HR 3484 — Business Owners Protection Act of 2025

changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

 SECURITIES EXCHANGE ACT OF 1934

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TITLE I--REGULATION OF SECURITIES EXCHANGES

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 registration and regulation of brokers and dealers

 Sec. 15. (a)(1) It shall be unlawful for any broker or dealer 
which is either a person other than a natural person or a 
natural person not associated with a broker or dealer which is 
a person other than a natural person (other than such a broker 
or dealer whose business is exclusively intrastate and who does 
not make use of any facility of a national securities exchange) 
to make use of the mails or any means or instrumentality of 
interstate commerce to effect any transactions in, or to induce 
or attempt to induce the purchase or sale of, any security 
(other than an exempted security or commercial paper, bankers' 
acceptances, or commercial bills) unless such broker or dealer 
is registered in accordance with subsection (b) of this 
section.
 (2) The Commission, by rule or order, as it deems consistent 
with the public interest and the protection of investors, may 
conditionally or unconditionally exempt from paragraph (1) of 
this subsection any broker or dealer or class of brokers or 
dealers specified in such rule or order.
 (b)(1) A broker or dealer may be registered by filing with 
the Commission an application for registration in such form and 
containing such information and documents concerning such 
broker or dealer and any persons associated with such broker or 
dealer as the Commission, by rule, may prescribe as necessary 
or appropriate in the public interest or for the protection of 
investors. Within forty-five days of the date of the filing of 
such application (or within such longer period as to which the 
applicant consents), the Commission shall--
 (A) by order grant registration, or
 (B) institute proceedings to determine whether 
 registration should be denied. Such proceedings shall 
 include notice of the grounds for denial under 
 consideration and opportunity for hearing and shall be 
 concluded within one hundred twenty days of the date of 
 the filing of the application for registration. At the 
 conclusion of such proceedings, the Commission, by 
 order, shall grant or deny such registration. The 
 Commission may extend the time for conclusion of such 
 proceedings for up to ninety days if it finds good 
 cause for such extension and publishes its reasons for 
 so finding or for such longer period as to which the 
 applicant consents.
The Commission shall grant such registration if the Commission 
finds that the requirements of this section are satisfied. The 
order granting registration shall not be effective until such 
broker or dealer has become a member of a registered securities 
association, or until such broker or dealer has become a member 
of a national securities exchange, if such broker or dealer 
effects transactions solely on that exchange, unless the 
Commission has exempted such broker or dealer, by rule or 
order, from such membership. The Commission shall deny such 
registration if it does not make such a finding or if it finds 
that if the applicant were so registered, its registration 
would be subject to suspension or revocation under paragraph 
(4) of this subsection.
 (2)(A) An application for registration of a broker or dealer 
to be formed or organized may be made by a broker or dealer to 
which the broker or dealer to be formed or organized is to be 
the successor. Such application, in such form as the 
Commission, by rule, may prescribe, shall contain such 
information and documents concerning the applicant, the 
successor, and any persons associated with the applicant or the 
successor, as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors. The grant or denial of registration to 
such an applicant shall be in accordance with the procedures 
set forth in paragraph (1) of this subsection. If the 
Commission grants such registration, the registration shall 
terminate on the forty-fifth day after the effective date 
thereof, unless prior thereto the successor shall, in 
accordance with such rules and regulations as the Commission 
may prescribe, adopt the application for registration as its 
own.
 (B) Any person who is a broker or dealer solely by reason of 
acting as a municipal securities dealer or municipal securities 
broker, who so acts through a separately identifiable 
department or division, and who so acted in such a manner on 
the date of enactment of the Securities Acts Amendments of 
1975, may, in accordance with such terms and conditions as the 
Commission, by rule, prescribes as necessary and appropriate in 
the public interest and for the protection of investors, 
register such separately identifiable department or division in 
accordance with this subsection. If any such department or 
division is so registered, the department or division and not 
such person himself shall be the broker or dealer for purposes 
of this title.
 (C) Within six months of the date of the granting of 
registration to a broker or dealer, the Commission, or upon the 
authorization and direction of the Commission, a registered 
securities association or national securities exchange of which 
such broker or dealer is a member, shall conduct an inspection 
of the broker or dealer to determine whether it is operating in 
conformity with the provisions of this title and the rules and 
regulations thereunder: Provided, however, That the Commission 
may delay such inspection of any class of brokers or dealers 
for a period not to exceed six months.
 (3) Any provision of this title (other than section 5 and 
subsection (a) of this section) which prohibits any act, 
practice, or course of business if the mails or any means or 
instrumentality of interstate commerce is used in connection 
therewith shall also prohibit any such act, practice, or course 
of business by any registered broker or dealer or any person 
acting on behalf of such a broker or dealer, irrespective of 
any use of the mails or any means or instrumentality of 
interstate commerce in connection therewith.
 (4) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding twelve months, or revoke the 
registration of any broker or dealer if it finds, on the record 
after notice and opportunity for hearing, that such censure, 
placing of limitations, suspension, or revocation is in the 
public interest and that such broker or dealer, whether prior 
or subsequent to becoming such, or any person associated with 
such broker or dealer, whether prior or subsequent to becoming 
so associated--
 (A) has willfully made or caused to be made in any 
 application for registration or report required to be 
 filed with the Commission or with any other appropriate 
 regulatory agency under this title, or in any 
 proceeding before the Commission with respect to 
 registration, any statement which was at the time and 
 in the light of the circumstances under which it was 
 made false or misleading with respect to any material 
 fact, or has omitted to state in any such application 
 or report any material fact which is required to be 
 stated therein.
 (B) has been convicted within ten years preceding the 
 filing of any application for registration or at any 
 time thereafter of any felony or misdemeanor or of a 
 substantially equivalent crime by a foreign court of 
 competent jurisdiction which the Commission finds--
 (i) involves the purchase or sale of any 
 security, the taking of a false oath, the 
 making of a false report, bribery, perjury, 
 burglary, any substantially equivalent activity 
 however denominated by the laws of the relevant 
 foreign government, or conspiracy to commit any 
 such offense;
 (ii) arises out of the conduct of the 
 business of a broker, dealer, municipal 
 securities dealer municipal advisor,, 
 government securities broker, government 
 securities dealer, investment adviser, bank, 
 insurance company, fiduciary, transfer agent, 
 nationally recognized statistical rating 
 organization, foreign person performing a 
 function substantially equivalent to any of the 
 above, or entity or person required to be 
 registered under the Commodity Exchange Act (7 
 U.S.C. 1 et seq.) or any substantially 
 equivalent foreign statute or regulation;
 (iii) involves the larceny, theft, robbery, 
 extortion, forgery, counterfeiting, fraudulent 
 concealment, embezzlement, fraudulent 
 conversion, or misappropriation of funds, or 
 securities, or substantially equivalent 
 activity however denominated by the laws of the 
 relevant foreign government; or
 (iv) involves the violation of section 152, 
 1341, 1342, or 1343 or chapter 25 or 47 of 
 title 18, United States Code, or a violation of 
 a substantially equivalent foreign statute.
 (C) is permanently or temporarily enjoined by order, 
 judgment, or decree of any court of competent 
 jurisdiction from acting as an investment adviser, 
 underwriter, broker, dealer, municipal securities 
 dealer municipal advisor,, government securities 
 broker, government securities dealer, security-based 
 swap dealer, major security-based swap participant, 
 transfer agent, nationally recognized statistical 
 rating organization, foreign person performing a 
 function substantially equivalent to any of the above, 
 or entity or person required to be registered under the 
 Commodity Exchange Act or any substantially equivalent 
 foreign statute or regulation, or as an affiliated 
 person or employee of any investment company, bank, 
 insurance company, foreign entity substantially 
 equivalent to any of the above, or entity or person 
 required to be registered under the Commodity Exchange 
 Act or any substantially equivalent foreign statute or 
 regulation, or from engaging in or continuing any 
 conduct or practice in connection with any such 
 activity, or in connection with the purchase or sale of 
 any security.
 (D) has willfully violated any provision of the 
 Securities Act of 1933, the Investment Advisers Act of 
 1940, the Investment Company Act of 1940, the Commodity 
 Exchange Act, this title, the rules or regulations 
 under any of such statutes, or the rules of the 
 Municipal Securities Rulemaking Board, or is unable to 
 comply with any such provision.
