S.Amdt. 3895

1. Adds SEC. 919C. SECURITIES LITIGATION ATTORNEY ACCOUNTABILITY AND TRANSPARENCY at the end of subtitle A of title IX

   Adds a section

   Inserted: SEC. 919C. SECURITIES LITIGATION ATTORNEY ACCOUNTABILITY AND TRANSPARENCY.

   Inserted: (a) Disclosures of Payments, Fee Arrangements, Contributions, and Other Potential Conflicts of Interest Between Plaintiff and Attorneys.--

   Inserted: (1) Securities exchange act of 1934.--Section 21D(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-4(a)) is amended by adding at the end the following new paragraphs:

   Inserted: "(10) Disclosures regarding payments.--

   Inserted: "(A) Sworn certifications required.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identify any direct or indirect payment, or promise of any payment, by such attorney, or any person affiliated with such attorney, to such plaintiff, or any person affiliated with such plaintiff, beyond the plaintiff's pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4). Upon disclosure of any such payment or promise of payment, the court shall disqualify the attorney from representing the plaintiff.

   Inserted: "(B) Definition.--For purposes of this paragraph, the term 'payment' shall include the transfer of money and any other thing of value, including the provision of services, other than representation of the plaintiff in the private action arising under this title.

   Inserted: "(11) Disclosures regarding legal representations.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies the nature and terms of any legal representation provided by such attorney, or any person affiliated with such attorney, to such plaintiff, or any person affiliated with such plaintiff other than the representation of the plaintiff in the private action arising under this title. The court may allow such certifications to be made under seal. The court shall make a determination whether the nature or terms of the fee arrangement for any other matter influenced the selection and retention of counsel in any private action arising under this title and, if the court so finds, shall disqualify the attorney from representing the plaintiff in any such action.

   Inserted: "(12) Disclosures regarding contributions.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies any contribution made within five years prior to the filing of the complaint by such attorney, any person affiliated with such attorney, or any political action committee controlled by such attorney, to any elected official with authority to retain counsel for such plaintiff or to select or appoint, influence the selection or appointment of, or oversee any individual or group of individuals with that authority.

   Inserted: "(13) Disclosure regarding other conflicts of interest.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies any other conflict of interest (other than one specified in paragraphs (10) through (12)) between such attorney and such plaintiff. The court shall make a determination of whether such conflict is sufficient to disqualify the attorney from representing the plaintiff.".

   Inserted: (2) Securities act of 1933.--Section 27(a) of the Securities Act of 1933 (15 U.S.C. 77z-1(a)) is amended by adding at the end the following new paragraph:

   Inserted: "(9) Disclosures regarding payments.--

   Inserted: "(A) Sworn certifications required.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identify any direct or indirect payment, or promise of any payment, by such attorney, or any person affiliated with such attorney, to such plaintiff, or any person affiliated with such plaintiff, beyond the plaintiff's pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4). Upon disclosure of any such payment or promise of payment, the court shall disqualify the attorney from representing the plaintiff.

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   Inserted: "(B) Definition.--For purposes of this paragraph, the term 'payment' shall include the transfer of money and any other thing of value, including the provision of services, other than representation of the plaintiff in the private action arising under this title.

   Inserted: "(10) Disclosures regarding legal representations.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies the nature and terms of any legal representation provided by such attorney, or any person affiliated with such attorney, to such plaintiff, or any person affiliated with such plaintiff other than the representation of the plaintiff in the private action arising under this title. The court may allow such certifications to be made under seal. The court shall make a determination whether the nature or terms of the fee arrangement for any other matter influenced the selection and retention of counsel in any private action arising under this title and, if the court so finds, shall disqualify the attorney from representing the plaintiff in any such action.

   Inserted: "(11) Disclosures regarding contributions.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies any contribution made within five years prior to the filing of the complaint by such attorney, any person affiliated with such attorney, or any political action committee controlled by such attorney, to any elected official with authority to retain counsel for such plaintiff or to select or appoint, influence the selection or appointment of, or oversee any individual or group of individuals with that authority.

   Inserted: "(12) Disclosure regarding other conflicts of interest.--In any private action arising under this title, each plaintiff and any attorney for such plaintiff shall provide sworn certifications, which shall be personally signed by such plaintiff and such attorney, respectively, and filed with the complaint, that identifies any other conflict of interest (other than one specified in paragraphs (9) through (11)) between such attorney and such plaintiff. The court shall make a determination of whether such conflict is sufficient to disqualify the attorney from representing the plaintiff.".

   Inserted: (b) Selection of Lead Counsel.--

   Inserted: (1) Securities exchange act of 1934.--Section 21D(a)(3)(B)(v) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-4(a)(3)(B)(v)) is amended by adding at the end the following: "In exercising the discretion of the court over the approval of lead counsel, the court may employ a competitive bidding process as one of the criteria in the selection and retention of counsel for the most adequate plaintiff.".

   Inserted: (2) Securities act of 1933.--Section 27(a)(3)(B)(v) of the Securities Act of 1933 (15 U.S.C. 77z-1(a)(3)(B)(v)) is amended by adding at the end the following: "In exercising the discretion of the court over the approval of lead counsel, the court may employ a competitive bidding process as one of the criteria in the selection and retention of counsel for the most adequate plaintiff.".

