB would be required to consult with the prudential regulators, as appropriate, prior

to proposing a rule regarding consistency with prudential, market, or systemic objectives. Aprudential regulator may provide a written objection to the proposed rule, but the CFPB is onlyrequired to articulate in the final rule a description of the objection and the basis for theBureau decision, if any, regarding such objection. [Section 1022(2)(C)]

In order to support its rulemaking and other functions, the CFPB would be required to monitor forrisks to consumers arising from the sales or provision of consumer financial products or services,including developments in markets for such products and services. [Section 1022(c)]

Under its enumerated objectives, the CFPB would be directed to identify outdated,unnecessary, or unduly burdensome regulations and to ensure that federal consumer financiallaw is enforced consistently, without regard to the status of a person as a depository

6 Enumerated laws transferred include: the Alternative Mortgage Transaction Parity Act, the Consumer Leasing Act, theElectronic Fund Transfer Act (EFTA), the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair CreditReporting Act (FCRA), the Home Owners Protection Act, the Fair Debt Collection Practices Act (FDCPA), the FederalDeposit Insurance Act (subsections (c) to (f) of section 43 only)(this covers disclosures to consumers regarding the risk offoregoing deposit insurance), the Gramm-Leach-Bliley Act (sections 502 to 509 only)(this covers the privacy disclosures,rulemaking, enforcement, FCRA, state law preemption, and information sharing study provisions of the GLBA), the HomeMortgage Disclosure Act, the Home Ownership and Equity Protection Act (HOEPA), the Real Estate SettlementProcedures Act (RESPA), the S.A.F.E. Mortgage Licensing Act, the Truth-in-Lending Act (TILA), and the Truth-in-Savings Act.


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institution, in order to promote fair competition. [Section 1021(b)]

Rule-making authority would extend to the new consumer protections listed in D below.

D.The CFPB would have sweeping new consumer protection authority. [Section 1031] Although theCFPB would not have explicit authority to establish standardized or plain vanilla products, it wouldbe granted broad authority to issue rules prohibiting unfair, deceptive, or abusive acts or practices.This is a new standard that goes beyond current UDAP rules which could effectively open the door forthe CFPB to regulate market terms and pricing.

New Consumer Protections

The term abusive is defined so broadly that it would permit the CFPB to outlaw products orservices perceived as too complicated for consumers to understand their risks, costs, or terms.Similarly, the CFPB would be able to outlaw a fee as abusive on the grounds that the lender hastaken unreasonable advantage of the consumers ability to protect his interests or the consumerstrust. This effectively adds a suitability test to the existing UDAP standard. [ Sec. 1031(d)]

The new unfair, deceptive, and abusive rules could be established under regular AdministrativeProcedures Act (APA) rulemaking rather than the more stringent rulemaking requirementscurrently followed by the FTC.

The CFPB would be authorized to establish rules for disclosures over and above those requiredby TILA or other federal laws. The standard would be very broad, requiring disclosures thatpermit consumers to understand the costs, benefits, and risks associated with the product orservice, in light of the facts and circumstances. The CFPB would also be authorized toinclude in any final rule requiring disclosures a model disclosure form. There would also be aprocess for covered persons to develop alternative disclosures. [Section 1032]

The CFPB also would have rulemaking authority over custodians of assets.

The CFPB would be required to promulgate new disclosure rules for remittances and theestablishment of an error resolution process relating to remittance transfers [Section 1078]

The CFPB would not be authorized to set interest (usury) rates, unless explicitly authorized bylaw. [Section 1027]

It would be unlawful for any covered person to enforce any contract or agreement or to chargea fee in connection with a consumer financial product or service that is not in conformity withthe CFPBs rules. [Section 1036]

E.The CFPB and the states would have broad enforcement authority. [Subtitle E, Sections 1051-1058]

Enforcement

The CFPB would have administrative enforcement authority over non-depository coveredpersons that it has examination authority over and for very large banks. This administrativeenforcement regime goes beyond the normal banking agency administrative authoritiescontained in Section 8 of the FDIA.


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Unlike current banking agency enforcement, which generally limits cease and desist monetaryrelief to restitution and rescission, the CFPBs enforcement authority would include orders to paydamages.