 (E) has willfully aided, abetted, counseled, 
 commanded, induced, or procured the violation by any 
 other person of any provision of the Securities Act of 
 1933, the Investment Advisers Act of 1940, the 
 Investment Company Act of 1940, the Commodity Exchange 
 Act, this title, the rules or regulations under any of 
 such statutes, or the rules of the Municipal Securities 
 Rulemaking Board, or has failed reasonably to 
 supervise, with a view to preventing violations of the 
 provisions of such statutes, rules, and regulations, 
 another person who commits such a violation, if such 
 other person is subject to his supervision. For the 
 purposes of this subparagraph (E) no person shall be 
 deemed to have failed reasonably to supervise any other 
 person, if--
 (i) there have been established procedures, 
 and a system for applying such procedures, 
 which would reasonably be expected to prevent 
 and detect, insofar as practicable, any such 
 violation by such other person, and
 (ii) such person has reasonably discharged 
 the duties and obligations incumbent upon him 
 by reason of such procedures and system without 
 reasonable cause to believe that such 
 procedures and system were not being complied 
 with.
 (F) is subject to any order of the Commission barring 
 or suspending the right of the person to be associated 
 with a broker, dealer, security-based swap dealer, or a 
 major security-based swap participant;
 (G) has been found by a foreign financial regulatory 
 authority to have--
 (i) made or caused to be made in any 
 application for registration or report required 
 to be filed with a foreign financial regulatory 
 authority, or in any proceeding before a 
 foreign financial regulatory authority with 
 respect to registration, any statement that was 
 at the time and in the light of the 
 circumstances under which it was made false or 
 misleading with respect to any material fact, 
 or has omitted to state in any application or 
 report to the foreign financial regulatory 
 authority any material fact that is required to 
 be stated therein;
 (ii) violated any foreign statute or 
 regulation regarding transactions in 
 securities, or contracts of sale of a commodity 
 for future delivery, traded on or subject to 
 the rules of a contract market or any board of 
 trade;
 (iii) aided, abetted, counseled, commanded, 
 induced, or procured the violation by any 
 person of any provision of any statutory 
 provisions enacted by a foreign government, or 
 rules or regulations thereunder, empowering a 
 foreign financial regulatory authority 
 regarding transactions in securities, or 
 contracts of sale of a commodity for future 
 delivery, traded on or subject to the rules of 
 a contract market or any board of trade, or has 
 been found, by a foreign financial regulatory 
 authority, to have failed reasonably to 
 supervise, with a view to preventing violations 
 of such statutory provisions, rules, and 
 regulations, another person who commits such a 
 violation, if such other person is subject to 
 his supervision; or
 (H) is subject to any final order of a State 
 securities commission (or any agency or officer 
 performing like functions), State authority that 
 supervises or examines banks, savings associations, or 
 credit unions, State insurance commission (or any 
 agency or office performing like functions), an 
 appropriate Federal banking agency (as defined in 
 section 3 of the Federal Deposit Insurance Act (12 
 U.S.C. 1813(q))), or the National Credit Union 
 Administration, that--
 (i) bars such person from association with an 
 entity regulated by such commission, authority, 
 agency, or officer, or from engaging in the 
 business of securities, insurance, banking, 
 savings association activities, or credit union 
 activities; or
 (ii) constitutes a final order based on 
 violations of any laws or regulations that 
 prohibit fraudulent, manipulative, or deceptive 
 conduct.
 (5) Pending final determination whether any registration 
under this subsection shall be revoked, the Commission, by 
order, may suspend such registration, if such suspension 
appears to the Commission, after notice and opportunity for 
hearing, to be necessary or appropriate in the public interest 
or for the protection of investors. Any registered broker or 
dealer may, upon such terms and conditions as the Commission 
deems necessary or appropriate in the public interest or for 
the protection of investors, withdraw from registration by 
filing a written notice of withdrawal with the Commission. If 
the Commission finds that any registered broker or dealer is no 
longer in existence or has ceased to do business as a broker or 
dealer, the Commission, by order, shall cancel the registration 
of such broker or dealer.
 (6)(A) With respect to any person who is associated, who is 
seeking to become associated, or, at the time of the alleged 
misconduct, who was associated or was seeking to become 
associated with a broker or dealer, or any person 
participating, or, at the time of the alleged misconduct, who 
was participating, in an offering of any penny stock, the 
Commission, by order, shall censure, place limitations on the 
activities or functions of such person, or suspend for a period 
not exceeding 12 months, or bar any such person from being 
associated with a broker, dealer, investment adviser, municipal 
securities dealer, municipal advisor, transfer agent, or 
nationally recognized statistical rating organization, or from 
participating in an offering of penny stock, if the Commission 
finds, on the record after notice and opportunity for a 
hearing, that such censure, placing of limitations, suspension, 
or bar is in the public interest and that such person--
 (i) has committed or omitted any act, or is subject 
 to an order or finding, enumerated in subparagraph (A), 
 (D), (E), (H), or (G) of paragraph (4) of this 
 subsection;
 (ii) has been convicted of any offense specified in 
 subparagraph (B) of such paragraph (4) within 10 years 
 of the commencement of the proceedings under this 
 paragraph; or
 (iii) is enjoined from any action, conduct, or 
 practice specified in subparagraph (C) of such 
 paragraph (4).
 (B) It shall be unlawful--
 (i) for any person as to whom an order under 
 subparagraph (A) is in effect, without the consent of 
 the Commission, willfully to become, or to be, 
 associated with a broker or dealer in contravention of 
 such order, or to participate in an offering of penny 
 stock in contravention of such order;
 (ii) for any broker or dealer to permit such a 
 person, without the consent of the Commission, to 
 become or remain, a person associated with the broker 
 or dealer in contravention of such order, if such 
 broker or dealer knew, or in the exercise of reasonable 
 care should have known, of such order; or
 (iii) for any broker or dealer to permit such a 
 person, without the consent of the Commission, to 
 participate in an offering of penny stock in 
 contravention of such order, if such broker or dealer 
 knew, or in the exercise of reasonable care should have 
 known, of such order and of such participation.
 (C) For purposes of this paragraph, the term ``person 
participating in an offering of penny stock'' includes any 
person acting as any promoter, finder, consultant, agent, or 
other person who engages in activities with a broker, dealer, 
or issuer for purposes of the issuance or trading in any penny 
stock, or inducing or attempting to induce the purchase or sale 
of any penny stock. The Commission may, by rule or regulation, 
define such term to include other activities, and may, by rule, 
regulation, or order, exempt any person or class of persons, in 
whole or in part, conditionally or unconditionally, from such 
term.
 (7) No registered broker or dealer or government securities 
broker or government securities dealer registered (or required 
to register) under section 15C(a)(1)(A) shall effect any 
transaction in, or induce the purchase or sale of, any security 
unless such broker or dealer meets such standards of 
operational capability and such broker or dealer and all 
natural persons associated with such broker or dealer meet such 
standards of training, experience, competence, and such other 
qualifications as the Commission finds necessary or appropriate 
in the public interest or for the protection of investors. The 
Commission shall establish such standards by rules and 
regulations, which may--
 (A) specify that all or any portion of such standards 
 shall be applicable to any class of brokers and dealers 
 and persons associated with brokers and dealers;
 (B) require persons in any such class to pass tests 
 prescribed in accordance with such rules and 
 regulations, which tests shall, with respect to any 
 class of partners, officers, or supervisory employees 
 (which latter term may be defined by the Commission's 
 rules and regulations and as so defined shall include 
 branch managers of brokers or dealers) engaged in the 
 management of the broker or dealer, include questions 
 relating to bookkeeping, accounting, internal control 
 over cash and securities, supervision of employees, 
 maintenance of records, and other appropriate matters; 
 and
 (C) provide that persons in any such class other than 
 brokers and dealers and partners, officers, and 
 supervisory employees of brokers or dealers, may be 
 qualified solely on the basis of compliance with such 
 standards of training and such other qualifications as 
 the Commission finds appropriate.
