H.R. 4624 (112th): Investment Adviser Oversight Act of 2012

112th Congress, 2011–2013. Text as of Apr 25, 2012 (Introduced).

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I

112th CONGRESS

2d Session

H. R. 4624

IN THE HOUSE OF REPRESENTATIVES

April 25, 2012

(for himself and Mrs. McCarthy of New York) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To amend the Investment Advisers Act of 1940 to provide for the registration and oversight of national investment adviser associations.

1.

Short title

This Act may be cited as the Investment Adviser Oversight Act of 2012.

2.

Registration and oversight of national investment adviser associations

The Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) is amended by inserting after section 203A the following new sections:

203B.

Registration of national investment adviser associations

(a)

Registration requirement

Except as provided in subsection (b), it shall be unlawful for any investment adviser registered under section 203 or that is regulated or required to be regulated as an investment adviser in a State in which it maintains its principal office and place of business to make use of the mails or any means or instrumentality of interstate commerce in connection with the person’s business as an investment adviser unless the investment adviser has applied to be a member of a registered national investment adviser association registered in accordance with this section and section 203C within the time period provided by the Commission under subsection (f). No investment adviser shall be required to be a member of more than one registered national investment adviser association.

(b)

Exemptions

The provisions of subsection (a) shall not apply to the following investment advisers:

(1)

Any investment adviser one or more of whose clients is an investment company registered under the Investment Company Act of 1940.

(2)

Any investment adviser that has total assets under management 90 percent or more of which are attributable individually or in the aggregate to one or more of the following persons with which the investment adviser has entered into a written investment advisory agreement:

(A)

A client that is not in the United States in accordance with the definitions in section 202.

(B)

A qualified purchaser as defined in section 2(a)(51) of the Investment Company Act of 1940.

(C)

An issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(10) of that Act.

(D)

An issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(11) of that Act.

(E)

A private fund.

(F)

An issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(5)(C) of that Act.

(G)

An issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for Rule 3a–7 issued under that Act (17 C.F.R. 270.3a–7).

(H)

A company that has elected to be a business development company pursuant to section 54 of the Investment Company Act of 1940 and has not withdrawn its election.

(I)

An investment adviser registered under section 203 or that is regulated or required to be regulated as an investment adviser in a State in which it maintains its principal office and place of business.

(J)

A broker or dealer registered under section 15 of the Securities Exchange Act of 1934; and

(K)

An employees’ securities company that has been granted an exemption under section 6(b) of the Investment Company Act of 1940 and any such company that has filed an application for an exemption under that section and that, under Commission rule, is exempt pending final determination of such application by the Commission.

(3)

Any investment adviser that is controlling, controlled by, or under common control with one or more investment advisers described in paragraph (1) or (2) (hereafter referred to as affiliated investment advisers) if the affiliated investment advisers and all such investment advisers described in such paragraph, have combined assets under management 90 percent or more of which are attributable to one or more of the types of clients described in paragraph (1) and subparagraphs (A) through (K) of paragraph (2), unless the Commission, by order, determines that such affiliated investment adviser is an independent affiliate.

(4)

Any investment adviser that is a member of any other national investment adviser association registered with the Commission.

(5)

Any other investment adviser or class of investment advisers that the Commission may exempt by rule or regulation consistent with section 206A.

(c)

Independent affiliate definition and determination

(1)

Definition

For purposes of subsection (b)(3), the term independent affiliate means any affiliated investment adviser with compliance programs, operations, and businesses that are sufficiently independent from those of the investment advisers described in subsection (b)(1) or (2) that membership by any such affiliated investment adviser in a registered national investment adviser association is necessary in the public interest and for the protection of investors or in furtherance of the purposes of this title.

(2)

Determination

The Commission’s determination under such subsection (b)(3) shall be made by order at the earlier of 180 days from receipt by the Commission of a request from any national investment adviser association or investment adviser for such a determination, or the date of the first on-site examination of such affiliated investment adviser conducted by the Commission after the date of enactment of this section. The Commission may, by order, determine that an investment adviser that the Commission had previously determined to be an independent affiliate is no longer an independent affiliate due to changes in its compliance programs, operations, or businesses.

(3)

Notification

The Commission shall promptly notify all national investment adviser associations of any determination that an investment adviser is an independent affiliate. In addition to the authority to determine by order that a particular investment adviser is an independent affiliate, the Commission shall have authority from time to time to exempt by rule, regulation or order, any class of investment advisers that the Commission determines are independent affiliates.

