H.R. 6613 (112th): Markets and Trading Reorganization Act

112th Congress, 2011–2013. Text as of Nov 29, 2012 (Introduced).

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I

112th CONGRESS

2d Session

H. R. 6613

IN THE HOUSE OF REPRESENTATIVES

November 29, 2012

(for himself and Mr. Capuano) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To establish the Securities and Derivatives Commission in order to combine the functions of the Commodity Futures Trading Commission and the Securities and Exchange Commission in a single independent regulatory commission.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Markets and Trading Reorganization Act.

(b)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

Sec. 3. Definition.

TITLE I—ESTABLISHMENT OF COMMISSION

Sec. 101. Establishment.

Sec. 102. Members; appointment; terms.

Sec. 103. Organization of Commission.

TITLE II—TRANSFERS OF FUNCTIONS

Sec. 201. Commodity futures trading commission functions.

Sec. 202. Securities and exchange commission functions.

TITLE III—ADMINISTRATIVE PROVISIONS

Sec. 301. Personnel provisions.

Sec. 302. General administrative provisions.

TITLE IV—FEE AND FUNDING AUTHORITY

Sec. 401. Fees to cover costs of the Commission.

Sec. 402. Funding Authority of the Commission.

TITLE V—TRANSITIONAL, SAVINGS, AND CONFORMING PROVISIONS

Sec. 501. Savings provisions.

Sec. 502. Reference.

Sec. 503. Amendments.

TITLE VI—EFFECTIVE DATE

Sec. 601. Effective date.

2.

Purposes

The purposes of this Act are—

(1)

to establish a single Federal regulatory body with jurisdiction over securities, derivatives, options, futures, and related markets and instruments;

(2)

to coordinate the regulation of relevant financial markets;

(3)

to strengthen investor confidence in United States financial markets; and

(4)

to ensure the efficiency and competitiveness of those markets.

3.

Definition

As used in this Act, the term Commission, other than where expressly referring to the Securities and Exchange Commission or the Commodity Futures Trading Commission, means the Securities and Derivatives Commission established by section 101 of this Act.

I

Establishment of commission

101.

Establishment

There is established an independent regulatory commission to be known as the Securities and Derivatives Commission.

102.

Members; appointment; terms

(a)

Composition of commission

The Commission shall be composed of 5 commissioners appointed by the President, by and with the advice and consent of the Senate. One of the commissioners shall be designated by the President as chairperson. Not more than three of such commissioners shall be members of the same political party. Each commissioner shall be selected solely on the basis of integrity and demonstrated knowledge of the operations of the markets subject to the jurisdiction of the Commission.

(b)

Qualifications

In appointing commissioners under subsection (a), the President shall—

(1)

select persons who each have demonstrated knowledge of securities, futures, swaps, or other derivatives, the regulation of such instruments, or the markets for agricultural or other types of commodities underlying transactions subject to the oversight of the Commission under this Act; and

(2)

seek to ensure that the demonstrated knowledge of the commissioners is balanced with respect to such areas, with at least one commissioner having knowledge of the agricultural commodities market.

(c)

Terms

Each commissioner shall be appointed for a term of 5 years, except that a commissioner may continue to serve after the expiration of such term until a successor is appointed and has qualified.

(1)

The terms of office of the commissioners first taking office after the enactment of this Act shall expire, as designated by the President at the time of their appointment—

(A)

one at the end of 1 year;

(B)

two at the end of 3 years; and

(C)

two at the end of 5 years.

(2)

Any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which the predecessor was appointed shall be appointed for the remainder of such term.

103.

Organization of Commission

(a)

Required divisions

The Commission shall establish the principal divisions and subdivisions of the Commission, including, at a minimum, the following three divisions:

(1)

A Markets and Trading Division with oversight of market conduct and utilities, the conduct of market professionals, and self-regulatory organizations with regard to such market professionals, including related examination functions.

(2)

An Issuers and Financial Disclosures Division with oversight of the issuance of securities, including investment companies and related rules and examinations.

(3)

An Enforcement Division responsible for the enforcement of all rules of the Commission.

(b)

Other offices

The Commission may establish such other offices as it determines useful in the conduct of the Commission’s affairs.

II

Transfers of functions

201.

Commodity futures trading commission functions

There are transferred to the Commission all functions of the Commodity Futures Trading Commission and of any officer or component of the Commodity Futures Trading Commission.

202.

Securities and exchange commission functions

There are transferred to the Commission all functions of the Securities and Exchange Commission and of any officer or component of the Securities and Exchange Commission.

III

Administrative provisions

301.