There is also a provision for recovery of costs from covered persons by the CFPB, state AttorneysGeneral or state regulators. [Section 1055]

State Attorneys General would be given authority to bring civil actions in state or federal courtfor any violation of the Act or its regulations. Although there is a requirement for consultationwith the CFPB, the state can proceed despite the CFPBs objections.

F.Financial institutions would be required to provide consumers with expanded access to account,transaction, fee, and other information, with exceptions for confidential commercial information andsuspicious activity reporting. [Section 1033]

There also would be expanded HMDA reporting standards, and new requirements for reporting data on

small business loan applications. [Sections 1072 and 1092] In addition, the CFPB would be expresslyempowered to gather information from covered persons and service providers on their organization,business conduct, and practices. [Section 1022]

The CFPB would be required to study and report to Congress on the use of agreements providing formandatory pre-dispute arbitration. The CFPB also would be authorized to restrict mandatory pre-dispute arbitration with respect to a consumer product or service. [Section 1028]

GAO would be required to conduct a study on the accuracy of various appraisal methods; their cost toconsumers; the prevalence of use of various types; and whether different approaches might havecontributed to price speculation. [Section 1073]

The Treasury would be required to conduct a study of and develop recommendations regarding theoptions for ending the conservatorship of Fannie Mae and Freddie Mac. [Section 1077]

TILA would be amended:

Reporting Burdens and Miscellaneous

1. To prohibit or phase-out prepayment penalties on certain residential mortgage loans and toincrease coverage for non-real estate secured credit transactions to $50,000. [Section 1076]

2. To prohibit the payment of loan origination fees based on the terms of the loan (other than theamount of the principal). [Section 1074]

3. To prohibit the financing of a mortgage origination fee other than bona fide third-partysettlement charges.[Section 1074]

4. To prohibit a lender from making a mortgage loan unless the lender has verified anddocumented the consumers Ability to Repay as defined in Section 129 of TILA, as amendedby this title. This section also may have the effect of prohibiting balloon payments in which theballoon payment is more than twice as large as the average of earlier scheduled payments.[Section 1074]


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RESPA would be amended to require the CFPB to publish a single, integrated disclosure for mortgagetransactions, including the disclosures required under RESPA and TILA, and to produce a bookletjointly addressing compliance with RESPA and TILA. [Section 1096]

The next-day funds availability amount under the Expedited Funds Availability Act would beincreased from $100 to $200 and in the future would be indexed for inflation.

The bill would amend the Fair Credit Reporting Act to require disclosure of a numerical credit scorewhen an adverse credit decision is based in whole or in part on information contained in a consumerreport. [Section 1077]

G. PreemptionThe Administration proposed language that would have eliminated federal preemption for nationalbanks and federal savings associations. The House adopted an amendment by Rep. Melissa Bean (D-IL) that would restore much of the basic framework of preemption. The Senate adopted anamendmentby Sen. Thomas Carper (D-DE) that moved the bill even closer to current law with respect to thepreemption standard. However, both the House and Senate bills contain language that provide

additional authority for state Attorneys General to bring actions against national banks and federallychartered savings associations. [Subtitle D, Sections 1041-1048]

Barnett Standard. Specifically, the Senate bill provides that any preemption of a state consumerfinancial law shall be made according to the legal standard established in the Barnett Bank

Like the House bill, the Senate bill expands state AGs general visitorial powers and their abilityboth to enforce federal and state laws, and to obtain significant monetary damages againstnational banks. These provisions remain a serious problem as they go far beyond the recentSupreme Court decision in the

case, thusmoving closer to preserving the standard for preemption as it stands today (and the benefits it providesto the broader economy, national banks, and state-chartered banks in states that maintain parity ofregulation between national and state chartered institutions). The same standard would apply tofederal savings associations.

In an important improvement, the Senate voted to eliminate a requirement, contained in the House bill,

that federal law provide substantive standards for the area regulated by the state law before that statelaw could be preempted. This removes an ambiguous and subjective hurdle that would have led tomuch uncertainty regarding the applicability of state laws. While each step in the process has seenthese provisions improve, problems remain:

Cuomo case that permitted state AGs to go to court to enforcenon-preempted state laws.

