S.Amdt. 4049

SA 4049. Mr. HARKIN (for himself and Mr. Casey) 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:

Beginning on page 656, strike line 20 and all that follows
through page 657, line 12, and insert the following:
``(2) Special rule; duty to protected customers.--
``(A) Definition of protected customer.--In this paragraph,
the term `protected customer' means any entity that is--
``(i) a Federal agency;
``(ii) a State, State agency, city, county, municipality,
or other political subdivision of a State;
``(iii) any employee benefit plan, as defined in section 3
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002);
``(iv) any governmental plan, as defined in section 3 of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002); or
``(v) any endowment that is an organization described in
section 501(c)(3) of the Internal Revenue Code of 1986.
``(B) Prohibition.--
``(i) In general.--It shall be unlawful for a swap dealer
that provides advice regarding, offers to enter into, or
enters into, a swap with a protected customer--

``(I) to employ any device, scheme, or artifice to defraud
any protected customer or prospective protected customer;
``(II) to engage in any transaction, practice, or course of
business that operates as a fraud or deceit on any protected
customer or prospective protected customer;
``(III) if the swap dealer acts as a principal for the
account of the swap dealer, to knowingly sell any swap to, or
purchase any swap from, a protected customer, or if the swap
dealer acts as a broker for a person other than the protected
customer, to knowingly effect any sale or purchase of any
swap for the account of the protected customer, without--

``(aa) before the completion of the transaction, disclosing
to the protected customer in writing the capacity in which
the swap dealer is acting; and
``(bb) obtaining the consent of the protected customer in
writing with respect to the transaction; and

``(IV) to engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative.

``(ii) Regulations.--As soon as practicable after the date
of enactment of this subparagraph, the Commission shall issue
rules and promulgate regulations to prescribe requirements
that are reasonably designed to prevent acts, practices, and
courses of business that are fraudulent, deceptive, or
manipulative.
``(C) Requirements.--
``(i) In general.--A swap dealer that recommends a swap
with a protected customer shall comply with clauses (ii) and
(iii).
``(ii) Reasonable grounds.--In recommending to a protected
customer the purchase, sale, or exchange of any swap, a swap
dealer shall have reasonable grounds for believing that the
recommendation is in the best interests of the protected
customer.
``(iii) Reasonable efforts.--Before the execution of a
transaction recommended to a protected customer under clause
(ii), a swap dealer shall make reasonable efforts to obtain
such information as is necessary to determine whether the
transaction is in the best interests of the protected
customer, including--

``(I) information relating to--

``(aa) the financial status of the protected customer;
``(bb) the tax status of the protected customer; and
``(cc) the stated investment objectives of the protected
customer; and

``(II) such other information that--

``(aa) is used or considered to be reasonable by the swap
dealer in making recommendations to the protected customer;
and
``(bb) the Commission may prescribe by rule or regulation.
``(iv) Business conduct requirements.--A swap dealer shall
satisfy each business conduct requirement described in
paragraph (3).
``(D) Written representations.--

[[Page S3836]]

``(i) In general.--Before entering into a swap with a
protected customer, a swap dealer shall receive in writing a
representation from the protected customer confirming that
the swap transaction has been expressly authorized--

``(I) by an advisor that is independent of the swap dealer;
and
``(II) in the case of an employee benefit plan subject to
the fiduciary duty requirements under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et seq.), by a
representative independent of the swap dealer that is a
fiduciary, as defined in section 3 of that Act (29 U.S.C.
1002).

``(ii) Regulations.--Not later than December 31, 2010, the
Commission shall issue rules or promulgate regulations to
provide guidelines to determine qualifications for advisors
that are authorized to provide advice under clause (i)(I).
Beginning on page 863, strike line 22 and all that follows
through page 864, line 16, and insert the following:
``(2) Special rule; duty to protected customers.--
``(A) Definition of protected customer.--In this paragraph,
the term `protected customer' means any entity that is--
``(i) a Federal agency;
``(ii) a State, State agency, city, county, municipality,
or other political subdivision of a State;
``(iii) any employee benefit plan, as defined in section 3
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002);
``(iv) any governmental plan, as defined in section 3 of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002); or
``(v) any endowment that is an organization described in
section 501(c)(3) of the Internal Revenue Code of 1986.
``(B) Prohibition.--
``(i) In general.--It shall be unlawful for a security-
based swap dealer that provides advice regarding, offers to
enter into, or enters into, a security-based swap with a
protected customer--

``(I) to employ any device, scheme, or artifice to defraud
any protected customer or prospective protected customer;
``(II) to engage in any transaction, practice, or course of
business that operates as a fraud or deceit on any protected
customer or prospective protected customer;
``(III) if the security-based swap dealer acts as a
principal for the account of the security-based swap dealer,
to knowingly sell any security-based swap to, or purchase any
security-based swap from, a protected customer, or if the
security-based swap dealer acts as a broker for a person
other than the protected customer, to knowingly effect any
sale or purchase of any security-based swap for the account
of the protected customer, without--

``(aa) before the completion of the transaction, disclosing
to the protected customer in writing the capacity in which
the security-based swap dealer is acting; and
``(bb) obtaining the consent of the protected customer in
writing with respect to the transaction; and

``(IV) to engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative.

``(ii) Regulations.--As soon as practicable after the date
of enactment of this subparagraph, the Commission shall issue
rules and promulgate regulations to prescribe requirements
that are reasonably designed to prevent acts, practices, and
courses of business that are fraudulent, deceptive, or
manipulative.
``(C) Requirements.--
``(i) In general.--A security-based swap dealer that
recommends a security-based swap with a protected customer
shall comply with clauses (ii) and (iii).
``(ii) Reasonable grounds.--In recommending to a protected
customer the purchase, sale, or exchange of any security-
based swap, a security-based swap dealer shall have
reasonable grounds for believing that the recommendation is
in the best interests of the protected customer.
``(iii) Reasonable efforts.--Before the execution of a
transaction recommended to a protected customer under clause
(ii), a security-based swap dealer shall make reasonable
efforts to obtain such information as is necessary to
determine whether the transaction is in the best interests of
the protected customer, including--

``(I) information relating to--

``(aa) the financial status of the protected customer;
``(bb) the tax status of the protected customer; and
``(cc) the stated investment objectives of the protected
customer; and

``(II) such other information that--

``(aa) is used or considered to be reasonable by the
security-based swap dealer in making recommendations to the
protected customer; and
``(bb) the Commission may prescribe by rule or regulation.
``(iv) Business conduct requirements.--A security-based
swap dealer shall satisfy each business conduct requirement
described in paragraph (3).
``(D) Written representations.--
``(i) In general.--Before entering into a security-based
swap with a protected customer, a security-based swap dealer
shall receive in writing a representation from the protected
customer confirming that the security-based swap transaction
has been expressly authorized--

``(I) by an advisor that is independent of the security-
based swap dealer; and
``(II) in the case of an employee benefit plan subject to
the fiduciary duty requirements under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et seq.), by a
representative independent of the security-based swap dealer
that is a fiduciary, as defined in section 3 of that Act (29
U.S.C. 1002).

``(ii) Regulations.--Not later than December 31, 2010, the
Commission shall issue rules or promulgate regulations to
provide guidelines to determine qualifications for advisors
that are authorized to provide advice under clause (i)(I).
______