Personnel provisions

(a)

Appointment and compensation

The Commission may appoint and fix the compensation of such officers and employees as may be necessary to carry out the functions of the Commission. Except as otherwise provided by law, such officers and employees shall be appointed in accordance with the civil service laws and the compensation of such employees shall be fixed in accordance with section 4802 of title 5, United States Code. The Commission shall, in accordance with such section, adjust the compensation of employees so that the compensation of employees transferred from the Commodity Futures Trading Commission pursuant to subsection (b) and the compensation of employees transferred from the Securities and Exchange Commission under such subsection are aligned. In making such an adjustment, the Commission shall not reduce the compensation of any employee.

(b)

Transfer of employees

(1)

In general

All employees of the Commodity Futures Trading Commission and the Securities and Exchange Commission shall be transferred to the Commission. Each employee to be transferred under this subsection shall be transferred not later than 90 days after the effective date set forth in section 601.

(2)

Employee status and functions

(A)

Status

The transfer of employees under this section shall not affect the status of the transferred employees as employees of an agency of the United States under any provision of law. Each transferred employee shall be placed in a position at the Commission with the same status and tenure as the transferred employee held on the day before the date on which the employee was transferred.

(B)

Functions

To the extent practicable, each transferred employee shall be placed in a position at the Commission responsible for the same functions and duties as the transferred employee had on the day before the date on which the employee was transferred, in accordance with the expertise and preferences of the transferred employee.

(3)

Personnel actions limited

(A)

Protection

Except as provided in subparagraph (B), each transferred employee shall not, during the 3-year period beginning on the transfer date, be involuntarily separated, or involuntarily reassigned outside his or her locality pay area.

(B)

Exceptions

Subparagraph (A) does not limit the right of the Commission to—

(i)

separate an employee for cause or for unacceptable performance;

(ii)

terminate an appointment to a position excepted from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character; or

(iii)

reassign an employee outside such employee’s locality pay area when the Commission determines that the reassignment is necessary for the efficient operation of the Commission.

(4)

Pay

(A)

Protection

(i)

In general

Except as provided in clause (ii), each transferred employee shall, during the 3-year period beginning on the designated transfer date, receive pay at a rate equal to not less than the basic rate of pay (including any geographic differential) that the employee received during the pay period immediately preceding the date of transfer.

(ii)

Limitation

Notwithstanding clause (i), if the employee was receiving a higher rate of basic pay on a temporary basis (because of a temporary assignment, temporary promotion, or other temporary action) immediately before the date of transfer, the Commission may reduce the rate of basic pay on the date on which the rate would have been reduced but for the transfer, and the protected rate for the remainder of the 3-year period shall be the reduced rate that would have applied, but for the transfer.

(B)

Exceptions

Subparagraph (A) does not limit the right of the Commission to reduce the rate of basic pay of a transferred employee—

(i)

for cause or for unacceptable performance; or

(ii)

with the consent of the employee.

(C)

Protection only while employed

Subparagraph (A) applies to a transferred employee only while that employee remains employed by the Commission.

(D)

Pay increases permitted

Subparagraph (A) does not limit the authority of the Commission to increase the pay of a transferred employee.

302.

General administrative provisions

(a)

General authority

In carrying out any function transferred by this Act, the Commission, or any officer or employee of the Commission, may exercise any authority available by law with respect to such function to the official or agency from which such function is transferred, and the actions of the Commission, or any officer or employee of the Commission in exercising such authority shall have the same force and effect as when exercised by such official or agency.

(b)

Rules

The Commission may prescribe such rules and regulations as the Commission determines necessary or appropriate to administer and manage the functions of the Commission.

(c)

Contracts

The Commission may make, enter into, and perform such contracts, grants, leases, cooperative agreements, or other similar transactions with Federal or other public agencies (including State and local governments) and private organizations and persons, and make such payments, by way of advance or reimbursement, as the Commission may determine necessary or appropriate to carry out functions of the Commission.

(d)

Regional and field offices

The Commission may establish, alter, discontinue, or maintain such regional or other field offices as the Commission may find necessary or appropriate to perform functions of the Commission.

(e)

Reserve fund

The Commission may obligate amounts in the Reserve Fund established under section 4(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(i)), not to exceed a total of $100,000,000 in any 1 fiscal year, as the Commission determines is necessary to carry out the functions of the Commission, including those transferred by title II of this Act. Any amounts in the reserve fund shall remain available until expended. Not later than 10 days after the date on which the Commission obligates amounts under this subsection, the Commission shall notify Congress of the date, amount, and purpose of the obligation.

IV

Fee and Funding Authority

401.

Fees to cover costs of the Commission

(a)

Imposition of fees

(1)

In general

The Commission shall, by order, impose a fee on each agreement, contract, or transaction that is a contract of sale of a commodity for future delivery, an option on such a contract, or a swap or securities-based swap, so that the total of the fees so imposed during each fiscal year is sufficient to cover the costs of the regulatory activities of the Commission related to such instruments for each fiscal year.

(2)

Limitation

The fees imposed under this subsection on all transactions of the same kind shall be determined in a uniform manner.

