THIS SEARCH     THIS DOCUMENT     GO TO
Next Hit        Forward           New Bills Search
Prev Hit        Back              HomePage
Hit List        Best Sections     Help
                Contents Display   

GPO's PDF Display

Congressional Record References

Link to Senate Committee Report 119

Bill Summary & Status

Printer Friendly Display - 19,726 bytes.[Help]

Billno should always have and extension i.e. h1.ih

S 1566 PCS

To reauthorize the Commodity Exchange Act, and for other purposes.

July 29, 2005

Mr. CHAMBLISS from the Committee on Agriculture, Nutrition, and Forestry reported the following original bill; which was read twice and placed on the calendar

To reauthorize the Commodity Exchange Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Commodity Exchange Reauthorization Act of 2005'.

SEC. 2. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.

Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended--

(1) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively; and

(2) by striking `Sec. 4b' and all that follows through the end of subsection (a) and inserting the following:

`SEC. 4b. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.

`(a) Unlawful Actions- It shall be unlawful--

`(1) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce or for future delivery that is made, or to be made, on or subject to the rules of a designated contract market, for or on behalf of any other person; or

`(2) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, or other agreement, contract, or transaction subject to paragraphs (1) and (2) of section 5a(g), that is made, or to be made, for or on behalf of, or with, any other person, other than on or subject to the rules of a designated contract market--

`(A) to cheat or defraud or attempt to cheat or defraud such other person;

`(B) willfully to make or cause to be made to such other person any false report or statement or willfully to enter or cause to be entered for such other person any false record;

`(C) willfully to deceive or attempt to deceive such other person by any means whatsoever in regard to any order or contract or the disposition or execution of any order or contract, or in regard to any act of agency performed, with respect to any order or contract for or, in the case of paragraph (2), with such other person; or

`(D)(i) to bucket an order if such order is either represented by such person as an order to be executed, or is required to be executed, on or subject to the rules of a designated contract market; or

`(ii) to fill an order by offset against the order or orders of any other person, or willfully and knowingly and without the prior consent of such other person to become the buyer in respect to any selling order of such other person, or become the seller in respect to any buying order of such other person, if such order is either represented by such person as an order to be executed, or is required to be executed, on or subject to the rules of a designated contract market unless such order is executed in accordance with the rules of the designated contract market.

`(b) Clarification- Subsection (a)(2) shall not obligate any person, in or in connection with a transaction in a contract of sale of a commodity for future delivery, or other agreement, contract or transaction subject to paragraphs (1) and (2) of section 5a(g), with another person, to disclose to such other person nonpublic information that may be material to the market price, rate or level of such commodity or transaction, except as necessary to make any statement made to such other person in or in connection with such transaction, not misleading in any material respect.'.

SEC. 3. CRIMINAL AND CIVIL PENALTIES.

(a) Enforcement Powers of the Commission- Section 6(c) of the Commodity Exchange Act (7 U.S.C. 9, 15) is amended in paragraph (3) of the 10th sentence--

(1) by inserting `(A)' after `assess such person'; and

(2) by inserting after `each such violation' the following: `, or (B) in any case of manipulation of, or attempt to manipulate, the price of any commodity, a civil penalty of not more than the greater of $1,000,000 or triple the monetary gain to such person for each such violation,'.

(b) Nonenforcement of Rules of Government or Other Violations- Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended--

(1) in the 1st sentence, by inserting before the period at the end the following: `, or, in any case of manipulation of, or an attempt to manipulate, the price of any commodity, a civil penalty of not more than $1,000,000 for each such violation'; and

(2) in the 2nd sentence, by inserting before the period at the end the following: `, except that if the failure or refusal to obey or comply with the order involved any offense under section 9(a)(2), the registered entity, director, officer, agent, or employee shall be guilty of a felony and, on conviction, shall be subject to penalties under section 9(a)(2)'.

(c) Action to Enjoin or Restrain Violations- Section 6c(d) of the Commodity Exchange Act (7 U.S.C. 13a-1(d)) is amended by striking `(d)' and all that follows through the end of the paragraph (1) and inserting the following:

`(d) Civil Penalties-

`(1) IN GENERAL- In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation--

`(A) a civil penalty in the amount of not more than the greater of $100,000 or triple the monetary gain to the person for each violation; or

`(B) in any case of manipulation of, or an attempt to manipulate, the price of any commodity, a civil penalty in the amount of not more than the greater of $1,000,000 or triple the monetary gain to the person for each violation.'.