The Commission, by rule, may prescribe reasonable fees and 
charges to defray its costs in carrying out this paragraph, 
including, but not limited to, fees for any test administered 
by it or under its direction. The Commission may cooperate with 
registered securities associations and national securities 
exchanges in devising and administering tests and may require 
registered brokers and dealers and persons associated with such 
brokers and dealers to pass tests administered by or on behalf 
of any such association or exchange and to pay such association 
or exchange reasonable fees or charges to defray the costs 
incurred by such association or exchange in administering such 
tests.
 (8) It shall be unlawful for any registered broker or dealer 
to effect any transaction in, or induce or attempt to induce 
the purchase or sale of, any security (other than or commercial 
paper, bankers' acceptances, or commercial bills), unless such 
broker or dealer is a member of a securities association 
registered pursuant to section 15A of this title or effects 
transactions in securities solely on a national securities 
exchange of which it is a member.
 (9) The Commission by rule or order, as it deems consistent 
with the public interest and the protection of investors, may 
conditionally or unconditionally exempt from paragraph (8) of 
this subsection any broker or dealer or class of brokers or 
dealers specified in such rule or order.
 (10) For the purposes of determining whether a person is 
subject to a statutory disqualification under section 6(c)(2), 
15A(g)(2), or 17A(b)(4)(A) of this title, the term 
``Commission'' in paragraph (4)(B) of this subsection shall 
mean ``exchange'', ``association'', or ``clearing agency'', 
respectively.
 (11) Broker/dealer registration with respect to 
 transactions in security futures products.--
 (A) Notice registration.--
 (i) Contents of notice.--
 Notwithstanding paragraphs (1) and (2), 
 a broker or dealer required to register 
 only because it effects transactions in 
 security futures products on an 
 exchange registered pursuant to section 
 6(g) may register for purposes of this 
 section by filing with the Commission a 
 written notice in such form and 
 containing such information concerning 
 such broker or dealer and any persons 
 associated with such broker or dealer 
 as the Commission, by rule, may 
 prescribe as necessary or appropriate 
 in the public interest or for the 
 protection of investors. A broker or 
 dealer may not register under this 
 paragraph unless that broker or dealer 
 is a member of a national securities 
 association registered under section 
 15A(k).
 (ii) Immediate effectiveness.--Such 
 registration shall be effective 
 contemporaneously with the submission 
 of notice, in written or electronic 
 form, to the Commission, except that 
 such registration shall not be 
 effective if the registration would be 
 subject to suspension or revocation 
 under paragraph (4).
 (iii) Suspension.--Such registration 
 shall be suspended immediately if a 
 national securities association 
 registered pursuant to section 15A(k) 
 of this title suspends the membership 
 of that broker or dealer.
 (iv) Termination.--Such registration 
 shall be terminated immediately if any 
 of the above stated conditions for 
 registration set forth in this 
 paragraph are no longer satisfied.
 (B) Exemptions for registered brokers and 
 dealers.--A broker or dealer registered 
 pursuant to the requirements of subparagraph 
 (A) shall be exempt from the following 
 provisions of this title and the rules 
 thereunder with respect to transactions in 
 security futures products:
 (i) Section 8.
 (ii) Section 11.
 (iii) Subsections (c)(3) and (c)(5) 
 of this section.
 (iv) Section 15B.
 (v) Section 15C.
 (vi) Subsections (d), (e), (f), (g), 
 (h), and (i) of section 17.
 (12) Exemption for security futures product exchange 
 members.--
 (A) Registration exemption.--A natural person 
 shall be exempt from the registration 
 requirements of this section if such person--
 (i) is a member of a designated 
 contract market registered with the 
 Commission as an exchange pursuant to 
 section 6(g);
 (ii) effects transactions only in 
 securities on the exchange of which 
 such person is a member; and
 (iii) does not directly accept or 
 solicit orders from public customers or 
 provide advice to public customers in 
 connection with the trading of security 
 futures products.
 (B) Other exemptions.--A natural person 
 exempt from registration pursuant to 
 subparagraph (A) shall also be exempt from the 
 following provisions of this title and the 
 rules thereunder:
 (i) Section 8.
 (ii) Section 11.
 (iii) Subsections (c)(3), (c)(5), and 
 (e) of this section.
 (iv) Section 15B.
 (v) Section 15C.
 (vi) Subsections (d), (e), (f), (g), 
 (h), and (i) of section 17.
 (13) Registration exemption for merger and 
 acquisition brokers.--
 (A) In general.--Except as provided in 
 subparagraph (B), an M&A broker shall be exempt 
 from registration under this section.
 (B) Excluded activities.--An M&A broker is 
 not exempt from registration under this 
 paragraph if such broker does any of the 
 following:
 (i) Directly or indirectly, in 
 connection with the transfer of 
 ownership of an eligible privately held 
 company, receives, holds, transmits, or 
 has custody of the funds or securities 
 to be exchanged by the parties to the 
 transaction.
 (ii) Engages on behalf of an issuer 
 in a public offering of any class of 
 securities that is registered, or is 
 required to be registered, with the 
 Commission under section 12 or with 
 respect to which the issuer files, or 
 is required to file, periodic 
 information, documents, and reports 
 under subsection (d).
 (iii) Engages on behalf of any party 
 in a transaction involving a shell 
 company, other than a business 
 combination related shell company.
 (iv) Directly, or indirectly through 
 any of its affiliates, provides 
 financing related to the transfer of 
 ownership of an eligible privately held 
 company.
 (v) Assists any party to obtain 
 financing from an unaffiliated third 
 party without--
 (I) complying with all other 
 applicable laws in connection 
 with such assistance, 
 including, if applicable, 
 Regulation T (12 C.F.R. 220 et 
 seq.); and
 (II) disclosing any 
 compensation in writing to the 
 party.
 (vi) Represents both the buyer and 
 the seller in the same transaction 
 without providing clear written 
 disclosure as to the parties the broker 
 represents and obtaining written 
 consent from both parties to the joint 
 representation.
 (vii) Facilitates a transaction with 
 a group of buyers formed with the 
 assistance of the M&A broker to acquire 
 the eligible privately held company.
 (viii) Engages in a transaction 
 involving the transfer of ownership of 
 an eligible privately held company to a 
 passive buyer or group of passive 
 buyers.
 (ix) Binds a party to a transfer of 
 ownership of an eligible privately held 
 company.
 (C) Disqualification.--An M&A broker is not 
 exempt from registration under this paragraph 
 if such broker (and if and as applicable, 
 including any officer, director, member, 
 manager, partner, or employee of such broker)--
 (i) has been barred from association 
 with a broker or dealer by the 
 Commission, any State, or any self-
 regulatory organization; or
 (ii) is suspended from association 
 with a broker or dealer.
 (D) Rule of construction.--Nothing in this 
 paragraph shall be construed to limit any other 
 authority of the Commission to exempt any 
 person, or any class of persons, from any 
 provision of this title, or from any provision 
 of any rule or regulation thereunder.
 (E) Definitions.--In this paragraph:
 (i) Business combination related 
 shell company.--The term ``business 
 combination related shell company'' 
 means a shell company that is formed by 
 an entity that is not a shell company--
 (I) solely for the purpose of 
 changing the corporate domicile 
 of that entity solely within 
 the United States; or
 (II) solely for the purpose 
 of completing a business 
 combination transaction (as 
 defined under section 
 230.165(f) of title 17, Code of 
 Federal Regulations) among one 
 or more entities other than the 
 company itself, none of which 
 is a shell company.
 (ii) Control.--The term ``control'' 
 means the power, directly or 
 indirectly, to direct the management or 
 policies of a company, whether through 
 ownership of securities, by contract, 
 or otherwise. There is a presumption of 
 control if, upon completion of a 
 transaction, the buyer or group of 
 buyers--
 (I) has the right to vote 25 
 percent or more of a class of 
 voting securities or the power 
 to sell or direct the sale of 
 25 percent or more of a class 
 of voting securities; or
 (II) in the case of a 
 partnership or limited 
 liability company, has the 
 right to receive upon 
 dissolution, or has 
 contributed, 25 percent or more 
 of the capital.