   Inserted: (c) Study of Average Hourly Fees in Securities Class Actions.--

   Inserted: (1) Study and review required.--The Comptroller General of the United States shall conduct a study and review of fee awards to lead counsel in securities class actions over the 5-year period preceding the date of enactment of this Act to determine the effective average hourly rate for lead counsel in such actions.

   Inserted: (2) Report required.--Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of the study and review required by this section. The Comptroller General shall submit an updated study every 3 years thereafter.

   Inserted: (3) Definition.--For purposes of this subsection, the term "securities class action" means a private class action arising under the Securities Act of 1933 (15 U.S.C. 77 et seq.) or the Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.

   Inserted: (d) Authority to Impose Civil Penalties in Cease-and-Desist Proceedings.--

   Inserted: (1) Under the securities act of 1933.--Section 8A of the Securities Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end the following:

   Inserted: "(g) Authority to Impose Money Penalties.--

   Inserted: "(1) Grounds.--In any cease-and-desist proceeding under subsection (a), the Commission may impose a civil penalty on a person, if the Commission finds, on the record, after notice and opportunity for hearing, that--

   Inserted: "(A) the person--

   Inserted: "(i) is violating or has violated any provision of this title, or any rule or regulation issued under this title; or

   Inserted: "(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation thereunder; and

   Inserted: "(B) the imposition of the penalty is in the public interest.

   Inserted: "(2) Maximum amount of penalty.--

   Inserted: "(A) First tier.--The maximum amount of a penalty for each act or omission described in paragraph (1) shall be $7,500 for a natural person or $75,000 for any other person.

   Inserted: "(B) Second tier.--Notwithstanding subparagraph (A), if the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement, the maximum amount of penalty for each act or omission shall be $75,000 for a natural person or $375,000 for any other person.

   Inserted: "(C) Third tier.--Notwithstanding subparagraphs (A) and (B), the maximum amount of penalty for each act or omission described in paragraph (1) shall be $150,000 for a natural person or $725,000 for any other person, if--

   Inserted: "(i) the act or omission involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and

   Inserted: "(ii) the act or omission directly or indirectly resulted in--

   Inserted: "(I) substantial losses or created a significant risk of substantial losses to other persons; or

   Inserted: "(II) substantial pecuniary gain to the person who committed the act or omission.

   Inserted: "(3) Evidence concerning ability to pay.--In any proceeding in which the Commission may impose a penalty under this section, a respondent may present evidence of the ability of the respondent to pay such penalty. The Commission may, in its discretion, consider such evidence in determining whether such penalty is in the public interest. Such evidence may relate to the extent of the ability of the respondent to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon the assets of the respondent and the amount of the assets of the respondent.".

   Inserted: (2) Under the securities exchange act of 1934.--Section 21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is amended--

   Inserted: (A) by striking the undesignated matter immediately following paragraph (4);

   Inserted: (B) in the matter preceding paragraph (1), by inserting after "opportunity for hearing," the following: "that such penalty is in the public interest and";

   Inserted: (C) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and adjusting the subparagraph margins accordingly;

   Inserted: (D) by striking "In any proceeding" and inserting the following:

   Inserted: "(1) In general.--In any proceeding"; and

   Inserted: (E) by adding at the end the following:

   Inserted: "(2) Cease-and-desist proceedings.--In any proceeding instituted under section 21C against any person, the Commission may impose a civil penalty, if the Commission finds, on the record after notice and opportunity for hearing, that such person--

   Inserted: "(A) is violating or has violated any provision of this title, or any rule or regulation issued under this title; or

   Inserted: "(B) is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.".

   Inserted: (3) Under the investment company act of 1940.--Section 9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is amended--

   Inserted: (A) by striking the matter immediately following subparagraph (C);

   Inserted: (B) in the matter preceding subparagraph (A), by inserting after "opportunity for hearing," the following: "that such penalty is in the public interest, and";

   Inserted: (C) by redesignating subparagraphs (A) through (C) as clauses (i) through (iii), respectively, and adjusting the clause margins accordingly;

   Inserted: (D) by striking "In any proceeding" and inserting the following:

   Inserted: "(A) In general.--In any proceeding"; and

   Inserted: (E) by adding at the end the following:

   Inserted: "(B) Cease-and-desist proceedings.--In any proceeding instituted pursuant to subsection (f) against any person, the Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person--

   Inserted: "(i) is violating or has violated any provision of this title, or any rule or regulation issued under this title; or

   Inserted: "(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.".

   Inserted: (4) Under the investment advisers act of 1940.--Section 203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1)) is amended--

   Inserted: (A) by striking the undesignated matter immediately following subparagraph (D);

   Inserted: (B) in the matter preceding subparagraph (A), by inserting after "opportunity for hearing," the following: "that such penalty is in the public interest and";

   Inserted: (C) by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the clause margins accordingly;

   Inserted: (D) by striking "In any proceeding" and inserting the following:

   Inserted: "(A) In general.--In any proceeding"; and

   Inserted: (E) by adding at the end the following:

   Inserted: "(B) Cease-and-desist proceedings.--In any proceeding instituted pursuant to subsection (k) against any person, the Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person--

   Inserted: "(i) is violating or has violated any provision of this title, or any rule or regulation issued under this title; or

   Inserted: "(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation issued under this title.".

   Original wording

   At the end of subtitle A of title IX, add the following:

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As printed