Federal savings associations are subject to the same preemption standards as national banks.This arguably represents a change in the existing thrift preemption provisions since existingpreemption rules are considered very broad, though it remains to be seen what the practicalimpact of this narrowing will be.

Operating subsidiaries and agents of national banks and federal savings associations would notreceive the same preemption protections afforded national banks and federal thrifts. Thiswould undercut protections given to such subsidiaries under existing OCC and OTS regulationsand the recent decision by the Supreme Court in the Watters case.
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H. InterchangeThe Senate adopted anamendmentby Sen. Durbin that would authorize the Fed to set reasonable andproportional interchange fees on debit cards. In identifying what is reasonable and proportional, theFed would be able to consider only the actual cost of a particular debit transaction, and not otheroperational costs associated with processing debit cards over the electronic payments network,including risk of fraud or non-payment. Issuers with assets under $10 billion technically would beexempted from the rates set by the Fed, though it is strongly expected that marketplace pressures wouldresult in these smaller institutions being subject to the same or similar rates. The amendment alsowould permit retailers to discriminate in providing discounts based on network, and serious concernsremain that they may also discriminate based on issuer. The amendment also would allow merchants todiscount based on payment form, i.e., based on the use of cash, check, debit, or credit. Retailers alsowould be able to establish minimum and maximum purchase limits for acceptance of credit cards, butcould not discriminate between issuers and networks when providing these discounts. [Section 1079]

TITLE XI FEDERAL RESERVE SYSTEM PROVISIONS(Back to Table of Contents)

This title includes emergency measures that are available to the Fed and to the FDIC to deal withsystemic risk. It also changes various Fed governance provisions.

A.The Feds ability to provide credit in unusual and exigent circumstances would be narrowed. It couldonly lend as part of a program with broad-based eligibility and not to aid a failing institution. The Fedwould have to assign a lendable value to all collateral securing a Fed loan, and it could not lend toborrowers that are insolvent. The Fed would have a priority status for its claim against a failed institution.

Treasury approval of the lending would be required. The Fed would have to report to Congress aboutany financial assistance it provided, including the identity of borrowers from the Fed and the amountborrowed (subject to limitations), and any Fed program would have to end in a timely and orderlyfashion. [Section 1151]

The Comptroller General (GAO) would be directed to review the Feds credit facilities, and the Fedwould have to post information on its website about its accounting, financial reporting, and internalcontrols. Moreover, the GAO is to conduct an audit of the Fed and Reserve Banks within a year, andthe Fed would have to report on the identity of every borrower under a Fed program and details abouteach loan that has been made since 2007 or is made after the effective date of the legislation. [Sections1152 and 1153]

Fed Lending

B.The FDIC would be authorized to guarantee the obligations of solvent (defined as assets exceedingliabilities) banks and bank holding companies under certain circumstances. The process would betriggered by a request from Treasury to the FDIC and the Fed for a determination of whether there is aliquidity event i.e., difficulty in (a) selling a type of asset without granting an unusual andsignificant discount, (b) borrowing against that asset without an unusual significant increase in margin,or (c) obtaining unsecured credit. [Section 1155(g)(3)]

FDIC Provision of Liquidity
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If two-thirds of both the FDIC members and Fed governors approve, then the FDIC would be directedto create a widely available guarantee program. [Section 1154]

The FDIC would establish the terms and conditions of the program but would be prohibited fromproviding equity to any participant. The Secretary would determine the limits on the amount that theFDIC may guarantee, but Congress would have to pass a joint resolution of approval for any debt

guarantee program. [Section 1155(a)-(c)]

The program would be funded through assessments on firms whose obligations are guaranteed. TheFDIC would be able to borrow from Treasury as needed but all borrowings would have to be repaid viaassessments. The FDIC would be explicitly prohibited from using the Deposit Insurance Fund to payfor the guarantee program. [Section 1155(e)]

A bank that defaulted on an FDIC-guaranteed debt would be placed into receivership; a non-bank thatdefaulted would either be resolved under the provisions of Title II or required to file for bankruptcy.[Section 1156]

C.

