§ 78q. — Records and reports.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78q]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78q. Records and reports
(a) Rules and regulations
(1) Every national securities exchange, member thereof, broker or
dealer who transacts a business in securities through the medium of any
such member, registered securities association, registered broker or
dealer, registered municipal securities dealer, registered securities
information processor, registered transfer agent, and registered
clearing agency and the Municipal Securities Rulemaking Board shall make
and keep for prescribed periods such records, furnish such copies
thereof, and make and disseminate such reports as the Commission, by
rule, prescribes as necessary or appropriate in the public interest, for
the protection of investors, or otherwise in furtherance of the purposes
of this chapter.
(2) Every registered clearing agency shall also make and keep for
prescribed periods such records, furnish such copies thereof, and make
and disseminate such reports, as the appropriate regulatory agency for
such clearing agency, by rule, prescribes as necessary or appropriate
for the safeguarding of securities and funds in the custody or control
of such clearing agency or for which it is responsible.
(3) Every registered transfer agent shall also make and keep for
prescribed periods such records, furnish such copies thereof, and make
such reports as the appropriate regulatory agency for such transfer
agent, by rule, prescribes as necessary or appropriate in furtherance of
the purposes of section 78q-1 of this title.
(b) Records subject to examination
(1) Procedures for cooperation with other agencies
All records of persons described in subsection (a) of this
section are subject at any time, or from time to time, to such
reasonable periodic, special, or other examinations by
representatives of the Commission and the appropriate regulatory
agency for such persons as the Commission or the appropriate
regulatory agency for such persons deems necessary or appropriate in
the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of this chapter: Provided, however,
That the Commission shall, prior to conducting any such examination
of a--
(A) registered clearing agency, registered transfer agent,
or registered municipal securities dealer for which it is not
the appropriate regulatory agency, give notice to the
appropriate regulatory agency for such clearing agency, transfer
agent, or municipal securities dealer of such proposed
examination and consult with such appropriate regulatory agency
concerning the feasibility and desirability of coordinating such
examination with examinations conducted by such appropriate
regulatory agency with a view to avoiding unnecessary regulatory
duplication or undue regulatory burdens for such clearing
agency, transfer agent, or municipal securities dealer; or
(B) broker or dealer registered pursuant to section
78o(b)(11) of this title, exchange registered pursuant to
section 78f(g) of this title, or national securities association
registered pursuant to section 78o-3(k) of this title gives
notice to the Commodity Futures Trading Commission of such
proposed examination and consults with the Commodity Futures
Trading Commission concerning the feasibility and desirability
of coordinating such examination with examinations conducted by
the Commodity Futures Trading Commission in order to avoid
unnecessary regulatory duplication or undue regulatory burdens
for such broker or dealer or exchange.
(2) Furnishing data and reports to CFTC
The Commission shall notify the Commodity Futures Trading
Commission of any examination conducted of any broker or dealer
registered pursuant to section 78o(b)(11) of this title, exchange
registered pursuant to section 78f(g) of this title, or national
securities association registered pursuant to section 78o-3(k) of
this title and, upon request, furnish to the Commodity Futures
Trading Commission any examination report and data supplied to, or
prepared by, the Commission in connection with such examination.
(3) Use of CFTC reports
Prior to conducting an examination under paragraph (1), the
Commission shall use the reports of examinations, if the information
available therein is sufficient for the purposes of the examination,
of--
(A) any broker or dealer registered pursuant to section
78o(b)(11) of this title;
(B) exchange \1\ registered pursuant to section 78f(g) of
this title; or
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\1\ So in original. Probably should be preceded by ``an''.
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(C) national \2\ securities association registered pursuant
to section 78o-3(k) of this title;
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\2\ So in original. Probably should be preceded by ``a''.
that is made by the Commodity Futures Trading Commission, a national
securities association registered pursuant to section 78o-3(k) of
this title, or an exchange registered pursuant to section 78f(g) of
this title.
(4) Rules of construction
(A) Notwithstanding any other provision of this subsection, the
records of a broker or dealer registered pursuant to section
78o(b)(11) of this title, an exchange registered pursuant to section
78f(g) of this title, or a national securities association
registered pursuant to section 78o-3(k) of this title described in
this subparagraph shall not be subject to routine periodic
examinations by the Commission.
(B) Any recordkeeping rules adopted under this subsection for a
broker or dealer registered pursuant to section 78o(b)(11) of this
title, an exchange registered pursuant to section 78f(g) of this
title, or a national securities association registered pursuant to
section 78o-3(k) of this title shall be limited to records with
respect to persons, accounts, agreements, contracts, and
transactions involving security futures products.
(C) Nothing in the proviso in paragraph (1) shall be construed
to impair or limit (other than by the requirement of prior
consultation) the power of the Commission under this subsection to
examine any clearing agency, transfer agent, or municipal securities
dealer or to affect in any way the power of the Commission under any
other provision of this chapter or otherwise to inspect, examine, or
investigate any such clearing agency, transfer agent, or municipal
securities dealer.