 (iii) Eligible privately held 
 company.--The term ``eligible privately 
 held company'' means a privately held 
 company that meets both of the 
 following conditions:
 (I) The company does not have 
 any class of securities 
 registered, or required to be 
 registered, with the Commission 
 under section 12 or with 
 respect to which the company 
 files, or is required to file, 
 periodic information, 
 documents, and reports under 
 subsection (d).
 (II) In the fiscal year 
 ending immediately before the 
 fiscal year in which the 
 services of the M&A broker are 
 initially engaged with respect 
 to the securities transaction, 
 the company meets either or 
 both of the following 
 conditions (determined in 
 accordance with the historical 
 financial accounting records of 
 the company):
 (aa) The earnings of 
 the company before 
 interest, taxes, 
 depreciation, and 
 amortization are less 
 than $25,000,000.
 (bb) The gross 
 revenues of the company 
 are less than 
 $250,000,000.
 For purposes of this subclause, 
 the Commission may by rule 
 modify the dollar figures if 
 the Commission determines that 
 such a modification is 
 necessary or appropriate in the 
 public interest or for the 
 protection of investors.
 (iv) M&A broker.--The term ``M&A 
 broker'' means a broker, and any person 
 associated with a broker, engaged in 
 the business of effecting securities 
 transactions solely in connection with 
 the transfer of ownership of an 
 eligible privately held company, 
 regardless of whether the broker acts 
 on behalf of a seller or buyer, through 
 the purchase, sale, exchange, issuance, 
 repurchase, or redemption of, or a 
 business combination involving, 
 securities or assets of the eligible 
 privately held company, if the broker 
 reasonably believes that--
 (I) upon consummation of the 
 transaction, any person 
 acquiring securities or assets 
 of the eligible privately held 
 company, acting alone or in 
 concert--
 (aa) will control the 
 eligible privately held 
 company or the business 
 conducted with the 
 assets of the eligible 
 privately held company; 
 and
 (bb) directly or 
 indirectly, will be 
 active in the 
 management of the 
 eligible privately held 
 company or the business 
 conducted with the 
 assets of the eligible 
 privately held company, 
 including without 
 limitation, for 
 example, by--
 (AA) electing 
 executive 
 officers;
 (BB) 
 approving the 
 annual budget;
 (CC) serving 
 as an executive 
 or other 
 executive 
 manager; or
 (DD) carrying 
 out such other 
 activities as 
 the Commission 
 may, by rule, 
 determine to be 
 in the public 
 interest; and
 (II) if any person is offered 
 securities in exchange for 
 securities or assets of the 
 eligible privately held 
 company, such person will, 
 prior to becoming legally bound 
 to consummate the transaction, 
 receive or have reasonable 
 access to the most recent 
 fiscal year-end financial 
 statements of the issuer of the 
 securities as customarily 
 prepared by the management of 
 the issuer in the normal course 
 of operations and, if the 
 financial statements of the 
 issuer are audited, reviewed, 
 or compiled, any related 
 statement by the independent 
 accountant, a balance sheet 
 dated not more than 120 days 
 before the date of the offer, 
 and information pertaining to 
 the management, business, 
 results of operations for the 
 period covered by the foregoing 
 financial statements, and 
 material loss contingencies of 
 the issuer.
 (v) Shell company.--The term ``shell 
 company'' means a company that at the 
 time of a transaction with an eligible 
 privately held company--
 (I) has no or nominal 
 operations; and
 (II) has--
 (aa) no or nominal 
 assets;
 (bb) assets 
 consisting solely of 
 cash and cash 
 equivalents; or
 (cc) assets 
 consisting of any 
 amount of cash and cash 
 equivalents and nominal 
 other assets.
 (F) Inflation adjustment.--
 (i) In general.--On the date that is 
 5 years after the date of the enactment 
 of this paragraph, and every 5 years 
 thereafter, each dollar amount in 
 subparagraph (E)(iii)(II) shall be 
 adjusted by--
 (I) dividing the annual value 
 of the Employment Cost Index 
 For Wages and Salaries, Private 
 Industry Workers (or any 
 successor index), as published 
 by the Bureau of Labor 
 Statistics, for the calendar 
 year preceding the calendar 
 year in which the adjustment is 
 being made by the annual value 
 of such index (or successor) 
 for the calendar year ending 
 December 31, 2020; and
 (II) multiplying such dollar 
 amount by the quotient obtained 
 under subclause (I).
 (ii) Rounding.--Each dollar amount 
 determined under clause (i) shall be 
 rounded to the nearest multiple of 
 $100,000.
 (c)(1)(A) No broker or dealer shall make use of the mails or 
any means or instrumentality of interstate commerce to effect 
any transaction in, or to induce or attempt to induce the 
purchase or sale of, any security (other than commercial paper, 
bankers' acceptances, or commercial bills), or any security-
based swap agreement by means of any manipulative, deceptive, 
or other fraudulent device or contrivance.
 (B) No broker, dealer, or municipal securities dealer shall 
make use of the mails or any means or instrumentality of 
interstate commerce to effect any transaction in, or to induce 
or attempt to induce the purchase or sale of, any municipal 
security or any security-based swap agreement involving a 
municipal security by means of any manipulative, deceptive, or 
other fraudulent device or contrivance.
 (C) No government securities broker or government securities 
dealer shall make use of the mails or any means or 
instrumentality of interstate commerce to effect any 
transaction in, or to induce or to attempt to induce the 
purchase or sale of, any government security or any security-
based swap agreement involving a government security by means 
of any manipulative, deceptive, or other fraudulent device or 
contrivance.
 (2)(A) No broker or dealer shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase 
or sale of, any security (other than an exempted security or 
commercial paper, bankers' acceptances, or commercial bills) 
otherwise than on a national securities exchange of which it is 
a member, in connection with which such broker or dealer 
engages in any fraudulent, deceptive, or manipulative act or 
practice, or makes any fictitious quotation.
 (B) No broker, dealer, or municipal securities dealer shall 
make use of the mails or any means or instrumentality of 
interstate commerce to effect any transaction in, or to induce 
or attempt to induce the purchase or sale of, any municipal 
security in connection with which such broker, dealer, or 
municipal securities dealer engages in any fraudulent, 
deceptive, or manipulative act or practice, or makes any 
fictitious quotation.
 (C) No government securities broker or government securities 
dealer shall make use of the mails or any means or 
instrumentality of interstate commerce to effect any 
transaction in, or induce or attempt to induce the purchase or 
sale of, any government security in connection with which such 
government securities broker or government securities dealer 
engages in any fraudulent, deceptive, or manipulative act or 
practice, or makes any fictitious quotation.
 (D) The Commission shall, for the purposes of this paragraph, 
by rules and regulations define, and prescribe means reasonably 
designed to prevent, such acts and practices as are fraudulent, 
deceptive, or manipulative and such quotations as are 
fictitious.
 (E) The Commission shall, prior to adopting any rule or 
regulation under subparagraph (C), consult with and consider 
the views of the Secretary of the Treasury and each appropriate 
regulatory agency. If the Secretary of the Treasury or any 
appropriate regulatory agency comments in writing on a proposed 
rule or regulation of the Commission under such subparagraph 
(C) that has been published for comment, the Commission shall 
respond in writing to such written comment before adopting the 
proposed rule. If the Secretary of the Treasury determines, and 
notifies the Commission, that such rule or regulation, if 
implemented, would, or as applied does (i) adversely affect the 
liquidity or efficiency of the market for government 
securities; or (ii) impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of this 
section, the Commission shall, prior to adopting the proposed 
rule or regulation, find that such rule or regulation is 
necessary and appropriate in furtherance of the purposes of 
this section notwithstanding the Secretary's determination.
 (3)(A) No broker or dealer (other than a government 
securities broker or government securities dealer, except a 
registered broker or dealer) shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase 
or sale of, any security (other than an exempted security 
(except a government security) or commercial paper, bankers' 
acceptances, or commercial bills) in contravention of such 
rules and regulations as the Commission shall prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors to provide safeguards with respect to 
the financial responsibility and related practices of brokers 
and dealers including, but not limited to, the acceptance of 
custody and use of customers' securities and the carrying and 
use of customers' deposits or credit balances. Such rules and 
regulations shall (A) require the maintenance of reserves with 
respect to customers' deposits or credit balances, and (B) no 
later than September 1, 1975, establish minimum financial 
responsibility requirements for all brokers and dealers.