(d)

Procedure for registration

An association of investment advisers may be registered as a national investment adviser association by filing with the Commission an application for registration in such form, and containing the rules of the association and such other information and documents, as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors or otherwise in furtherance of the provisions of this title.

(e)

Requirements for registration

An association of investment advisers shall not be registered as a national investment adviser association unless the Commission determines that—

(1)

such association is so organized and has the capacity to be able to carry out the purposes of this title and to enforce compliance by its members and persons associated with its members with the provisions of this title, the rules and regulations thereunder, and the rules of the association; and

(2)

the rules of the association—

(A)

assure a fair representation of the public interest and the association’s members in the selection of the association’s board of directors and the administration of its affairs and provide that a majority of its directors shall not be associated with any member of the association or other self-regulatory organization registered under the Securities Exchange Act of 1934, or any investment adviser, broker, or dealer;

(B)

are designed to prevent fraudulent and manipulative acts and practices, to protect investors and the public interest, and to promote business conduct standards for its members consistent with their obligations to investors under this title and the rules thereunder and are not designed to impose any schedule or fixed rates of fees to be charged by its members or to regulate by virtue of any authority conferred by this title matters not related to the purposes of this title or the administration of the association;

(C)

are necessary in furtherance of, and are consistent with, the principles and provisions of this title and the rules thereunder, and the fiduciary standards applicable to investment advisers under this title or State law, and do not unnecessarily duplicate, overlap, or conflict with any existing provision of this title or the rules thereunder;

(D)

are necessary or appropriate in light of the business of registered investment advisers and do not impose any burden on the ability of members to compete in the market for financial services that is not necessary or appropriate in the public interest or for the protection of investors or otherwise in furtherance of the provisions of this title;

(E)

provide for periodic examinations of its members and persons associated with its members to determine compliance with the applicable provisions of this title, the rules and regulations thereunder, and the rules of the association, and for consultation with the Commission in the development of such an examination program, except that the association—

(i)

shall not conduct periodic examinations of any investment adviser in a State—

(I)

in which the investment adviser is regulated or required to be regulated and maintains its principal office and place of business; and

(II)

that has adopted a plan to conduct an on-site examination of all such investment advisers on average at least once every four years (hereafter referred to as a State examination plan); and

(ii)

may conduct examinations for cause of any such investment adviser that is a member of the association and may conduct a periodic examinations of any such investment adviser that is a member of the association and that is also registered as a broker or dealer under section 15 of the Securities Exchange Act of 1934 or that is controlling, controlled by, or under common control with such a broker or dealer;

(F)

provide for the equitable allocation of reasonable dues, fees, and other charges among members and other persons using any facility or system that the association operates or controls;

(G)

provide for the issuance by the association of an annual report on the operations, performance, and financial condition of the association and any financial arrangement between the association and any company directly controlling, controlled by, or under common control with the association, and for the submission of the report to the Commission and for the publication of the report;

(H)

establish appropriate procedures and criteria for investment advisers to become members of the association;

(I)

establish appropriate procedures to register persons associated with members, to require supervisory systems for members and persons associated with members, and to discipline its members and persons associated with its members for violations of the provisions of this title or the rules and regulations thereunder, and the rules of the association;

(J)

provide for substantively equivalent regulation and oversight of members and associated persons of members, including with respect to business conduct requirements and examinations, as provided under the rules of any other national investment adviser association registered with the Commission; and

(K)

require the association to—

(i)

implement and maintain a comprehensive information security program that meets administrative, technical, and physical safeguards as the Commission shall by rule determine, and that contains strong and risk-based information security controls to protect all information that the association is required to protect from unauthorized internal or external disclosure or dissemination (including, without limitation, a member’s confidential or proprietary information, or examination or inspection reports and documents prepared by the association or other regulatory authority);

(ii)

obtain, every 3 years, a comprehensive, independent review of the association’s information security program and the association’s compliance with its information security policies and procedures conducted by an independent reviewer who is qualified data security professional;

(iii)

within 45 days after the receipt of such independent reviewer’s report on the association’s information security program and the association’s compliance with its security policies and procedures, submit the annual report to the Commission together with the independent reviewer’s attestation in writing that addresses—

(I)

whether the association’s information security policies and procedures conform to the Commission’s information security standards;

(II)

whether the strength of the association’s information security controls meet recognized industry standards;

(III)

whether the independent reviewer’s tests revealed any material weaknesses in the association’s information security controls;

(IV)

whether the association complies with its information security policy and procedures; and

(V)

any other requirements as the Commission may by rule determine; and

(iv)

provide notice promptly to the Commission, any affected member, or any affected person associated with any member of any unauthorized access to—

(I)

the association’s information systems; or

(II)

the confidential or proprietary information of the member or associated person.