(c) Copies of reports filed with other regulatory agencies
(1) Every clearing agency, transfer agent, and municipal securities
dealer for which the Commission is not the appropriate regulatory agency
shall (A) file with the appropriate regulatory agency for such clearing
agency, transfer agent, or municipal securities dealer a copy of any
application, notice, proposal, report, or document filed with the
Commission by reason of its being a clearing agency, transfer agent, or
municipal securities dealer and (B) file with the Commission a copy of
any application, notice, proposal, report, or document filed with such
appropriate regulatory agency by reason of its being a clearing agency,
transfer agent, or municipal securities dealer. The Municipal Securities
Rulemaking Board shall file with each agency enumerated in section
78c(a)(34)(A) of this title copies of every proposed rule change filed
with the Commission pursuant to section 78s(b) of this title.
(2) The appropriate regulatory agency for a clearing agency,
transfer agent, or municipal securities dealer for which the Commission
is not the appropriate regulatory agency shall file with the Commission
notice of the commencement of any proceeding and a copy of any order
entered by such appropriate regulatory agency against any clearing
agency, transfer agent, municipal securities dealer, or person
associated with a transfer agent or municipal securities dealer, and the
Commission shall file with such appropriate regulatory agency, if any,
notice of the commencement of any proceeding and a copy of any order
entered by the Commission against the clearing agency, transfer agent,
or municipal securities dealer, or against any person associated with a
transfer agent or municipal securities dealer for which the agency is
the appropriate regulatory agency.
(3) The Commission and the appropriate regulatory agency for a
clearing agency, transfer agent, or municipal securities dealer for
which the Commission is not the appropriate regulatory agency shall each
notify the other and make a report of any examination conducted by it of
such clearing agency, transfer agent, or municipal securities dealer,
and, upon request, furnish to the other a copy of such report and any
data supplied to it in connection with such examination.
(4) The Commission or the appropriate regulatory agency may specify
that documents required to be filed pursuant to this subsection with the
Commission or such agency, respectively, may be retained by the
originating clearing agency, transfer agent, or municipal securities
dealer, or filed with another appropriate regulatory agency. The
Commission or the appropriate regulatory agency (as the case may be)
making such a specification shall continue to have access to the
document on request.
(d) Self-regulatory organizations
(1) The Commission, by rule or order, as it deems necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organizations, or to remove impediments to and foster the development of
a national market system and national system for the clearance and
settlement of securities transactions, may--
(A) with respect to any person who is a member of or participant
in more than one self-regulatory organization, relieve any such
self-regulatory organization of any responsibility under this
chapter (i) to receive regulatory reports from such person, (ii) to
examine such person for compliance, or to enforce compliance by such
person, with specified provisions of this chapter, the rules and
regulations thereunder, and its own rules, or (iii) to carry out
other specified regulatory functions with respect to such person,
and
(B) allocate among self-regulatory organizations the authority
to adopt rules with respect to matters as to which, in the absence
of such allocation, such self-regulatory organizations share
authority under this chapter.
In making any such rule or entering any such order, the Commission shall
take into consideration the regulatory capabilities and procedures of
the self-regulatory organizations, availability of staff, convenience of
location, unnecessary regulatory duplication, and such other factors as
the Commission may consider germane to the protection of investors,
cooperation and coordination among self-regulatory organizations, and
the development of a national market system and a national system for
the clearance and settlement of securities transactions. The Commission,
by rule or order, as it deems necessary or appropriate in the public
interest and for the protection of investors, may require any self-
regulatory organization relieved of any responsibility pursuant to this
paragraph, and any person with respect to whom such responsibility
relates, to take such steps as are specified in any such rule or order
to notify customers of, and persons doing business with, such person of
the limited nature of such self-regulatory organization's responsibility
for such person's acts, practices, and course of business.
(2) A self-regulatory organization shall furnish copies of any
report of examination of any person who is a member of or a participant
in such self-regulatory organization to any other self-regulatory
organization of which such person is a member or in which such person is
a participant upon the request of such person, such other self-
regulatory organization, or the Commission.
(e) Balance sheet and income statement; other financial statements and
information
(1)(A) Every registered broker or dealer shall annually file with
the Commission a balance sheet and income statement certified by a
registered public accounting firm, prepared on a calendar or fiscal year
basis, and such other financial statements (which shall, as the
Commission specifies, be certified) and information concerning its
financial condition as the Commission, by rule may prescribe as
necessary or appropriate in the public interest or for the protection of
investors.
(B) Every registered broker and dealer shall annually send to its
customers its certified balance sheet and such other financial
statements and information concerning its financial condition as the
Commission, by rule, may prescribe pursuant to subsection (a) of this
section.
(C) The Commission, by rule or order, may conditionally or
unconditionally exempt any registered broker or dealer, or class of such
brokers or dealers, from any provision of this paragraph if the
Commission determines that such exemption is consistent with the public
interest and the protection of investors.