(3)

Mid-year adjustment

(A)

In general

By March 1 of each fiscal year, the Commission shall determine whether, based on the fees collected under this subsection during the first 5 months of the fiscal year, the total of the amounts collected and to be collected under this section for the fiscal year is reasonably likely to be 10 percent (or more) greater or less than the costs described in paragraph (1) for the fiscal year. If the Commission so determines, the Commission shall by order, no later than March 1 of the fiscal year, adjust the fee rates otherwise applicable under this subsection for the fiscal year so that the total of the amounts so collected and to be collected is reasonably likely to equal to the costs so described.

(B)

Effective date

An adjusted rate prescribed under subparagraph (A) of this paragraph in a fiscal year shall take effect on the 1st day of the fiscal year to which the rate applies.

(4)

Publication

The Commission shall publish in the Federal Register notices of the fee rates applicable under this subsection for a fiscal year not later than 30 days after such rates are set, together with any estimates or projections on which the fee rates are based.

(5)

Inapplicability of rulemaking requirements

In exercising its authority under this subsection, the Commission shall not be required to comply with section 553 of title 5, United States Code.

(6)

No judicial review

A fee rate prescribed under this subsection and published in accordance with paragraph (4) shall not be subject to judicial review.

(b)

Payment and collection of fees

(1)

Cleared transactions; uncleared swaps reported to swap data repositories

(A)

Payment of fees

(i)

Cleared transactions

In the case of a contract of sale of a commodity for future delivery, an option on such a contract, or a swap or securities-based swap that is cleared by a derivatives clearing organization registered or exempt from registration under the Commodity Exchange Act or by a clearing agency registered or exempt from registration under the Securities Exchange Act of 1934, as applicable, each party to the agreement, contract, or transaction shall pay the fee determined under subsection (a) to the derivatives clearing organization or clearing agency, as applicable.

(ii)

Uncleared swaps reported to swap data repositories

In the case of a swap or securities-based swap that is not cleared by a derivatives clearing organization registered or exempt from registration under the Commodity Exchange Act or by a clearing agency registered or exempt from registration under the Securities Exchange Act of 1934 and that is accepted by a swap data repository registered under section 21 of the Commodity Exchange Act (7 U.S.C. 24a) or a securities-based swap data repository registered under section 13n of the Securities Exchange Act of 1934 (15 U.S.C. 78m(n)), as applicable, each party to the swap or securities-based swap shall pay the transaction fee determined under subsection (a) to the swap data repository or securities-based swap data repository.

(B)

Collection of fees

The Commission shall collect the fees paid in accordance with subparagraph (A) in such manner and within such time as the Commission determines appropriate.

(2)

Uncleared swaps reported to commission

In the case of a swap or securities-based swap that is not cleared by a derivatives clearing organization or a clearing agency registered or exempt from registration under the Commodity Exchange Act or the Securities Exchange Act of 1934 and that is reported to the Commission pursuant to such Acts, each party to the swap or securities-based swap shall pay the fee determined under subsection (a) to the Commission in a manner and within such time as the Commission determines appropriate.

402.

Funding Authority of the Commission

(a)

Commodity Futures Trading Commission

Section 12 of the Commodity Exchange Act (7 U.S.C. 16) is amended—

(1)

in subsection (b)(1), by striking and as may be from time to time appropriated for by Congress;

(2)

by striking subsection (d); and

(3)

in subsection (f)(3), by striking Any payment or reimbursement accepted shall be considered a reimbursement to the appropriated funds of the Commission. and inserting Such payments or reimbursements shall be available to the Commission without further appropriation..

(b)

Securities Exchange Commission

Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is amended—

(1)

in subsection (a)—

(A)

in the heading for such subsection, by striking Recovery of Costs of Annual Appropriation and inserting In general; and

(B)

by striking recover the costs to the Government of the annual appropriation to the Commission by Congress and inserting cover the costs to the Commission for the supervision and regulation of securities markets and securities professionals, and use such fees and assessments without further appropriation;

(2)

by striking subsection (i);

(3)

in subsection (j)—

(A)

by striking regular appropriation to the Commission by Congress each place such term appears and inserting target offsetting collection amount; and

(B)

by amending paragraph (4)(A) to read as follows:

(A)

Annual adjustment

An adjusted rate prescribed under paragraph (1) shall take effect on the first day of the fiscal year to which such rate applies.

; and

(4)

by striking subsection (k).

V

Transitional, savings, and conforming provisions

501.