The President of the New York Federal Reserve Bank would be appointed by the President. No entitythat is supervised by the Fed would be allowed to vote for members of a Reserve Banks board ofdirectors; moreover all current and past employees of an entity under Fed supervision (or an affiliatethereof) would be prohibited from serving as a Reserve Bank director. [Section 1157]

The Fed would have two vice-chairmen, with one designated as the Vice Chairman for Supervision.Financial stability would be added as an explicit function of the Fed, and the Fed would be prohibitedfrom delegating its functions for establishing policies for supervision and regulation. [Section 1158]

Fed Governance

TITLE XII IMPROVING ACCESS TO MAINSTREAM FINANCIAL INSTITUTIONS(Back to Table of Contents)

This title is designed to encourage the provision of products and services to low- and moderate-incomeindividuals who do not have or do not access fully banking products and services.

A.The Secretary of the Treasury would be authorized to undertake grant programs designed to enablelow- and moderate-income individuals to establish bank accounts and apply for small-dollar valueloans designed to be lower cost alternatives to payday loans. As a condition to receipt of a grant fromTreasury, the bank or other eligible entity would be required to promote financial literacy andeducation. Loans would be required to be made on such terms and conditions, and pursuant to suchlending practices, as are reasonable for the consumer. [Sections 1204, 1205]

Treasury Programs to Provide Banking Products and Services to Low- and Moderate-

Income Individuals

B. Grants to CDFIs to Establish Loan Loss Reserves.Community development financial institutions (CDFIs) and bank-CDFI partnerships would eligible forgrants to establish loan-loss reserve funds to mitigate losses on small dollar loans. The CDFI would beresponsible for match funding half of the amount of the grant with non-federal funds. CDFIs also would


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be eligible to receive technical assistance grants to support small dollar loan programs. [Section 1206]

C. Definition of Small Dollar Loan ProgramA small dollar loan would be an installment loan with no prepayment penalty in an amount that doesnot exceed $2,500. The lender would be required to report payments on the loan to at least onenationwide consumer reporting agency. Other affordability requirements could be imposed on lenders.

TITLE XIIIPAY IT BACK ACT(Back to Table of Contents)

This title would reduce the amount of the TARP authorization to $550 billion and remove the authorityto use the funds on a rotating basis. No additional assistance under TARP would be authorized exceptin cases of immediate and substantial threats to the U.S. economy. [Section 1302]

Treasury would be obligated to use the proceeds from the sale of any debt it purchased from FannieMae, Freddie Mac, or the Federal Home Loan Banks under Treasurys emergency powers for deficit

reduction. [Section 1304] Similarly, any unused funds under the American Recovery andReinvestment Act of 2009 are to be used solely for deficit reduction. [Section 1306]

TITLE XIV MISCELLANEOUS(Back to Table of Contents)

Under this title, the President is to direct the U.S. Executive Director of the International Monetary Fund(IMF) to evaluate any proposed loan to a country if the public debt of that country exceeds its GDP anddetermine whether the loan is likely to be repaid. If the Executive Director concludes that an IMF loanwill not be repaid, the President is to direct the Executive Director to oppose the loan. [Section 1301]

TITLE XV CONGO CONFLICT MINERALS(Back to Table of Contents)

This title includes a Sense of the Congress statement about the conflict in Congo and requires certainsecurities disclosures. It provides that it is the Sense of the Congress that exploitation and trade in goldand other minerals in the Republic of Congo is helping to finance extreme levels of violence in thatcountry and that this warrants new securities disclosures as provided in Section 1302 of the bill.[Section 1501, note the reference to Sec. 1302 in the bill actually should be Sec. 1502].

It also adds a new Section 13(o) to the Securities Exchange Act requiring the SEC to promulgate rules to

require new disclosures regarding gold and other minerals (Congo Conflict Minerals). The new ruleswould apply to every issuer that is required to file annual reports with the SEC and for which any of theminerals is necessary to the functionality or production of a product by the issuer. Among other things,issuers would have to report on the measures that were taken to ensure that its activities did not directlyor indirectly finance or benefit armed groups in Congo or any adjoining country. [Section 1502]

aba summary of reg restructuring legis

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