S.Amdt. 4009

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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