Savings provisions

(a)

Continuity of legal instruments

All orders, determinations, rules, regulations, permits, grants, contracts, certificates, licenses, and privileges—

(1)

which have been issued, made, granted, or allowed to become effective by the President, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, or any component thereof, or by a court of competent jurisdiction, in the performance of functions which are transferred under this Act to the Commission, and

(2)

which are in effect at the time this Act takes effect,

shall continue in effect according to their terms until modified, terminated, superseded, set aside, or revoked in accordance with the law by the President, the Commission, or other authorized official, a court of competent jurisdiction, or by operation of law.
(b)

Continuity of proceedings

(1)

In general

The provisions of this Act shall not affect any proceedings, including notices of proposed rulemaking, or any application for any license, permit, certificate, or financial assistance pending on the effective date of this Act before either the Securities and Exchange Commission or the Commodity Futures Trading Commission, or any component thereof, functions of which are transferred by this Act. Such proceedings and applications, to the extent that they relate to functions so transferred, shall be continued. Orders shall be issued in such proceedings, appeals shall be taken therefrom, and payments shall be made pursuant to such orders, as if this Act had not been enacted and orders issued in any such proceedings shall continue in effect until modified, terminated, superseded, or revoked by the Commission, by a court of competent jurisdiction, or by operation of law. Nothing in this subsection shall be construed to prohibit the discontinuance or modification of any such proceeding under the same terms and conditions and to the same extent that such proceeding could have been discontinued or modified if this Act had not been enacted.

(2)

Regulations concerning transfers

The Commission may prescribe regulations providing for the orderly transfer of proceedings continued under paragraph (1) to the Commission.

(c)

Pending litigation

Except as provided in subsection (e)—

(1)

the provisions of this Act shall not affect suits commenced prior to the effective date of this Act; and

(2)

in all such suits, proceedings shall be had, appeals taken, and judgments rendered in the same manner and effect as if this Act had not been enacted.

(d)

Nonabatement

No suit, action, or other proceeding commenced by or against any officer in the official capacity of such individual as an officer of the Securities and Exchange Commission or the Commodity Futures Trading Commission, or any component thereof, functions of which are transferred by this Act, shall abate by reason of the enactment of this Act. No cause of action by or against any department or agency, functions of which are transferred by this Act, or by or against any officer thereof in the official capacity of such officer shall abate by reason of the enactment of this Act.

(e)

Substitution of parties

If, before the date on which this Act takes effect, the Securities and Exchange Commission or the Commodity Futures Trading Commission, or any component thereof, or officer thereof in the official capacity of such officer, is a party to a suit, and under this Act any function of such department, agency, or officer is transferred to the Commission or any other official of the Commission, then such suit shall be continued with the Commission or other appropriate official of the Commission substituted or added as a party.

(f)

Judicial review as required by existing law

Orders and actions of the Commission in the exercise of functions transferred under this Act shall be subject to judicial review to the same extent and in the same manner as if such orders and actions had been by the agency or office, or part thereof, exercising such functions immediately preceding their transfer. Any statutory requirements relating to notice, hearings, action upon the record, or administrative review that apply to any function transferred by this Act shall apply to the exercise of such function by the Commission.

502.

Reference

Any reference in any other Federal law to the Securities and Exchange Commission or the Commodity Futures Trading Commission shall be deemed a reference to the Securities and Derivatives Commission established by this Act.

503.

Amendments

(a)

Executive schedule salaries

(1)

Chairperson

Section 5314 of title 5, United States Code, is amended—

(A)

by striking Chairman, Securities and Exchange Commission. and inserting Chairperson, Securities and Derivatives Commission.; and

(B)

by striking Chairman, Commodity Futures Trading Commission..

(2)

Members

Section 5315 of title 5, United States Code, is amended—

(A)

by striking Members, Securities and Exchange Commission and inserting Members, Securities and Derivatives Commission; and

(B)

by striking Members, Commodity Futures Trading Commission..

(b)

Conforming amendments

(1)

Securities exchange act

Sections 4(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(a)) is amended—

(A)

by striking There is hereby established a Securities and Exchange Commission (hereinafter referred to as the Commission) to be composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate. Not more than three of such commissioners shall be members of the same political party, and in making appointments members of different political parties shall be appointed alternately as nearly as may be practicable.; and

(B)

by striking Each commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and except (1) any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and (2) the terms of office of the commissioners first taking office after the enactment of this title shall expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, one at the end of three years, one at the end of four years, and one at the end of five years, after the date of the enactment of this title..

(2)

Commodity exchange act

Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2a) is amended by striking paragraphs (2), (3), and (4).

(3)

Dodd-Frank

Section 111(b)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5321(b)(1)) is amended—

(A)

by amending subparagraph (E) to read as follows:

(E)

the Chairperson of the Securities and Derivatives Commission;

;

(B)

by striking subparagraph (G); and

(C)

by redesignating subparagraphs (H), (I), and (J) as subparagraphs (G), (H), and (I), respectively.

VI

Effective date

601.

Effective date

The provisions of this Act shall take effect 1 year after the date of enactment of this Act, except that the President may nominate and the Senate confirm Commissioners prior to such date.