15 U.S.C. § 80b–11 | Rules, regulations, and orders of Commission

(a)

Power of Commission

section 80b–6 of this titleThe Commission shall have authority from time to time to make, issue, amend, and rescind such rules and regulations and such orders as are necessary or appropriate to the exercise of the functions and powers conferred upon the Commission elsewhere in this subchapter, including rules and regulations defining technical, trade, and other terms used in this subchapter, except that the Commission may not define the term “client” for purposes of paragraphs (1) and (2) of to include an investor in a private fund managed by an investment adviser, if such private fund has entered into an advisory contract with such adviser. For the purposes of its rules or regulations the Commission may classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters.

(b)

Effective date of regulations

Subject to the provisions of chapter 15 of title 44 and regulations prescribed under the authority thereof, the rules and regulations of the Commission under this subchapter, and amendments thereof, shall be effective upon publication in the manner which the Commission shall prescribe, or upon such later date as may be provided in such rules and regulations.

(c)

Orders of Commission after notice and hearing; type of notice

Orders of the Commission under this subchapter shall be issued only after appropriate notice and opportunity for hearing. Notice to the parties to a proceeding before the Commission shall be given by personal service upon each party or by registered mail or certified mail or confirmed telegraphic notice to the party’s last known business address. Notice to interested persons, if any, other than parties may be given in the same manner or by publication in the Federal Register.

(d)

Good faith compliance with rules and regulations

No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or order of the Commission, notwithstanding that such rule, regulation, or order may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

(e)

Disclosure rules on private funds

July 21, 20101

1 So in original. Probably should be “section”.

7 U.S.C. 1The Commission and the Commodity Futures Trading Commission shall, after consultation with the Council but not later than 12 months after , jointly promulgate rules to establish the form and content of the reports required to be filed with the Commission under subsection  80b–4(b) of this title and with the Commodity Futures Trading Commission by investment advisers that are registered both under this subchapter and the Commodity Exchange Act [ et seq.].

(g)

2
2 So in original. No subsec. (f) has been enacted.
  Standard of conduct

(1)

In general

The Commission may promulgate rules to provide that the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), 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. In accordance with such rules, any material conflicts of interest shall be disclosed and may be consented to by the customer. Such rules shall provide that such standard of conduct shall be no less stringent than the standard applicable to investment advisers under section 80b–6(1) and (2) of this title when providing personalized investment advice about securities, except the Commission shall not ascribe a meaning to the term “customer” that would include an investor in a private fund managed by an investment adviser, where such private fund has entered into an advisory contract with such adviser. The receipt of compensation based on commission or fees shall not, in and of itself, be considered a violation of such standard applied to a broker, dealer, or investment adviser.

(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, dealer, or investment adviser; and

(B)

uses such advice primarily for personal, family, or household purposes.

(h)

Other matters

The Commission shall—

(1)

facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest; and

(2)

examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors.

(i)

Harmonization of enforcement

The enforcement authority of the Commission with respect to violations of the standard of conduct applicable to an investment adviser shall include—

(1)

the enforcement authority of the Commission with respect to such violations provided under this subchapter; and

(2)

15 U.S.C. 78a the enforcement authority of the Commission with respect to violations of the standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer under the Securities Exchange Act of 1934 [ et seq.], including the authority to impose sanctions for such violations, and

15 U.S.C. 78athe Commission shall seek to prosecute and sanction violators of the standard of conduct applicable to an investment adviser under this subchapter to same extent as the Commission prosecutes and sanctions violators of the standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer under the Securities Exchange Act of 1934 [ et seq.].

Aug. 22, 1940, ch. 686 54 Stat. 855 Pub. L. 86–507, § 1(16)June 11, 196074 Stat. 201 Pub. L. 86–750, § 14Sept. 13, 196074 Stat. 888 Pub. L. 100–181, title VII, § 705Dec. 4, 1987101 Stat. 1264 Pub. L. 111–203, title IV, § 406July 21, 2010124 Stat. 1574(, title II, § 211, ; , , ; , , ; , , ; , title IX, § 913(g)(2), (h)(2), , , 1828, 1829.)