 (B) Consistent with this title, the Commission, in 
consultation with the Commodity Futures Trading Commission, 
shall issue such rules, regulations, or orders as are necessary 
to avoid duplicative or conflicting regulations applicable to 
any broker or dealer registered with the Commission pursuant to 
section 15(b) (except paragraph (11) thereof), that is also 
registered with the Commodity Futures Trading Commission 
pursuant to section 4f(a) of the Commodity Exchange Act (except 
paragraph (2) thereof), with respect to the application of: (i) 
the provisions of section 8, section 15(c)(3), and section 17 
of this title and the rules and regulations thereunder related 
to the treatment of customer funds, securities, or property, 
maintenance of books and records, financial reporting, or other 
financial responsibility rules, involving security futures 
products; and (ii) similar provisions of the Commodity Exchange 
Act and rules and regulations thereunder involving security 
futures products.
 (C) Notwithstanding any provision of sections 
 2(a)(1)(C)(i) or 4d(a)(2) of the Commodity Exchange Act 
 and the rules and regulations thereunder, and pursuant 
 to an exemption granted by the Commission under section 
 36 of this title or pursuant to a rule or regulation, 
 cash and securities may be held by a broker or dealer 
 registered pursuant to subsection (b)(1) and also 
 registered as a futures commission merchant pursuant to 
 section 4f(a)(1) of the Commodity Exchange Act, in a 
 portfolio margining account carried as a futures 
 account subject to section 4d of the Commodity Exchange 
 Act and the rules and regulations thereunder, pursuant 
 to a portfolio margining program approved by the 
 Commodity Futures Trading Commission, and subject to 
 subchapter IV of chapter 7 of title 11 of the United 
 States Code and the rules and regulations thereunder. 
 The Commission shall consult with the Commodity Futures 
 Trading Commission to adopt rules to ensure that such 
 transactions and accounts are subject to comparable 
 requirements to the extent practicable for similar 
 products.
 (4) If the Commission finds, after notice and opportunity for 
a hearing, that any person subject to the provisions of section 
12, 13, 14, or subsection (d) of section 15 of this title or 
any rule or regulation thereunder has failed to comply with any 
such provision, rule, or regulation in any material respect, 
the Commission may publish its findings and issue an order 
requiring such person, and any person who was a cause of the 
failure to comply due to an act or omission the person knew or 
should have known would contribute to the failure to comply, to 
comply, or to take steps to effect compliance, with such 
provision or such rule or regulation thereunder upon such terms 
and conditions and within such time as the Commission may 
specify in such order.
 (5) No dealer (other than a specialist registered on a 
national securities exchange) acting in the capacity of market 
maker or otherwise shall make use of the mails or any means or 
instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase 
or sale of, any security (other than an exempted security or a 
municipal security) in contravention of such specified and 
appropriate standards with respect to dealing as the 
Commission, by rule, shall prescribe as necessary or 
appropriate in the public interest and for the protection of 
investors, to maintain fair and orderly markets, or to remove 
impediments to and perfect the mechanism of a national market 
system. Under the rules of the Commission a dealer in a 
security may be prohibited from acting as broker in that 
security.
 (6) No broker or dealer shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase 
or sale of, any security (other than an exempted security, 
municipal security, commercial paper, bankers' acceptances, or 
commercial bills) in contravention of such rules and 
regulations as the Commission shall prescribe as necessary or 
appropriate in the public interest and for the protection of 
investors or to perfect or remove impediments to a national 
system for the prompt and accurate clearance and settlement of 
securities transactions, with respect to the time and method 
of, and the form and format of documents used in connection 
with, making settlements of and payments for transactions in 
securities, making transfers and deliveries of securities, and 
closing accounts. Nothing in this paragraph shall be construed 
(A) to affect the authority of the Board of Governors of the 
Federal Reserve System, pursuant to section 7 of this title, to 
prescribe rules and regulations for the purpose of preventing 
the excessive use of credit for the purchase or carrying of 
securities, or (B) to authorize the Commission to prescribe 
rules or regulations for such purpose.
 (7) In connection with any bid for or purchase of a 
government security related to an offering of government 
securities by or on behalf of an issuer, no government 
securities broker, government securities dealer, or bidder for 
or purchaser of securities in such offering shall knowingly or 
willfully make any false or misleading written statement or 
omit any fact necessary to make any written statement made not 
misleading.
 (8) Prohibition of referral fees.--No broker or dealer, or 
person associated with a broker or dealer, may solicit or 
accept, directly or indirectly, remuneration for assisting an 
attorney in obtaining the representation of any person in any 
private action arising under this title or under the Securities 
Act of 1933.
 (d) Supplementary and Periodic Information.--
 (1) In general.--Each issuer which has filed a 
 registration statement containing an undertaking which 
 is or becomes operative under this subsection as in 
 effect prior to the date of enactment of the Securities 
 Acts Amendments of 1964, and each issuer which shall 
 after such date file a registration statement which has 
 become effective pursuant to the Securities Act of 
 1933, as amended, shall file with the Commission, in 
 accordance with such rules and regulations as the 
 Commission may prescribe as necessary or appropriate in 
 the public interest or for the protection of investors, 
 such supplementary and periodic information, documents, 
 and reports as may be required pursuant to section 13 
 of this title in respect of a security registered 
 pursuant to section 12 of this title. The duty to file 
 under this subsection shall be automatically suspended 
 if and so long as any issue of securities of such 
 issuer is registered pursuant to section 12 of this 
 title. The duty to file under this subsection shall 
 also be automatically suspended as to any fiscal year, 
 other than the fiscal year within which such 
 registration statement became effective, if, at the 
 beginning of such fiscal year, the securities of each 
 class, other than any class of asset-backed securities, 
 to which the registration statement relates are held of 
 record by less than 300 persons, or, in the case of a 
 bank, a savings and loan holding company (as defined in 
 section 10 of the Home Owners' Loan Act), or a bank 
 holding company, as such term is defined in section 2 
 of the Bank Holding Company Act of 1956 (12 U.S.C. 
 1841), 1,200 persons persons. For the purposes of this 
 subsection, the term ``class'' shall be construed to 
 include all securities of an issuer which are of 
 substantially similar character and the holders of 
 which enjoy substantially similar rights and 
 privileges. The Commission may, for the purpose of this 
 subsection, define by rules and regulations the term 
 ``held of record'' as it deems necessary or appropriate 
 in the public interest or for the protection of 
 investors in order to prevent circumvention of the 
 provisions of this subsection. Nothing in this 
 subsection shall apply to securities issued by a 
 foreign government or political subdivision thereof.
 (2) Asset-backed securities.--
 (A) Suspension of duty to file.--The 
 Commission may, by rule or regulation, provide 
 for the suspension or termination of the duty 
 to file under this subsection for any class of 
 asset-backed security, on such terms and 
 conditions and for such period or periods as 
 the Commission deems necessary or appropriate 
 in the public interest or for the protection of 
 investors.
 (B) Classification of issuers.--The 
 Commission may, for purposes of this 
 subsection, classify issuers and prescribe 
 requirements appropriate for each class of 
 issuers of asset-backed securities.
 (e) Notices to Customers Regarding Securities Lending.--Every 
registered broker or dealer shall provide notice to its 
customers that they may elect not to allow their fully paid 
securities to be used in connection with short sales. If a 
broker or dealer uses a customer's securities in connection 
with short sales, the broker or dealer shall provide notice to 
its customer that the broker or dealer may receive compensation 
in connection with lending the customer's securities. The 
Commission, by rule, as it deems necessary or appropriate in 
the public interest and for the protection of investors, may 
prescribe the form, content, time, and manner of delivery of 
any notice required under this paragraph.
 (f) The Commission, by rule, as it deems necessary or 
appropriate in the public interest and for the protection of 
investors or to assure equal regulation, may require any member 
of a national securities exchange not required to register 
under section 15 of this title and any person associated with 
any such member to comply with any provision of this title 
(other than section 15(a)) or the rules or regulations 
thereunder which by its terms regulates or prohibits any act, 
practice, or course of business by a ``broker or dealer'' or 
``registered broker or dealer'' or a ``person associated with a 
broker or dealer,'' respectively.