(f)

Time period for membership application

A Commission determination to permit the registration of a national investment adviser association shall establish a reasonable period of time following the effective date of such registration for investment advisers to apply for membership in accordance with the rules of the association.

(g)

Rules of construction

(1)

Non-preemption of State authority

Nothing in this section shall be construed to limit or detract from or otherwise preempt the authority of any State securities commission (or any agency or office performing similar functions) to adopt rules, investigate possible violations of State law, initiate enforcement proceedings, or otherwise regulate any investment adviser that is subject to State authority under section 203A(a).

(2)

Information sharing

Nothing in this Act shall be construed to limit the authority of any national investment adviser association, whether or not it is also a self-regulatory organization registered under the Securities Exchange Act of 1934, to share any information in its possession with a Federal, State, or local governmental agency, nor shall the sharing of information be construed to be the action of such an agency.

(h)

Annual conference

(1)

Requirement

In order to foster cooperation between national investment adviser associations and any association composed of duly constituted representatives of State governments one of whose primary assignment is the regulation of investment advisers within those States (hereafter referred to as State securities administrators association), each national investment adviser association shall conduct an annual conference as well as such other meetings as are determined necessary, to which representatives from the State securities administrators association and the Commission shall be invited to participate.

(2)

Purpose

One purpose of the conference shall be the discussion by the State securities administrators association, each national investment adviser association and the Commission, concerning those States that have adopted a State examination plan under subsection (e)(2)(E)(i) and the proposed methodology of those State examinations.

(3)

Report

Promptly following each conference, each national investment adviser association shall submit a report to Congress, describing those States that the State securities administrators association has identified as having adopted a State examination plan, and providing any information available to the national investment adviser association concerning the States’ proposed methodology of their examinations and the extent to which those States have been able to meet their previously submitted State examination plans.

203C.

Oversight of national investment adviser associations

(a)

Procedures for approval of registration

(1)

In general

The Commission shall, upon the filing of an application for registration as a national investment adviser association pursuant to section 203B, publish notice of the filing and afford interested persons an opportunity to submit written data, views, and arguments concerning such application. Within 90 days of the date of publication of such notice (or within such longer period as to which the applicant consents), the Commission shall—

(A)

by order, grant such registration; or

(B)

institute proceedings to determine whether registration should be denied.

(2)

Proceedings for denial

The proceedings to determine whether registration should be denied shall include notice of the grounds for denial under consideration and opportunity for hearing and shall be concluded within 180 days of the date of publication of notice of the filing of the application for registration. At the conclusion of such proceedings, the Commission, by order, shall grant or deny registration. The Commission may extend the time for conclusion of such proceedings for up to 90 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.

(3)

Basis for approval

The Commission shall grant such registration if it finds that the requirements of this title and the rules and regulations thereunder with respect to the applicant are satisfied. The Commission shall deny such registration if it does not make such finding.

(4)

Withdrawal

A national investment adviser association may, upon such terms and conditions as the Commission, by rule, considers necessary or appropriate in the public interest and for the protection of investors or otherwise in furtherance of the purposes of this title, withdraw from registration by filing a written notice of withdrawal with the Commission. If the Commission finds that any national investment adviser association is no longer in existence or has ceased to do business in the capacity specified in its application for registration, the Commission, by order, shall cancel its registration.

(b)

Procedures for approval of rules and rule changes

(1)

Filing and publication by commission

(A)

Filing

Each national investment adviser association shall file with the Commission, in accordance with such rules as the Commission may prescribe, any proposed rule or any proposed change in, addition to, or deletion from the rules of the association (in this paragraph collectively referred to as a proposed rule change) accompanied by a concise statement of the basis and purpose of, and the terms of substance of, or a description of the subjects and issues involved with, the proposed rule change.

(B)

Explanation and comments

The national investment adviser association shall explain in its public filing with the Commission the nature of comments that it received, including those from the industry or consumer groups, concerning the potential costs or benefits of the proposed rule or proposed rule change, and shall provide a response to those comments in its public filing with the Commission, including an explanation of any amendments to the proposed rule or proposed rule change that were made in response to those comments and a description of significant alternatives to the proposed rule change that were suggested in those comments and the reasons that the national investment adviser association did not any propose them.