(2) The Commission, by rule, as it deems necessary or appropriate in
the public interest or for the protection of investors, may prescribe
the form and content of financial statements filed pursuant to this
chapter and the accounting principles and accounting standards used in
their preparation.
(f) Missing, lost, counterfeit, and stolen securities
(1) Every national securities exchange, member thereof, registered
securities association, broker, dealer, municipal securities dealer,
government securities broker, government securities dealer, registered
transfer agent, registered clearing agency, participant therein, member
of the Federal Reserve System, and bank whose deposits are insured by
the Federal Deposit Insurance Corporation shall--
(A) report to the Commission or other person designated by the
Commission and, in the case of securities issued pursuant to chapter
31 of title 31, to the Secretary of the Treasury such information
about missing, lost, counterfeit, or stolen securities, in such form
and within such time as the Commission, by rule, determines is
necessary or appropriate in the public interest or for the
protection of investors; such information shall be available on
request for a reasonable fee, to any such exchange, member,
association, broker, dealer, municipal securities dealer, government
securities broker, government securities dealer, transfer agent,
clearing agency, participant, member of the Federal Reserve System,
or insured bank, and such other persons as the Commission, by rule,
designates; and
(B) make such inquiry with respect to information reported
pursuant to this subsection as the Commission, by rule, prescribes
as necessary or appropriate in the public interest or for the
protection of investors, to determine whether securities in their
custody or control, for which they are responsible, or in which they
are effecting, clearing, or settling a transaction have been
reported as missing, lost, counterfeit, or stolen.
(2) Every member of a national securities exchange, broker, dealer,
registered transfer agent, and registered clearing agency, shall require
that each of its partners, directors, officers, and employees be
fingerprinted and shall submit such fingerprints, or cause the same to
be submitted, to the Attorney General of the United States for
identification and appropriate processing. The Commission, by rule, may
exempt from the provisions of this paragraph upon specified terms,
conditions, and periods, any class of partners, directors, officers, or
employees of any such member, broker, dealer, transfer agent, or
clearing agency, if the Commission finds that such action is not
inconsistent with the public interest or the protection of investors.
Notwithstanding any other provision of law, in providing identification
and processing functions, the Attorney General shall provide the
Commission and self-regulatory organizations designated by the
Commission with access to all criminal history record information.
(3)(A) In order to carry out the authority under paragraph (1)
above, the Commission or its designee may enter into agreement with the
Attorney General to use the facilities of the National Crime Information
Center (``NCIC'') to receive, store, and disseminate information in
regard to missing, lost, counterfeit, or stolen securities and to permit
direct inquiry access to NCIC's file on such securities for the
financial community.
(B) In order to carry out the authority under paragraph (1) of this
subsection, the Commission or its designee and the Secretary of the
Treasury shall enter into an agreement whereby the Commission or its
designee will receive, store, and disseminate information in the
possession, and which comes into the possession, of the Department of
the Treasury in regard to missing, lost, counterfeit, or stolen
securities.
(4) In regard to paragraphs (1), (2), and (3), above insofar as such
paragraphs apply to any bank or member of the Federal Reserve System,
the Commission may delegate its authority to:
(A) the Comptroller of the Currency as to national banks and
banks operating under the Code of Law for the District of Columbia;
(B) the Federal Reserve Board in regard to any member of the
Federal Reserve System which is not a national bank or a bank
operating under the Code of Law for the District of Columbia; and
(C) the Federal Deposit Insurance Corporation for any State bank
which is insured by the Federal Deposit Insurance Corporation but
which is not a member of the Federal Reserve System.
(5) The Commission shall encourage the insurance industry to require
their insured to report expeditiously instances of missing, lost,
counterfeit, or stolen securities to the Commission or to such other
person as the Commission may, by rule, designate to receive such
information.
(g) Persons extending credit
Any broker, dealer, or other person extending credit who is subject
to the rules and regulations prescribed by the Board of Governors of the
Federal Reserve System pursuant to this chapter shall make such reports
to the Board as it may require as necessary or appropriate to enable it
to perform the functions conferred upon it by this chapter. If any such
broker, dealer, or other person shall fail to make any such report or
fail to furnish full information therein, or, if in the judgment of the
Board it is otherwise necessary, such broker, dealer, or other person
shall permit such inspections to be made by the Board with respect to
the business operations of such broker, dealer, or other person as the
Board may deem necessary to enable it to obtain the required
information.
(h) Risk assessment for holding company systems
(1) Obligations to obtain, maintain, and report information
Every person who is (A) a registered broker or dealer, or (B) a
registered municipal securities dealer for which the Commission is
the appropriate regulatory agency, shall obtain such information and
make and keep such records as the Commission by rule prescribes
concerning the registered person's policies, procedures, or systems
for monitoring and controlling financial and operational risks to it
resulting from the activities of any of its associated persons,
other than a natural person. Such records shall describe, in the
aggregate, each of the financial and securities activities conducted
by, and the customary sources of capital and funding of, those of
its associated persons whose business activities are reasonably
likely to have a material impact on the financial or operational
condition of such registered person, including its net capital, its
liquidity, or its ability to conduct or finance its operations. The
Commission, by rule, may require summary reports of such information
to be filed with the Commission no more frequently than quarterly.