 (g) Every registered broker or dealer shall establish, 
maintain, and enforce written policies and procedures 
reasonably designed, taking into consideration the nature of 
such broker's or dealer's business, to prevent the misuse in 
violation of this title, or the rules or regulations 
thereunder, of material, nonpublic information by such broker 
or dealer or any person associated with such broker or dealer. 
The Commission, as it deems necessary or appropriate in the 
public interest or for the protection of investors, shall adopt 
rules or regulations to require specific policies or procedures 
reasonably designed to prevent misuse in violation of this 
title (or the rules or regulations thereunder) of material, 
nonpublic information.
 (h) Requirements for Transactions in Penny Stocks.--
 (1) In general.--No broker or dealer shall make use 
 of the mails or any means or instrumentality of 
 interstate commerce to effect any transaction in, or to 
 induce or attempt to induce the purchase or sale of, 
 any penny stock by any customer except in accordance 
 with the requirements of this subsection and the rules 
 and regulations prescribed under this subsection.
 (2) Risk disclosure with respect to penny stocks.--
 Prior to effecting any transaction in any penny stock, 
 a broker or dealer shall give the customer a risk 
 disclosure document that--
 (A) contains a description of the nature and 
 level of risk in the market for penny stocks in 
 both public offerings and secondary trading;
 (B) contains a description of the broker's or 
 dealer's duties to the customer and of the 
 rights and remedies available to the customer 
 with respect to violations of such duties or 
 other requirements of Federal securities laws;
 (C) contains a brief, clear, narrative 
 description of a dealer market, including 
 ``bid'' and ``ask'' prices for penny stocks and 
 the significance of the spread between the bid 
 and ask prices;
 (D) contains the toll free telephone number 
 for inquiries on disciplinary actions 
 established pursuant to section 15A(i) of this 
 title;
 (E) defines significant terms used in the 
 disclosure document or in the conduct of 
 trading in penny stocks; and
 (F) contains such other information, and is 
 in such form (including language, type size, 
 and format), as the Commission shall require by 
 rule or regulation.
 (3) Commission rules relating to disclosure.--The 
 Commission shall adopt rules setting forth additional 
 standards for the disclosure by brokers and dealers to 
 customers of information concerning transactions in 
 penny stocks. Such rules--
 (A) shall require brokers and dealers to 
 disclose to each customer, prior to effecting 
 any transaction in, and at the time of 
 confirming any transaction with respect to any 
 penny stock, in accordance with such procedures 
 and methods as the Commission may require 
 consistent with the public interest and the 
 protection of investors--
 (i) the bid and ask prices for penny 
 stock, or such other information as the 
 Commission may, by rule, require to 
 provide customers with more useful and 
 reliable information relating to the 
 price of such stock;
 (ii) the number of shares to which 
 such bid and ask prices apply, or other 
 comparable information relating to the 
 depth and liquidity of the market for 
 such stock; and
 (iii) the amount and a description of 
 any compensation that the broker or 
 dealer and the associated person 
 thereof will receive or has received in 
 connection with such transaction;
 (B) shall require brokers and dealers to 
 provide, to each customer whose account with 
 the broker or dealer contains penny stocks, a 
 monthly statement indicating the market value 
 of the penny stocks in that account or 
 indicating that the market value of such stock 
 cannot be determined because of the 
 unavailability of firm quotes; and
 (C) may, as the Commission finds necessary or 
 appropriate in the public interest or for the 
 protection of investors, require brokers and 
 dealers to disclose to customers additional 
 information concerning transactions in penny 
 stocks.
 (4) Exemptions.--The Commission, as it determines 
 consistent with the public interest and the protection 
 of investors, may by rule, regulation, or order exempt 
 in whole or in part, conditionally or unconditionally, 
 any person or class of persons, or any transaction or 
 class of transactions, from the requirements of this 
 subsection. Such exemptions shall include an exemption 
 for brokers and dealers based on the minimal percentage 
 of the broker's or dealer's commissions, commission-
 equivalents, and markups received from transactions in 
 penny stocks.
 (5) Regulations.--It shall be unlawful for any person 
 to violate such rules and regulations as the Commission 
 shall prescribe in the public interest or for the 
 protection of investors or to maintain fair and orderly 
 markets--
 (A) as necessary or appropriate to carry out 
 this subsection; or
 (B) as reasonably designed to prevent 
 fraudulent, deceptive, or manipulative acts and 
 practices with respect to penny stocks.
 (i) Limitations on State Law.--
 (1) Capital, margin, books and records, bonding, and 
 reports.--No law, rule, regulation, or order, or other 
 administrative action of any State or political 
 subdivision thereof shall establish capital, custody, 
 margin, financial responsibility, making and keeping 
 records, bonding, or financial or operational reporting 
 requirements for brokers, dealers, municipal securities 
 dealers, government securities brokers, or government 
 securities dealers that differ from, or are in addition 
 to, the requirements in those areas established under 
 this title. The Commission shall consult periodically 
 the securities commissions (or any agency or office 
 performing like functions) of the States concerning the 
 adequacy of such requirements as established under this 
 title.
 (2) Funding portals.--
 (A) Limitation on state laws.--Except as 
 provided in subparagraph (B), no State or 
 political subdivision thereof may enforce any 
 law, rule, regulation, or other administrative 
 action against a registered funding portal with 
 respect to its business as such.
 (B) Examination and enforcement authority.--
 Subparagraph (A) does not apply with respect to 
 the examination and enforcement of any law, 
 rule, regulation, or administrative action of a 
 State or political subdivision thereof in which 
 the principal place of business of a registered 
 funding portal is located, provided that such 
 law, rule, regulation, or administrative action 
 is not in addition to or different from the 
 requirements for registered funding portals 
 established by the Commission.
 (C) Definition.--For purposes of this 
 paragraph, the term ``State'' includes the 
 District of Columbia and the territories of the 
 United States.
 (3) De minimis transactions by associated persons.--
 No law, rule, regulation, or order, or other 
 administrative action of any State or political 
 subdivision thereof may prohibit an associated person 
 of a broker or dealer from effecting a transaction 
 described in paragraph (3) for a customer in such State 
 if--
 (A) such associated person is not ineligible 
 to register with such State for any reason 
 other than such a transaction;
 (B) such associated person is registered with 
 a registered securities association and at 
 least one State; and
 (C) the broker or dealer with which such 
 person is associated is registered with such 
 State.
 (4) Described transactions.--
 (A) In general.--A transaction is described 
 in this paragraph if--
 (i) such transaction is effected--
 (I) on behalf of a customer 
 that, for 30 days prior to the 
 day of the transaction, 
 maintained an account with the 
 broker or dealer; and
 (II) by an associated person 
 of the broker or dealer--
 (aa) to which the 
 customer was assigned 
 for 14 days prior to 
 the day of the 
 transaction; and
 (bb) who is 
 registered with a State 
 in which the customer 
 was a resident or was 
 present for at least 30 
 consecutive days during 
 the 1-year period prior 
 to the day of the 
 transaction; or
 (ii) the transaction is effected--
 (I) on behalf of a customer 
 that, for 30 days prior to the 
 day of the transaction, 
 maintained an account with the 
 broker or dealer; and
 (II) during the period 
 beginning on the date on which 
 such associated person files an 
 application for registration 
 with the State in which the 
 transaction is effected and 
 ending on the earlier of--
 (aa) 60 days after 
 the date on which the 
 application is filed; 
 or
 (bb) the date on 
 which such State 
 notifies the associated 
 person that it has 
 denied the application 
 for registration or has 
 stayed the pendency of 
 the application for 
 cause.
 (B) Rules of construction.--For purposes of 
 subparagraph (A)(i)(II)--
 (i) each of up to 3 associated 
 persons of a broker or dealer who are 
 designated to effect transactions 
 during the absence or unavailability of 
 the principal associated person for a 
 customer may be treated as an 
 associated person to which such 
 customer is assigned; and
 (ii) if the customer is present in 
 another State for 30 or more 
 consecutive days or has permanently 
 changed his or her residence to another 
 State, a transaction is not described 
 in this paragraph, unless the 
 associated person of the broker or 
 dealer files an application for 
 registration with such State not later 
 than 10 business days after the later 
 of the date of the transaction, or the 
 date of the discovery of the presence 
 of the customer in the other State for 
 30 or more consecutive days or the 
 change in the customer's residence.