(C)

Publication

The Commission shall, as soon as practicable upon the filing of any proposed rule change, publish notice thereof together with the terms of substance of the proposed rule change or a description of the subjects and issues involved. The Commission shall give interested persons an opportunity to submit written data, views, and arguments concerning such proposed rule change.

(2)

Determination

Not later than 35 days after the date of publication of notice of the filing of a proposed rule change in accordance with paragraph (1), or within such longer period as the Commission may designate if it finds a longer period to be appropriate and publishes its reasons for so finding or as to which the national investment adviser association consents, the Commission shall—

(A)

by order, approve the proposed rule change; or

(B)

institute proceedings to determine whether the proposed rule change should be disapproved.

(3)

Proceedings for disapproval

The proceedings to determine whether the proposed rule change should be disapproved shall include notice of the grounds for disapproval under consideration and opportunity for hearing and shall be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. At the conclusion of the proceedings, the Commission, by order, shall approve or disapprove the proposed rule change. The Commission may extend the time for conclusion of the proceedings for up to 60 days if it finds good cause for the extension and publishes its reasons for so finding or for such longer period to which the national investment adviser association consents.

(4)

Basis for approval

The Commission shall approve a proposed rule change of a national investment adviser association if it finds that the proposed rule change is consistent with the requirements of this title, the rules thereunder, and the rules and regulations applicable to the national investment adviser association. The Commission shall disapprove a proposed rule change of a national investment adviser association if it does not make this finding. The Commission shall not approve any proposed rule change before the 30th day after the date of publication of notice of its filing, unless the Commission finds good cause for so doing and publishes its reasons for so finding.

(5)

Stay pending approval

No proposed rule of any national investment adviser association, and no proposed rule change of such an association, including any rule or proposed rule change concerning any assessment, fee, or other charge imposed by the association, shall take effect unless approved by the Commission after public notice and opportunity for comment.

(6)

Effective date

Notwithstanding paragraph (5), no proposed rule of any national investment adviser association shall take effect within 1 year after the date of enactment of this section, unless the Commission determines that an earlier effective date is appropriate to facilitate the effective operation of the association’s examination or enforcement programs, the organization and management of the association, or the Commission’s oversight of the association.

(7)

Summary effectiveness

(A)

In general

Notwithstanding any other provision of this subsection, a proposed rule change may be put into effect summarily if it appears to the Commission that such action is necessary for the protection of investors or the safeguarding of securities or funds. Any proposed rule change so put into effect shall be filed promptly thereafter in accordance with the provisions of paragraph (1).

(B)

Amendments

Any proposed rule change of a national investment adviser association which has taken effect under subparagraph (A) may be enforced by the national investment adviser association to the extent it is not inconsistent with the provisions of this title, the rules and regulations thereunder, and applicable Federal law. The Commission, by rule, may abrogate, add to, and delete from (in this subsection collectively referred to as amend) the rules of an association as the Commission considers necessary or appropriate to ensure the fair administration of the national investment adviser association, to conform its rules to requirements of this title and the rules and regulations applicable to such national investment adviser association, or otherwise in furtherance of the purposes of this title, in the manner provided for herein.

(8)

Notification and opportunity to comment

The Commission shall notify the national investment adviser association and publish notice of any proposed rulemaking in the Federal Register. The notice shall include the text of the proposed amendment to the rules of the association and a statement of the Commission’s reasons, including any pertinent facts, for commencing the proposed rulemaking. The Commission shall give interested persons an opportunity for a hearing.

(9)

Statement of basis for determination

A rule adopted under this subsection shall incorporate the text of the amendment to the rules of the association and a statement of the Commission’s basis for and purpose in amending such rules. This statement shall include an identification of any facts on which the Commission considers its determination to amend the rules of the association to be based, including the reasons for the Commission’s conclusions as to any of such facts which were disputed in the rulemaking.

(10)

APA rulemaking procedures

(A)

Except where a hearing is provided in paragraphs (1) through (9), rulemaking under this subsection shall be in accordance with the procedures specified in section 553 of title 5, United States Code, for notice-and-comment rulemaking.

(B)

Nothing in this subsection shall be construed to impair or limit the Commission’s power to make, or to modify or alter the procedures the Commission may follow in making rules and regulations pursuant to any other authority under this title.

(C)

Any amendment to the rules of a national investment adviser association made by the Commission under this subsection shall be considered for all purposes of this title to be part of the rules of the association and shall not be considered to be a rule of the Commission.