(2) Authority to require additional information
If, as a result of adverse market conditions or based on reports
provided to the Commission pursuant to paragraph (1) of this
subsection or other available information, the Commission reasonably
concludes that it has concerns regarding the financial or
operational condition of (A) any registered broker or dealer, or (B)
any registered municipal securities dealer, government securities
broker, or government securities dealer for which the Commission is
the appropriate regulatory agency, the Commission may require the
registered person to make reports concerning the financial and
securities activities of any of such person's associated persons,
other than a natural person, whose business activities are
reasonably likely to have a material impact on the financial or
operational condition of such registered person. The Commission, in
requiring reports pursuant to this paragraph, shall specify the
information required, the period for which it is required, the time
and date on which the information must be furnished, and whether the
information is to be furnished directly to the Commission or to a
self-regulatory organization with primary responsibility for
examining the registered person's financial and operational
condition.
(3) Special provisions with respect to associated persons
subject to Federal banking agency regulation
(A) Cooperation in implementation
In developing and implementing reporting requirements
pursuant to paragraph (1) of this subsection with respect to
associated persons subject to examination by or reporting
requirements of a Federal banking agency, the Commission shall
consult with and consider the views of each such Federal banking
agency. If a Federal banking agency comments in writing on a
proposed rule of the Commission under this subsection that has
been published for comment, the Commission shall respond in
writing to such written comment before adopting the proposed
rule. The Commission shall, at the request of the Federal
banking agency, publish such comment and response in the Federal
Register at the time of publishing the adopted rule.
(B) Use of banking agency reports
A registered broker, dealer, or municipal securities dealer
shall be in compliance with any recordkeeping or reporting
requirement adopted pursuant to paragraph (1) of this subsection
concerning an associated person that is subject to examination
by or reporting requirements of a Federal banking agency if such
broker, dealer, or municipal securities dealer utilizes for such
recordkeeping or reporting requirement copies of reports filed
by the associated person with the Federal banking agency
pursuant to section 161 of title 12, subchapter VIII of chapter
3 of title 12, section 1817(a) of title 12, section 1467a(b) of
title 12, or section 1847 of title 12. The Commission may,
however, by rule adopted pursuant to paragraph (1), require any
broker, dealer, or municipal securities dealer filing such
reports with the Commission to obtain, maintain, or report
supplemental information if the Commission makes an explicit
finding that such supplemental information is necessary to
inform the Commission regarding potential risks to such broker,
dealer, or municipal securities dealer. Prior to requiring any
such supplemental information, the Commission shall first
request the Federal banking agency to expand its reporting
requirements to include such information.
(C) Procedure for requiring additional information
Prior to making a request pursuant to paragraph (2) of this
subsection for information with respect to an associated person
that is subject to examination by or reporting requirements of a
Federal banking agency, the Commission shall--
(i) notify such agency of the information required with
respect to such associated person; and
(ii) consult with such agency to determine whether the
information required is available from such agency and for
other purposes, unless the Commission determines that any
delay resulting from such consultation would be inconsistent
with ensuring the financial and operational condition of the
broker, dealer, municipal securities dealer, government
securities broker, or government securities dealer or the
stability or integrity of the securities markets.
(D) Exclusion for examination reports
Nothing in this subsection shall be construed to permit the
Commission to require any registered broker or dealer, or any
registered municipal securities dealer, government securities
broker, or government securities dealer for which the Commission
is the appropriate regulatory agency, to obtain, maintain, or
furnish any examination report of any Federal banking agency or
any supervisory recommendations or analysis contained therein.
(E) Confidentiality of information provided
No information provided to or obtained by the Commission
from any Federal banking agency pursuant to a request by the
Commission under subparagraph (C) of this paragraph regarding
any associated person which is subject to examination by or
reporting requirements of a Federal banking agency may be
disclosed to any other person (other than a self-regulatory
organization), without the prior written approval of the Federal
banking agency. Nothing in this subsection shall authorize the
Commission to withhold information from Congress, or prevent the
Commission from complying with a request for information from
any other Federal department or agency requesting the
information for purposes within the scope of its jurisdiction,
or complying with an order of a court of the United States in an
action brought by the United States or the Commission.
(F) Notice to banking agencies concerning financial and
operational condition concerns
The Commission shall notify the Federal banking agency of
any concerns of the Commission regarding significant financial
or operational risks resulting from the activities of any
registered broker or dealer, or any registered municipal
securities dealer, government securities broker, or government
securities dealer for which the Commission is the appropriate
regulatory agency, to any associated person thereof which is
subject to examination by or reporting requirements of the
Federal banking agency.