 (j) Rulemaking To Extend Requirements to New Hybrid 
Products.--
 (1) Consultation.--Prior to commencing a rulemaking 
 under this subsection, the Commission shall consult 
 with and seek the concurrence of the Board concerning 
 the imposition of broker or dealer registration 
 requirements with respect to any new hybrid product. In 
 developing and promulgating rules under this 
 subsection, the Commission shall consider the views of 
 the Board, including views with respect to the nature 
 of the new hybrid product; the history, purpose, 
 extent, and appropriateness of the regulation of the 
 new product under the Federal banking laws; and the 
 impact of the proposed rule on the banking industry.
 (2) Limitation.--The Commission shall not--
 (A) require a bank to register as a broker or 
 dealer under this section because the bank 
 engages in any transaction in, or buys or 
 sells, a new hybrid product; or
 (B) bring an action against a bank for a 
 failure to comply with a requirement described 
 in subparagraph (A),
 unless the Commission has imposed such requirement by 
 rule or regulation issued in accordance with this 
 section.
 (3) Criteria for rulemaking.--The Commission shall 
 not impose a requirement under paragraph (2) of this 
 subsection with respect to any new hybrid product 
 unless the Commission determines that--
 (A) the new hybrid product is a security; and
 (B) imposing such requirement is necessary 
 and appropriate in the public interest and for 
 the protection of investors.
 (4) Considerations.--In making a determination under 
 paragraph (3), the Commission shall consider--
 (A) the nature of the new hybrid product; and
 (B) the history, purpose, extent, and 
 appropriateness of the regulation of the new 
 hybrid product under the Federal securities 
 laws and under the Federal banking laws.
 (5) Objection to commission regulation.--
 (A) Filing of petition for review.--The Board 
 may obtain review of any final regulation 
 described in paragraph (2) in the United States 
 Court of Appeals for the District of Columbia 
 Circuit by filing in such court, not later than 
 60 days after the date of publication of the 
 final regulation, a written petition requesting 
 that the regulation be set aside. Any 
 proceeding to challenge any such rule shall be 
 expedited by the Court of Appeals.
 (B) Transmittal of petition and record.--A 
 copy of a petition described in subparagraph 
 (A) shall be transmitted as soon as possible by 
 the Clerk of the Court to an officer or 
 employee of the Commission designated for that 
 purpose. Upon receipt of the petition, the 
 Commission shall file with the court the 
 regulation under review and any documents 
 referred to therein, and any other relevant 
 materials prescribed by the court.
 (C) Exclusive jurisdiction.--On the date of 
 the filing of the petition under subparagraph 
 (A), the court has jurisdiction, which becomes 
 exclusive on the filing of the materials set 
 forth in subparagraph (B), to affirm and 
 enforce or to set aside the regulation at 
 issue.
 (D) Standard of review.--The court shall 
 determine to affirm and enforce or set aside a 
 regulation of the Commission under this 
 subsection, based on the determination of the 
 court as to whether--
 (i) the subject product is a new 
 hybrid product, as defined in this 
 subsection;
 (ii) the subject product is a 
 security; and
 (iii) imposing a requirement to 
 register as a broker or dealer for 
 banks engaging in transactions in such 
 product is appropriate in light of the 
 history, purpose, and extent of 
 regulation under the Federal securities 
 laws and under the Federal banking 
 laws, giving deference neither to the 
 views of the Commission nor the Board.
 (E) Judicial stay.--The filing of a petition 
 by the Board pursuant to subparagraph (A) shall 
 operate as a judicial stay, until the date on 
 which the determination of the court is final 
 (including any appeal of such determination).
 (F) Other authority to challenge.--Any 
 aggrieved party may seek judicial review of the 
 Commission's rulemaking under this subsection 
 pursuant to section 25 of this title.
 (6) Definitions.--For purposes of this subsection:
 (A) New hybrid product.--The term ``new 
 hybrid product'' means a product that--
 (i) was not subjected to regulation 
 by the Commission as a security prior 
 to the date of the enactment of the 
 Gramm-Leach-Bliley Act;
 (ii) is not an identified banking 
 product as such term is defined in 
 section 206 of such Act; and
 (iii) is not an equity swap within 
 the meaning of section 206(a)(6) of 
 such Act.
 (B) Board.--The term ``Board'' means the 
 Board of Governors of the Federal Reserve 
 System.
 (j) The authority of the Commission under this section with 
respect to security-based swap agreements shall be subject to 
the restrictions and limitations of section 3A(b) of this 
title.
 (k) Registration or Succession to a United States Broker or 
Dealer.--In determining whether to permit a foreign person or 
an affiliate of a foreign person to register as a United States 
broker or dealer, or succeed to the registration of a United 
States broker or dealer, the Commission may consider whether, 
for a foreign person, or an affiliate of a foreign person that 
presents a risk to the stability of the United States financial 
system, the home country of the foreign person has adopted, or 
made demonstrable progress toward adopting, an appropriate 
system of financial regulation to mitigate such risk.
 (l) Termination of a United States Broker or Dealer.--For a 
foreign person or an affiliate of a foreign person that 
presents such a risk to the stability of the United States 
financial system, the Commission may determine to terminate the 
registration of such foreign person or an affiliate of such 
foreign person as a broker or dealer in the United States, if 
the Commission determines that the home country of the foreign 
person has not adopted, or made demonstrable progress toward 
adopting, an appropriate system of financial regulation to 
mitigate such risk.
 [(k) Standard of Conduct.--
 [(1) In general.--Notwithstanding any other provision 
 of this Act or the Investment Advisers Act of 1940, the 
 Commission may promulgate rules to provide that, with 
 respect to a broker or dealer, when providing 
 personalized investment advice about securities to a 
 retail customer (and such other customers as the 
 Commission may by rule provide), the standard of 
 conduct for such broker or dealer with respect to such 
 customer shall be the same as the standard of conduct 
 applicable to an investment adviser under section 211 
 of the Investment Advisers Act of 1940. The receipt of 
 compensation based on commission or other standard 
 compensation for the sale of securities shall not, in 
 and of itself, be considered a violation of such 
 standard applied to a broker or dealer. Nothing in this 
 section shall require a broker or dealer or registered 
 representative to have a continuing duty of care or 
 loyalty to the customer after providing personalized 
 investment advice about securities.
 [(2) Disclosure of range of products offered.--Where 
 a broker or dealer sells only proprietary or other 
 limited range of products, as determined by the 
 Commission, the Commission may by rule require that 
 such broker or dealer provide notice to each retail 
 customer and obtain the consent or acknowledgment of 
 the customer. The sale of only proprietary or other 
 limited range of products by a broker or dealer shall 
 not, in and of itself, be considered a violation of the 
 standard set forth in paragraph (1).]
 (l) Other Matters.--The [Commission shall--] Commission shall 
facilitate
 [(1) facilitate] the provision of simple and clear 
 disclosures to investors regarding the terms of their 
 relationships with brokers, dealers, and investment 
 advisers, including any material conflicts of 
 interest[; and].
 [(2) examine and, where appropriate, promulgate rules 
 prohibiting or restricting certain sales practices, 
 conflicts of interest, and compensation schemes for 
 brokers, dealers, and investment advisers that the 
 Commission deems contrary to the public interest and 
 the protection of investors.]
 (m) Harmonization of Enforcement.--The enforcement authority 
of the Commission with respect to violations of the standard of 
conduct applicable to a broker or dealer providing personalized 
investment advice about securities to a retail customer shall 
include--
 (1) the enforcement authority of the Commission with 
 respect to such violations provided under this Act; and
 (2) the enforcement authority of the Commission with 
 respect to violations of the standard of conduct 
 applicable to an investment adviser under the 
 Investment Advisers Act of 1940, including the 
 authority to impose sanctions for such violations, and
the Commission shall seek to prosecute and sanction violators 
of the standard of conduct applicable to a broker or dealer 
providing personalized investment advice about securities to a 
retail customer under this Act to same extent as the Commission 
prosecutes and sanctions violators of the standard of conduct 
applicable to an investment advisor under the Investment 
Advisers Act of 1940.