(c)

Discipline of members

(1)

In general

In any proceeding by a national investment adviser association to determine whether a member or person associated with a member should be disciplined (other than a summary proceeding pursuant to paragraph (3)), the national investment adviser association shall bring specific charges, notify the member or person associated with a member of, and give the member or person an opportunity to defend against, such charges, and keep a record. A determination by the national investment adviser association to impose a disciplinary sanction shall be supported by a statement setting forth—

(A)

any act or practice in which the member or person associated with a member has been found to have engaged, or which the member or person associated with a member has been found to have omitted;

(B)

the specific provision of this title, the rules or regulations thereunder, or the rules of the association which any such act or practice, or omission to act, violates; and

(C)

the sanction imposed and the reason for it.

(2)

Procedures and determination

In any proceeding by a national investment adviser association to determine whether a person shall be denied membership, barred from becoming associated with a member, or prohibited or limited with respect to access to services offered by the national investment adviser association, the national investment adviser association shall notify the person of, and give such person an opportunity to be heard on, the specific grounds for denial, bar, prohibition, or limitation under consideration, and keep a record. A determination by the national investment adviser association to deny membership, bar a person from becoming associated with a member, or prohibit or limit a person with respect to access to services offered by the national investment adviser association shall be supported by a statement setting forth the specific grounds on which the denial, bar, prohibition, or limitation is based.

(3)

Summary suspension and subsequent procedures

A national investment adviser association may summarily—

(A)

suspend a member or person associated with a member who has been and is expelled or suspended from any self-regulatory organization or barred or suspended from being associated with a member of any self-regulatory organization;

(B)

suspend a member who is in such financial or operating difficulty that the national investment adviser association determines and so notifies the Commission that the member cannot be permitted to continue to do business as a member and serve the interest of investors, creditors, other members, or the national investment adviser association; or

(C)

limit or prohibit any person with respect to access to services offered by the national investment adviser association if subparagraph (A) or (B) is applicable to such person or, in the case of a person who is not a member, if the national investment adviser association determines that such person does not meet the qualification requirements or other prerequisites for such access and such person cannot be permitted to continue to have such access and serve the interest of investors, creditors, members, or the national investment adviser association. Any person aggrieved by any such summary action shall be promptly afforded an opportunity for a hearing by the national investment adviser association in accordance with the provisions of paragraph (1) or (2). The Commission, by order, may stay any such summary action on its own motion or upon application by any person aggrieved thereby, if the Commission determines summarily or after notice and opportunity for hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that such stay is consistent with the public interest and the protection of investors.

(d)

Final disciplinary sanction

(1)

Notice

If any national investment adviser association imposes any final disciplinary sanction on any member, denies membership to any applicant, or prohibits or limits any person in respect to access to services offered by the national investment adviser association, or if any national investment adviser association imposes any final disciplinary sanction on any person associated with a member, or bars any person from becoming associated with a member, the national investment adviser association shall promptly file notice thereof with the Commission and publish the notice. The notice shall be in such form and contain such information as the Commission, by rule, may prescribe as necessary or appropriate in furtherance of the purposes of this title.

(2)

Review

Any action with respect to which a national investment adviser association is required by paragraph (1) to file notice shall be subject to review by the Commission, on its own motion, or upon application by any person aggrieved thereby filed within 30 days after the date such notice was both filed with the Commission and received by such aggrieved person, or within such longer period as the Commission may determine. Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of the action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). The Commission may establish for appropriate cases an expedited procedure for consideration and determination of the question of a stay.

(e)

Review of final sanction

(1)

In general

In any proceeding to review a final disciplinary sanction imposed by a national investment adviser association on a member or a person associated with a member, after notice and opportunity for hearing (which hearing may consist solely of consideration of the record before the national investment adviser association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction)—

(A)

if the Commission finds that such member or person associated with a member has engaged in such acts or practices, or has omitted such acts, as the national investment adviser association has found him or her to have engaged in or omitted that such acts or practices, or omissions to act, are in violation of such provisions of this title, the rules or regulations thereunder, or the rules of the association, as have been specified in the determination of the national investment adviser association, and that such provisions are, and were applied in a manner, consistent with the purposes of this title, the Commission, by order, shall so declare and, as appropriate, affirm the sanction imposed by the national investment adviser association, modify the sanction in accordance with paragraph (2), or remand to the national investment adviser association for further proceedings; or

(B)

if the Commission does not make any such finding it shall, by order, set aside the sanction imposed by the national investment adviser association and, if consistent with the purposes of this title, remand to the national investment adviser association for further proceedings.