(G) ``Federal banking agency'' defined
For purposes of this paragraph, the term ``Federal banking
agency'' shall have the same meaning as the term ``appropriate
Federal bank agency'' in section 1813(q) of title 12.
(4) Exemptions
The Commission by rule or order may exempt any person or class
of persons, under such terms and conditions and for such periods as
the Commission shall provide in such rule or order, from the
provisions of this subsection, and the rules thereunder. In granting
such exemptions, the Commission shall consider, among other
factors--
(A) whether information of the type required under this
subsection is available from a supervisory agency (as defined in
section 3401(6) \3\ of title 12), a State insurance commission
or similar State agency, the Commodity Futures Trading
Commission, or a similar foreign regulator;
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\3\ See References in Text note below.
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(B) the primary business of any associated person;
(C) the nature and extent of domestic or foreign regulation
of the associated person's activities;
(D) the nature and extent of the registered person's
securities activities; and
(E) with respect to the registered person and its associated
persons, on a consolidated basis, the amount and proportion of
assets devoted to, and revenues derived from, activities in the
United States securities markets.
(5) Authority to limit disclosure of information
Notwithstanding any other provision of law, the Commission shall
not be compelled to disclose any information required to be reported
under this subsection, or any information supplied to the Commission
by any domestic or foreign regulatory agency that relates to the
financial or operational condition of any associated person of a
registered broker, dealer, government securities broker, government
securities dealer, or municipal securities dealer. Nothing in this
subsection shall authorize the Commission to withhold information
from Congress, or prevent the Commission from complying with a
request for information from any other Federal department or agency
requesting the information for purposes within the scope of its
jurisdiction, or complying with an order of a court of the United
States in an action brought by the United States or the Commission.
For purposes of section 552 of title 5, this subsection shall be
considered a statute described in subsection (b)(3)(B) of such
section 552. In prescribing regulations to carry out the
requirements of this subsection, the Commission shall designate
information described in or obtained pursuant to subparagraph (B) or
(C) of paragraph (3) of this subsection as confidential information
for purposes of section 78x(b)(2) of this title.
(i) Investment bank holding companies
(1) Elective supervision of an investment bank holding
company not having a bank or savings association
affiliate
(A) In general
An investment bank holding company that is not--
(i) an affiliate of an insured bank (other than an
institution described in subparagraph (D), (F), or (G) of
section 1841(c)(2), or held under section 1843(f), of title
12), or a savings association;
(ii) a foreign bank, foreign company, or company that is
described in section 3106(a) of title 12; or
(iii) a foreign bank that controls, directly or
indirectly, a corporation chartered under section 25A of the
Federal Reserve Act [12 U.S.C. 611 et seq.],
may elect to become supervised by filing with the Commission a
notice of intention to become supervised, pursuant to
subparagraph (B) of this paragraph. Any investment bank holding
company filing such a notice shall be supervised in accordance
with this section and comply with the rules promulgated by the
Commission applicable to supervised investment bank holding
companies.
(B) Notification of status as a supervised investment bank
holding company
An investment bank holding company that elects under
subparagraph (A) to become supervised by the Commission shall
file with the Commission a written notice of intention to become
supervised by the Commission in such form and containing such
information and documents concerning such investment bank
holding company as the Commission, by rule, may prescribe as
necessary or appropriate in furtherance of the purposes of this
section. Unless the Commission finds that such supervision is
not necessary or appropriate in furtherance of the purposes of
this section, such supervision shall become effective 45 days
after the date of receipt of such written notice by the
Commission or within such shorter time period as the Commission,
by rule or order, may determine.
(2) Election not to be supervised by the Commission as an
investment bank holding company
(A) Voluntary withdrawal
A supervised investment bank holding company that is
supervised pursuant to paragraph (1) may, upon such terms and
conditions as the Commission deems necessary or appropriate,
elect not to be supervised by the Commission by filing a written
notice of withdrawal from Commission supervision. Such notice
shall not become effective until 1 year after receipt by the
Commission, or such shorter or longer period as the Commission
deems necessary or appropriate to ensure effective supervision
of the material risks to the supervised investment bank holding
company and to the affiliated broker or dealer, or to prevent
evasion of the purposes of this section.
(B) Discontinuation of Commission supervision
If the Commission finds that any supervised investment bank
holding company that is supervised pursuant to paragraph (1) is
no longer in existence or has ceased to be an investment bank
holding company, or if the Commission finds that continued
supervision of such a supervised investment bank holding company
is not consistent with the purposes of this section, the
Commission may discontinue the supervision pursuant to a rule or
order, if any, promulgated by the Commission under this section.