 (n) Disclosures to Retail Investors.--
 (1) In general.--Notwithstanding any other provision 
 of the securities laws, the Commission may issue rules 
 designating documents or information that shall be 
 provided by a broker or dealer to a retail investor 
 before the purchase of an investment product or service 
 by the retail investor.
 (2) Considerations.--In developing any rules under 
 paragraph (1), the Commission shall consider whether 
 the rules will promote investor protection, efficiency, 
 competition, and capital formation.
 (3) Form and contents of documents and information.--
 Any documents or information designated under a rule 
 promulgated under paragraph (1) shall--
 (A) be in a summary format; and
 (B) contain clear and concise information 
 about--
 (i) investment objectives, 
 strategies, costs, and risks; and
 (ii) any compensation or other 
 financial incentive received by a 
 broker, dealer, or other intermediary 
 in connection with the purchase of 
 retail investment products.
 [(o) Authority to Restrict Mandatory Pre-dispute 
Arbitration.--The Commission, by rule, may prohibit, or impose 
conditions or limitations on the use of, agreements that 
require customers or clients of any broker, dealer, or 
municipal securities dealer to arbitrate any future dispute 
between them arising under the Federal securities laws, the 
rules and regulations thereunder, or the rules of a self-
regulatory organization if it finds that such prohibition, 
imposition of conditions, or limitations are in the public 
interest and for the protection of investors.]

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 ---------- 

 SECTION 921 OF THE INVESTOR PROTECTION AND SECURITIES REFORM ACT OF 
 2010

SEC. 921. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION

 [(a) Amendment to Securities Exchange Act of 1934.--Section 
15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), as 
amended by this title, is further amended by adding at the end 
the following new subsection:
 [``(o) Authority to Restrict Mandatory Pre-dispute 
Arbitration.--The Commission, by rule, may prohibit, or impose 
conditions or limitations on the use of, agreements that 
require customers or clients of any broker, dealer, or 
municipal securities dealer to arbitrate any future dispute 
between them arising under the Federal securities laws, the 
rules and regulations thereunder, or the rules of a self-
regulatory organization if it finds that such prohibition, 
imposition of conditions, or limitations are in the public 
interest and for the protection of investors.''.]
 (b) Amendment to Investment Advisers Act of 1940.--Section 
205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5) is 
amended by adding at the end the following new subsection:
 ``(f) Authority to Restrict Mandatory Pre-dispute 
Arbitration.--The Commission, by rule, may prohibit, or impose 
conditions or limitations on the use of, agreements that 
require customers or clients of any investment adviser to 
arbitrate any future dispute between them arising under the 
Federal securities laws, the rules and regulations thereunder, 
or the rules of a self-regulatory organization if it finds that 
such prohibition, imposition of conditions, or limitations are 
in the public interest and for the protection of investors.''.
 ---------- 

 INVESTMENT ADVISERS ACT OF 1940

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TITLE II--INVESTMENT ADVISERS

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 rules, regulations, and orders

 Sec. 211. (a) The Commission shall have authority from time 
to time to make, issue, amend, and rescind such rules and 
regulations and such orders as are necessary or appropriate to 
the exercise of the functions and powers conferred upon the 
Commission elsewhere in this title, including rules and 
regulations defining technical, trade, and other terms used in 
this title, except that the Commission may not define the term 
``client'' for purposes of paragraphs (1) and (2) of section 
206 to include an investor in a private fund managed by an 
investment adviser, if such private fund has entered into an 
advisory contract with such adviser. For the purposes of its 
rules or regulations the Commission may classify persons and 
matters within its jurisdiction and prescribe different 
requirements for different classes of persons or matters.
 (b) Subject to the provisions of chapter 15 of title 44, 
United States Code, and regulations prescribed under the 
authority thereof, the rules and regulations of the Commission 
under this title, and amendments thereof, shall be effective 
upon publication in the manner which the Commission shall 
prescribe, or upon such later date as may be provided in such 
rules and regulations.
 (c) Orders of the Commission under this title shall be issued 
only after appropriate notice and opportunity for hearing. 
Notice to the parties to a proceeding before the Commission 
shall be given by personal service upon each party or by 
registered mail or certified mail or confirmed telegraphic 
notice to the party's last known business address. Notice to 
interested persons, if any, other than parties may be given in 
the same manner or by publication in the Federal Register.
 (d) No provision of this title imposing any liability shall 
apply to any act done or omitted in good faith in conformity 
with any rule, regulation, or order of the Commission, 
notwithstanding that such rule, regulation, or order may, after 
such act or omission, be amended or rescinded or be determined 
by judicial or other authority to be invalid for any reason.
 (e) Disclosure Rules on Private Funds.--The Commission and 
the Commodity Futures Trading Commission shall, after 
consultation with the Council but not later than 12 months 
after the date of enactment of the Private Fund Investment 
Advisers Registration Act of 2010, jointly promulgate rules to 
establish the form and content of the reports required to be 
filed with the Commission under subsection 204(b) and with the 
Commodity Futures Trading Commission by investment advisers 
that are registered both under this title and the Commodity 
Exchange Act (7 U.S.C. 1a et seq.).
 (g) Standard of Conduct.--
 (1) In general.--The Commission may promulgate rules 
 to provide that the standard of conduct for all 
 brokers, dealers, and investment advisers, when 
 providing personalized investment advice about 
 securities to retail customers (and such other 
 customers as the Commission may by rule provide), shall 
 be to act in the best interest of the customer without 
 regard to the financial or other interest of the 
 broker, dealer, or investment adviser providing the 
 advice. In accordance with such rules, any material 
 conflicts of interest shall be disclosed and may be 
 consented to by the customer. Such rules shall provide 
 that such standard of conduct shall be no less 
 stringent than the standard applicable to investment 
 advisers under section 206(1) and (2) of this Act when 
 providing personalized investment advice about 
 securities, except the Commission shall not ascribe a 
 meaning to the term ``customer'' that would include an 
 investor in a private fund managed by an investment 
 adviser, where such private fund has entered into an 
 advisory contract with such adviser. The receipt of 
 compensation based on commission or fees shall not, in 
 and of itself, be considered a violation of such 
 standard applied to a broker, dealer, or investment 
 adviser.
 (2) Retail customer defined.--For purposes of this 
 subsection, the term ``retail customer'' means a 
 natural person, or the legal representative of such 
 natural person, who--
 (A) receives personalized investment advice 
 about securities from a broker, dealer, or 
 investment adviser; and
 (B) uses such advice primarily for personal, 
 family, or household purposes.
 (h) Other Matters.--The [Commission shall--] Commission shall 
facilitate
 [(1) facilitate] the provision of simple and clear 
 disclosures to investors regarding the terms of their 
 relationships with brokers, dealers, and investment 
 advisers, including any material conflicts of 
 interest[; and].
 [(2) examine and, where appropriate, promulgate rules 
 prohibiting or restricting certain sales practices, 
 conflicts of interest, and compensation schemes for 
 brokers, dealers, and investment advisers that the 
 Commission deems contrary to the public interest and 
 the protection of investors.]
 (i) Harmonization of Enforcement.--The enforcement authority 
of the Commission with respect to violations of the standard of 
conduct applicable to an investment adviser shall include--
 (1) the enforcement authority of the Commission with 
 respect to such violations provided under this Act; and
 (2) the enforcement authority of the Commission with 
 respect to violations of the standard of conduct 
 applicable to a broker or dealer providing personalized 
 investment advice about securities to a retail customer 
 under the Securities Exchange Act of 1934, including 
 the authority to impose sanctions for such violations, 
 and
the Commission shall seek to prosecute and sanction violators 
of the standard of conduct applicable to an investment adviser 
under this Act to same extent as the Commission prosecutes and 
sanctions violators of the standard of conduct applicable to a 
broker or dealer providing personalized investment advice about 
securities to a retail customer under the Securities Exchange 
Act of 1934.

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