(2)

Reduction or revocation of sanction

If the Commission, having due regard for the public interest, the protection of investors, and the policies and purposes of this title, finds after a proceeding in accordance with paragraph (1) that a sanction imposed by a national investment adviser association on a member or person associated with a member imposes any burden on competition not necessary or appropriate in furtherance of the purposes of this title or is excessive or oppressive, the Commission may cancel, reduce, or require the revocation of such sanction.

(f)

Review of denial of membership

In any proceeding to review the denial of membership in a national investment adviser association to any applicant, the barring of any person from becoming associated with a member, or the prohibition or limitation by a national investment adviser association of any person with respect to access to services offered by the national investment adviser association—

(1)

if the Commission, after notice and opportunity for hearing (which hearing may consist solely of consideration of the record before the national investment adviser association and opportunity for the presentation of supporting reasons to dismiss the proceeding or set aside the action of the national investment adviser association) finds that the specific grounds on which the denial, bar, prohibition or limitation is based exist in fact, that the denial, bar, prohibition, or limitation is in accordance with the rules of the association, and that the rules are and were applied in a manner consistent with the purposes of this title, the Commission, by order, shall dismiss the proceeding; or

(2)

if the Commission does not make any such finding or it finds that the denial, bar, prohibition or limitation imposes any burden on competition not necessary or appropriate in furtherance of the purposes of this title, the Commission, by order, shall set aside the action of the national investment adviser association and require it to admit the applicant to membership or participation, permit the person to become associated with a member, or grant the person access to services offered by the national investment adviser association.

(g)

Compliance

(1)

In general

Every registered national investment adviser association shall comply with the provisions of this title, the rules and regulations thereunder, and its own rules, and (subject to the provisions of paragraph (2) and the rules thereunder) absent reasonable justification or excuse, enforce compliance with such provisions by its members and persons associated with a member. The Commission shall conduct regular and routine inspections, at least annually, of the registered national investment adviser association, to ensure that the association complies with the provisions of this title and the rules and regulations thereunder.

(2)

Relief of responsibility

The Commission, by rule, consistent with the public interest and the protection of investors, and the other policies and purposes of this title, may relieve any national investment adviser association of any responsibility under this title to enforce compliance with any provision of this title or the rules or regulations thereunder by any member of the national investment adviser association or any class of such members or persons associated with a member.

(h)

Enforcement authority of the commission

(1)

Suspension, censure and limitation on associations

If in its opinion such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, the Commission may, by order, suspend for a period not exceeding 12 months or revoke the registration of a national investment adviser association, or to censure or impose limitations upon the activities, functions, and operations of the national investment adviser association, if the Commission finds, on the record after notice and opportunity for hearing, that the national investment adviser association has violated or is unable to comply with any provision of this title, the rules or regulations thereunder, or its own rules, or without reasonable justification or excuse has failed to enforce compliance with any such provision by a member or a person associated with a member.

(2)

Suspension and expulsion of members

If in its opinion such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, the Commission may, by order, suspend for a period not exceeding 12 months or expel from a national investment adviser association any member, if the member is subject to an order of the Commission pursuant to section 203(e) or if the Commission finds, on the record after notice and opportunity for hearing, that the member has willfully violated, or has participated in any transaction with or for any other person who the member had reason to believe was violating with respect to such transaction, any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, this title, the Commodity Exchange Act, or the rules or regulations under any of such statutes, or the rules of the Municipal Securities Rulemaking Board.

(3)

Other bars

If in its opinion, such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, the Commission may, by order, suspend for a period not exceeding 12 months or bar any person from being associated with a member of a national investment adviser association, if the person is subject to an order of the Commission under section 203(f) or if the Commission finds, on the record after notice and opportunity for hearing, that the person has willfully violated, or has participated in any transaction with any other person who the person associated with a member had reason to believe was violating with respect to the transaction, any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, this title, or the rules or regulations under any of those statutes, or the rules of the Municipal Securities Rulemaking Board.

(4)

Removal or censure of officers and directors

If in its opinion such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, the Commission may, by order, remove from office or censure any officer, director or any person performing similar functions of a national investment adviser association, if the Commission finds, on the record after notice and opportunity for hearing, that such person has willfully violated any provision of this title, the rules or regulations thereunder, or the rules of the national investment adviser association, willfully abused his authority, or without reasonable justification or excuse has failed to enforce compliance with any such provision by any member or person associated with a member.

.