Editorial Notes

References in Text

act Sept. 21, 1922, ch. 369 42 Stat. 998 section 1 of Title 7The Commodity Exchange Act, referred to in subsec. (e), is , , which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see and Tables.

act June 6, 1934, ch. 404 48 Stat. 881 section 78a of this titleThe Securities Exchange Act of 1934, referred to in subsec. (i), is , , which is classified principally to chapter 2B (§ 78a et seq.) of this title. For complete classification of this Act to the Code, see and Tables.

Amendments

Pub. L. 111–203, § 406(1)section 80b–6 of this title2010—Subsec. (a). , inserted “, including rules and regulations defining technical, trade, and other terms used in this subchapter, except that the Commission may not define the term ‘client’ for purposes of paragraphs (1) and (2) of to include an investor in a private fund managed by an investment adviser, if such private fund has entered into an advisory contract with such adviser” after “elsewhere in this subchapter”.

Pub. L. 111–203, § 406(2)Subsec. (e). , which directed addition of subsec. (e) at end of section, was executed by adding subsec. (e) after subsec. (d) to reflect the probable intent of Congress. See Effective Date of 2010 Amendment notes below.

Pub. L. 111–203, § 913(g)(2)Subsecs. (g), (h). , added subsecs. (g) and (h).

Pub. L. 111–203, § 913(h)(2)Subsec. (i). , added subsec. (i).

Pub. L. 100–1811987—Subsec. (b). substituted “chapter 15 of title 44” for “the Federal Register Act”.

Pub. L. 86–7501960—Subsec. (a). inserted “functions and”.

Pub. L. 86–507Subsec. (c). inserted “or certified mail” after “registered mail”.

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Pub. L. 111–203July 21, 2010section 4 of Pub. L. 111–203 section 5301 of Title 12Amendment by section 913(g)(2), (h)(2) of effective 1 day after , except as otherwise provided, see , set out as an Effective Date note under , Banks and Banking.

section 406 of Pub. L. 111–203July 21, 2010section 419 of Pub. L. 111–203 section 80b–2 of this titleAmendment by effective 1 year after , except that any investment adviser may, at the discretion of the investment adviser, register with the Commission under the Investment Advisers Act of 1940 during that 1-year period, subject to the rules of the Commission, and except as otherwise provided, see , set out as a note under .

Study on Enhancing Investment Adviser Examinations

Pub. L. 111–203, title IX, § 914July 21, 2010124 Stat. 1830

“(a)

Study Required.—

“(1)

In general .—

The Commission shall review and analyze the need for enhanced examination and enforcement resources for investment advisers.

“(2)

Areas of consideration .—

The study required by this subsection shall examine—

“(A)

July 21, 2010 the number and frequency of examinations of investment advisers by the Commission over the 5 years preceding the date of the enactment of this subtitle [];

“(B)

the extent to which having Congress authorize the Commission to designate one or more self-regulatory organizations to augment the Commission’s efforts in overseeing investment advisers would improve the frequency of examinations of investment advisers; and

“(C)

current and potential approaches to examining the investment advisory activities of dually registered broker-dealers and investment advisers or affiliated broker-dealers and investment advisers.

“(b)

Report Required .—

July 21, 2010The Commission shall report its findings to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, not later than 180 days after the date of enactment of this subtitle [], and shall use such findings to revise its rules and regulations, as necessary. The report shall include a discussion of regulatory or legislative steps that are recommended or that may be necessary to address concerns identified in the study.”

, , , provided that:

section 914 of Pub. L. 111–203 section 5301 of Title 12[For definitions of terms used in , set out above, see , Banks and Banking.]

Executive Documents

Transfer of Functions

May 24, 195064 Stat. 1265 section 78d of this titleFor transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. , 15 F.R. 3175, , set out under .