(3) Supervision of investment bank holding companies
(A) Recordkeeping and reporting
(i) In general
Every supervised investment bank holding company and
each affiliate thereof shall make and keep for prescribed
periods such records, furnish copies thereof, and make such
reports, as the Commission may require by rule, in order to
keep the Commission informed as to--
(I) the company's or affiliate's activities,
financial condition, policies, systems for monitoring
and controlling financial and operational risks, and
transactions and relationships between any broker or
dealer affiliate of the supervised investment bank
holding company; and
(II) the extent to which the company or affiliate
has complied with the provisions of this chapter and
regulations prescribed and orders issued under this
chapter.
(ii) Form and contents
Such records and reports shall be prepared in such form
and according to such specifications (including
certification by a registered public accounting firm), as
the Commission may require and shall be provided promptly at
any time upon request by the Commission. Such records and
reports may include--
(I) a balance sheet and income statement;
(II) an assessment of the consolidated capital of
the supervised investment bank holding company;
(III) an independent auditor's report attesting to
the supervised investment bank holding company's
compliance with its internal risk management and
internal control objectives; and
(IV) reports concerning the extent to which the
company or affiliate has complied with the provisions of
this chapter and any regulations prescribed and orders
issued under this chapter.
(B) Use of existing reports
(i) In general
The Commission shall, to the fullest extent possible,
accept reports in fulfillment of the requirements under this
paragraph that the supervised investment bank holding
company or its affiliates have been required to provide to
another appropriate regulatory agency or self-regulatory
organization.
(ii) Availability
A supervised investment bank holding company or an
affiliate of such company shall provide to the Commission,
at the request of the Commission, any report referred to in
clause (i).
(C) Examination authority
(i) Focus of examination authority
The Commission may make examinations of any supervised
investment bank holding company and any affiliate of such
company in order to--
(I) inform the Commission regarding--
(aa) the nature of the operations and financial
condition of the supervised investment bank holding
company and its affiliates;
(bb) the financial and operational risks within
the supervised investment bank holding company that
may affect any broker or dealer controlled by such
supervised investment bank holding company; and
(cc) the systems of the supervised investment
bank holding company and its affiliates for
monitoring and controlling those risks; and
(II) monitor compliance with the provisions of this
subsection, provisions governing transactions and
relationships between any broker or dealer affiliated
with the supervised investment bank holding company and
any of the company's other affiliates, and applicable
provisions of subchapter II of chapter 53, title 31
(commonly referred to as the ``Bank Secrecy Act'') and
regulations thereunder.
(ii) Restricted focus of examinations
The Commission shall limit the focus and scope of any
examination of a supervised investment bank holding company
to--
(I) the company; and
(II) any affiliate of the company that, because of
its size, condition, or activities, the nature or size
of the transactions between such affiliate and any
affiliated broker or dealer, or the centralization of
functions within the holding company system, could, in
the discretion of the Commission, have a materially
adverse effect on the operational or financial condition
of the broker or dealer.
(iii) Deference to other examinations
For purposes of this subparagraph, the Commission shall,
to the fullest extent possible, use the reports of
examination of an institution described in subparagraph (D),
(F), or (G) of section 1841(c)(2), or held under section
1843(f), of title 12 made by the appropriate regulatory
agency, or of a licensed insurance company made by the
appropriate State insurance regulator.
(4) Functional regulation of banking and insurance
activities of supervised investment bank holding
companies
The Commission shall defer to--
(A) the appropriate regulatory agency with regard to all
interpretations of, and the enforcement of, applicable banking
laws relating to the activities, conduct, ownership, and
operations of banks, and institutions described in subparagraph
(D), (F), and (G) of section 1841(c)(2), or held under section
1843(f), of title 12; and
(B) the appropriate State insurance regulators with regard
to all interpretations of, and the enforcement of, applicable
State insurance laws relating to the activities, conduct, and
operations of insurance companies and insurance agents.
(5) Definitions
For purposes of this subsection:
(A) The term ``investment bank holding company'' means--
(i) any person other than a natural person that owns or
controls one or more brokers or dealers; and
(ii) the associated persons of the investment bank
holding company.
(B) The term ``supervised investment bank holding company''
means any investment bank holding company that is supervised by
the Commission pursuant to this subsection.
(C) The terms ``affiliate'', ``bank'', ``bank holding
company'', ``company'', ``control'', and ``savings association''
have the same meanings as given in section 1841 of title 12.
(D) The term ``insured bank'' has the same meaning as given
in section 1813 of title 12.
(E) The term ``foreign bank'' has the same meaning as given
in section 3101(7) of title 12.
(F) The terms ``person associated with an investment bank
holding company'' and ``associated person of an investment bank
holding company'' mean any person directly or indirectly
controlling, controlled by, or under common control with, an
investment bank holding company.
