[Pages S3729-S3730]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  SA 4009. Ms. COLLINS submitted an amendment intended to be proposed 
to amendment SA 3739 proposed by Mr. Reid (for Mr. Dodd (for himself 
and Mrs. Lincoln)) to the bill S. 3217, to promote the financial 
stability of the United States by improving accountability and 
transparency in the financial system, to end ``too big to fail'', to 
protect the American taxpayer by ending bailouts, to protect consumers 
from abusive financial services practices, and for other purposes; 
which was ordered to lie on the table; as follows:

       On page 893, after line 25, insert the following:

     SEC. 774. STANDARDS OF CONDUCT FOR BROKERS, DEALERS, AND 
                   INVESTMENT ADVISERS.

       (a) Amendment to Securities Exchange Act of 1934.--Section 
     15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is 
     amended by adding at the end the following:
       ``(k) Standards of Conduct.--
       ``(1) In general.--Notwithstanding any other provision of 
     this title or the Investment Advisers Act of 1940, the 
     Commission shall issue rules to provide, in substance, that 
     the standards of conduct for all brokers, dealers, and 
     investment advisers, in providing investment advice about 
     securities to retail customers, shall be to act in the 
     interest of the customer, without regard to the financial or 
     other interest of the broker, dealer, or investment adviser 
     providing the advice.
       ``(2) Exclusion for limited range of products offered.--
     Paragraph (1) shall not apply with respect to any limited 
     representative-investment company and variable contracts 
     products, or for any other broker or dealer, as defined by 
     the Commission, who sells only proprietary or other limited 
     range of products.
       ``(3) Definitions.--For purposes of this subsection, the 
     following definitions shall apply:
       ``(A) Retail customer defined.--The term `retail customer' 
     means a natural person, or the legal representative of such 
     natural person, who--
       ``(i) receives personalized investment advice about 
     securities from a broker or dealer; and
       ``(ii) uses such advice primarily for personal, family, or 
     household purposes.
       ``(B) Limited representative-investment company and 
     variable contracts products.--The term `limited 
     representative-investment company and variable contracts 
     product' shall have the meaning given such term by rule of 
     the Commission, and includes any person that is licensed by a 
     registered security association pursuant to section 15A--
       ``(i) the activities of which in the investment banking and 
     securities business are limited to the solicitation, 
     purchase, and sale of--

       ``(I) redeemable securities of companies registered 
     pursuant to the Investment Company Act of 1940;
       ``(II) securities of closed-end companies registered 
     pursuant to the Investment Company Act of 1940, during the 
     period of original distribution only; and
       ``(III) variable contracts and insurance premium funding 
     programs and other contracts issued by an insurance company, 
     other than any contract that is an exempt security pursuant 
     to section 3(a)(8) of the Securities Act of 1933; and

       ``(ii) does not function as a representative in any 
     financial instrument that is not described in clause (i).
       ``(l) Other Matters.--
       ``(1) In general.--The Commission shall--
       ``(A) facilitate the provision of clear, appropriate 
     disclosures to customers regarding the terms of their 
     relationships with, material conflicts of interest of, and 
     direct and indirect compensation to, brokers, dealers, and 
     investment advisers; and
       ``(B) examine and, where appropriate, promulgate rules 
     regulating sales practices, conflicts of interest, and 
     compensation schemes for financial intermediaries (including 
     brokers, dealers, and investment advisers) that the 
     Commission deems contrary to the public interest and the 
     interests of investors.
       ``(2) Rule of construction.--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 the standard, under paragraph (1)(A), when 
     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.
       ``(m) Harmonization of Enforcement and Remedy 
     Regulations.--The Commission shall issue regulations to 
     ensure, to the extent practicable, that the enforcement 
     options and remedies available for violations of the standard 
     of conduct applicable to a broker or dealer providing 
     investment advice to a customer are commensurate with those 
     enforcement options and remedies available for violations of 
     the standard of conduct applicable to investment advisers 
     under the Investment Advisers Act of 1940.''.

[[Page S3730]]

       (b) Amendment to Investment Advisers Act of 1940.--Section 
     211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11) 
     is amended by adding at the end the following:
       ``(f) Standards of Conduct.--
       ``(1) In general.--Notwithstanding any other provision of 
     this title or the Securities Exchange Act of 1934, the 
     Commission shall promulgate rules to provide that the 
     standards of conduct for all brokers, dealers, and investment 
     advisers, in providing investment advice to retail customers, 
     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.
       ``(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 or dealer; and
       ``(B) uses such advice primarily for personal, family, or 
     household purposes.
       ``(g) Other Matters.--
       ``(1) In general.--The Commission shall--
       ``(A) facilitate the provision of clear, appropriate 
     disclosures to customers regarding the terms of their 
     relationships with, material conflicts of interest of, and 
     direct and indirect compensation to, brokers, dealers, and 
     investment advisers; and
       ``(B) examine and, where appropriate, promulgate rules 
     regulating sales practices, conflicts of interest, and 
     compensation schemes for financial intermediaries (including 
     brokers, dealers, and investment advisers) that the 
     Commission deems contrary to the public interest and the 
     interests of investors.''.
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