(j) Authority to limit disclosure of information
Notwithstanding any other provision of law, the Commission shall not
be compelled to disclose any information required to be reported under
subsection (h) or (i) of this section or any information supplied to the
Commission by any domestic or foreign regulatory agency that relates to
the financial or operational condition of any associated person of a
broker or dealer, investment bank holding company, or any affiliate of
an investment bank holding company. Nothing in this subsection shall
authorize the Commission to withhold information from Congress, or
prevent the Commission from complying with a request for information
from any other Federal department or agency or any self-regulatory
organization requesting the information for purposes within the scope of
its jurisdiction, or complying with an order of a court of the United
States in an action brought by the United States or the Commission. For
purposes of section 552 of title 5, this subsection shall be considered
a statute described in subsection (b)(3)(B) of such section 552. In
prescribing regulations to carry out the requirements of this
subsection, the Commission shall designate information described in or
obtained pursuant to subparagraphs (A), (B), and (C) of subsection
(i)(5) \4\ of this section as confidential information for purposes of
section 78x(b)(2) of this title.
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\4\ So in original. Probably should be subsection ``(i)(3)''.
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(k) Coordination of examining authorities
(1) Elimination of duplication
The Commission and the examining authorities, through
cooperation and coordination of examination and oversight
activities, shall eliminate any unnecessary and burdensome
duplication in the examination process.
(2) Coordination of examinations
The Commission and the examining authorities shall share such
information, including reports of examinations, customer complaint
information, and other nonpublic regulatory information, as
appropriate to foster a coordinated approach to regulatory oversight
of brokers and dealers that are subject to examination by more than
one examining authority.
(3) Examinations for cause
At any time, any examining authority may conduct an examination
for cause of any broker or dealer subject to its jurisdiction.
(4) Confidentiality
(A) In general
Section 78x of this title shall apply to the sharing of
information in accordance with this subsection. The Commission
shall take appropriate action under section 78x(c) of this title
to ensure that such information is not inappropriately
disclosed.
(B) Appropriate disclosure not prohibited
Nothing in this paragraph authorizes the Commission or any
examining authority to withhold information from the Congress,
or prevent the Commission or any examining authority from
complying with a request for information from any other Federal
department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order
of a court of the United States in an action brought by the
United States or the Commission.
(5) ``Examining authority'' defined
For purposes of this subsection, the term ``examining
authority'' means a self-regulatory organization registered with the
Commission under this chapter (other than a registered clearing
agency) with the authority to examine, inspect, and otherwise
oversee the activities of a registered broker or dealer.
(June 6, 1934, ch. 404, title I, Sec. 17, 48 Stat. 897; May 27, 1936,
ch. 462, Sec. 4, 49 Stat. 1379; June 25, 1938, ch. 677, Sec. 5, 52 Stat.
1076; Pub. L. 94-29, Sec. 14, June 4, 1975, 89 Stat. 137; Pub. L. 99-
571, title I, Sec. 102(h), (i), Oct. 28, 1986, 100 Stat. 3219; Pub. L.
100-181, title III, Sec. 321, title VIII, Sec. 801(b), Dec. 4, 1987, 101
Stat. 1257, 1265; Pub. L. 101-432, Sec. 4(a), Oct. 16, 1990, 104 Stat.
966; Pub. L. 104-290, title I, Sec. 108, Oct. 11, 1996, 110 Stat. 3425;
Pub. L. 105-353, title III, Sec. 301(b)(5), Nov. 3, 1998, 112 Stat.
3236; Pub. L. 106-102, title II, Sec. 231(a), Nov. 12, 1999, 113 Stat.
1402; Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 204], Dec. 21, 2000,
114 Stat. 2763, 2763A-424; Pub. L. 107-204, title II, Sec. 205(c)(2),
July 30, 2002, 116 Stat. 774.)
References in Text
This chapter, referred to in subsecs. (a)(1), (b), (d)(1)(A), (B),
(e)(2), (g), (i)(3)(A)(ii)(IV), and (k)(5), was in the original ``this
title'', and this chapter, referred to in subsec. (i)(3)(A)(i)(II), was
in the original ``this Act''. See References in Text note set out under
section 78a of this title.
Subchapter VIII of chapter 3 of title 12, referred to in subsec.
(h)(3)(B), was in the original ``section 9 of the Federal Reserve Act'',
meaning section 9 of act Dec. 23, 1913, ch. 6, 38 Stat. 251, as amended,
which is classified generally to subchapter VIII (Sec. 321 et seq.) of
chapter 3 of Title 12, Banks and Banking.
Section 3401(6) of title 12, referred to in subsec. (h)(4)(A), was
redesignated section 3401(7) of title 12 by Pub. L. 101-73, title IX,
Sec. 941(1), Aug. 9, 1989, 103 Stat. 496.
Section 25A of the Federal Reserve Act, referred to in subsec.
(i)(1)(A)(iii), is classified to subchapter II (Sec. 611 et seq.) of
chapter 6 of Title 12, Banks and Banking.
The Bank Secrecy Act, referred to in subsec. (i)(3)(C)(i)(II), is
also the popular name of title I of Pub. L. 91-508, Oct. 26, 1970, 84
Stat. 1114, as amended, which is classified principally to chapter 21
(Sec. 1951 et seq.) of Title 12, Banks and Banking. For complete
classification of this Act to the Code, see Short Title note set out
under section 1951 of Title 12 and Tables.
Amendments
2002--Subsecs. (e)(1)(A), (i)(3)(A)(ii). Pub. L. 107-204 substituted
``a registered public accounting firm'' for ``an independent public
accountant''.
2000--Subsec. (b). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 204(5)], which directed amendment of subsec. (b) by adding at the
end pars. (2) to (4)(B), was executed by making the addition after par.
(1), to reflect the probable intent of Congress.
Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec. 204(1) to (4), (6)],
inserted subsec. heading, inserted par. (1) designation and heading
before ``All'', substituted ``prior to conducting any such examination
of a--'' for ``prior to conducting any such examination of a'', inserted
subpar. (A) designation before ``registered clearing'', added subpar.
(B), designated last sentence as par. (4)(C) and substituted ``Nothing
in the proviso in paragraph (1)'' for ``Nothing in the proviso to the
preceding sentence''.
1999--Subsecs. (i) to (k). Pub. L. 106-102 added subsecs. (i) and
(j) and redesignated former subsec. (i) as (k).
1998--Subsec. (g). Pub. L. 105-353 substituted ``Board of Governors
of the Federal Reserve System'' for ``Federal Reserve Board'' in first
sentence.
1996--Subsec. (i). Pub. L. 104-290 added subsec. (i).
1990--Subsec. (h). Pub. L. 101-432 added subsec. (h).
1987--Subsec. (c)(2). Pub. L. 100-181, Sec. 321(1), substituted new
par. (2) for former par. (2) which read as follows: ``The appropriate
regulatory agency for a clearing agency, transfer agent, or municipal
securities dealer for which the Commission is not the appropriate
regulatory agency shall file with the Commission notice of the
commencement of any proceeding and a copy of any order entered by such
appropriate regulatory agency against such clearing agency, transfer
agent, or municipal securities dealer, and the Commission shall file
with such appropriate regulatory agency notice of the commencement of
any proceeding and a copy of any order entered by the Commission against
such clearing agency, transfer agent, or municipal securities dealer.''
Subsec. (f)(1)(A). Pub. L. 100-181, Sec. 801(b), substituted
``securities issued pursuant to chapter 31 of title 31'' for
``government securities''.
Subsec. (f)(2). Pub. L. 100-181, Sec. 321(2), inserted at end
``Notwithstanding any other provision of law, in providing
identification and processing functions, the Attorney General shall
provide the Commission and self-regulatory organizations designated by
the Commission with access to all criminal history record information.''
Subsec. (f)(3)(A). Pub. L. 100-181, Sec. 321(3), substituted
``paragraph (1)'' for ``paragraphs (1) and (2)''.
1986--Subsec. (c)(4). Pub. L. 99-571, Sec. 102(h), added par. (4).
Subsec. (f)(1). Pub. L. 99-571, Sec. 102(i)(1), inserted
``government securities broker, government securities dealer,'' in
introductory provisions and in subpar. (A).
Subsec. (f)(1)(A). Pub. L. 99-571, Sec. 102(i)(2), inserted ``and,
in the case of government securities, to the Secretary of the
Treasury''.
Subsec. (f)(3). Pub. L. 99-571, Sec. 102(i)(3), designated existing
provisions as subpar. (A) and added subpar. (B).
1975--Subsec. (a). Pub. L. 94-29 designated existing provisions as
par. (1), expanded the coverage to require registered municipal
securities dealers, the Municipal Securities Rulemaking Board,
registered securities information processors, and registered clearing
agencies to make and keep such records, to furnish copies thereof, and
to make such reports as the Commission may prescribe and clarified the
Commission's authority to require the dissemination of reports submitted
pursuant to the rules of the Commission, and added pars. (2) and (3).
Subsecs. (b) to (g). Pub. L. 94-29 added subsecs. (b) to (f) and
redesignated former subsec. (b) as (g).
1938--Subsec. (a). Act June 25, 1938, inserted ``every registered
securities association''.
1936--Subsec. (a). Act May 27, 1936, substituted ``every broker or
dealer registered pursuant to section 78o of this title'' for ``every
broker or dealer making or creating a market for both the purchase and
sale of securities through the use of the mails or of any means or
instrumentality of interstate commerce''.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99-571 effective 270 days after Oct. 28, 1986,
see section 401 of Pub. L. 99-571, set out as an Effective Date note
under section 78o-5 of this title.
Effective Date of 1975 Amendment
Amendment by Pub. L. 94-29 effective June 4, 1975, see section 31(a)
of Pub. L. 94-29, set out as a note under section 78b of this title.
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
Section Referred to in Other Sections
This section is referred to in sections 78c, 78f, 78o, 78o-3, 78o-4,
78o-5, 78q-1, 78s, 78y, 78hh, 78fff-1, 78iii, 7217 of this title; title
7 sections 1a, 2, 6d.