(d) Violations Generally-

(1) IN GENERAL- Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended--

(A) in subsection (a), in the matter preceding paragraph (1)--

(i) by striking `(or $500,000 in the case of a person who is an individual)'; and

(ii) by striking `five years' and inserting `10 years';

(B) by redesignating subsection (f) as subsection (e);

(C) in paragraph (1) of subsection (e) (as redesignated by subparagraph (B)), by striking the period at the end and inserting `; or'; and

(D) by adding at the end the following:

`(f) Commission Administrative and Civil Authority- The Commission may bring an administrative or civil action under this Act for an alleged violation of any provision of this section.'.

(2) EFFECT OF CLARIFICATION- The amendment made by paragraph (1)(D) restates, without substantive change, Commission civil enforcement authority in effect on the date of enactment of this Act, which continues to apply to any action pending on or commenced after the date of enactment of this Act for any alleged violation occurring before, on, or after, that date.

SEC. 4. CLARIFICATION OF AUTHORITY.

Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is amended by striking subparagraphs (B) and (C) and inserting the following:

`(B) AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN RETAIL FOREIGN CURRENCY-

`(i) IN GENERAL- This Act applies to, and the Commission shall have jurisdiction over, any agreement, contract, or transaction in foreign currency (including agreements, contracts, or transactions described in subsection (a)(1)(A)), and any person who engages in any activity in connection with any agreement, contract, or transaction in foreign currency, that is--

`(I) offered to, or entered into with, a person that is not an eligible contract participant;

`(II) offered, or entered into, on a leveraged, margined, or financed on a similar basis; and

`(III) offered, or entered into, for purposes other than commercial or personal use of such foreign currency, except that personal use shall include only those agreements, contracts, or transactions in which a person takes immediate ownership and possession of foreign currency.

`(ii) EXCLUSIONS- Subparagraph (B)(i) shall not apply if the counterparty, or the person offering to be the counterparty, of the person that is not an eligible contract participant is--

`(I) a financial institution;

`(II) a broker or dealer registered under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) (except notice registration under paragraph (11)(A) of that section) or under section 15C of that Act (15 U.S.C. 78o-5), provided that each person who participates in the solicitation or recommendation of the agreement, contract, or transaction is--

`(aa) registered under section 15(b) or 15C of that Act (15 U.S.C. 78o(b), 78o-5);

`(bb) an individual registered with a securities association registered under section 15A(a) of that Act (15 U.S.C. 78o-3(a)); and

`(cc) a member or associate of a securities association registered under section 15A(a) of that Act (15 U.S.C. 78o-3(a));

`(III) a person that is registered as a futures commission merchant under this Act, provided that each person who participates in the solicitation or recommendation of the agreement, contract, or transaction is--

`(aa) registered under section 4d, 4k, or 4m; and

`(bb) a member or associate of a futures association registered under section 17;

`(IV) an insurance company described in section 1a(12)(A)(ii), or a regulated subsidiary or affiliate of such an insurance company;

`(V) a financial holding company (as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841)); or

`(VI) an investment bank holding company (as defined in section 17(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78q)).

`(C) Notwithstanding subclause (III) of subparagraph (B)(ii), agreements, contracts, or transactions described in subparagraph (B), and persons who engage in any activity in connection with agreements, contracts, or transactions described in subparagraph (B), shall be subject to subsection (a)(1)(B) and sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) (except to the extent that sections 6(c) and 6(d) prohibit manipulation of the market price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any market), 6c, 6d, 8(a), 13(a), and 13(b) if the agreements, contracts, or transactions are offered, or entered into, by a person that is registered as a futures commission merchant under this Act.

`(D) Sections 4(b) and 4b shall apply to any agreement, contract, or transaction in foreign currency described in subparagraphs (B) and (C) as though the agreement, contract, or transaction were a contract of sale of a commodity for future delivery.'.

SEC. 5. AUTHORIZATION OF APPROPRIATIONS.

Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is amended by striking `2005' and inserting `2010'.

SEC. 6. LIAISON WITH DEPARTMENT OF JUSTICE.

Section 2(a)(9) of the Commodity Exchange Act (7 U.S.C. 2(a)(9)) is amended by adding at the end the following:

`(C) LIAISON WITH DEPARTMENT OF JUSTICE-

`(i) IN GENERAL- The Commission shall, in cooperation with the Attorney General, maintain a liaison between the Commission and the Department of Justice to coordinate civil and criminal investigations and prosecutions of violations of this Act as appropriate.

`(ii) DESIGNATION- The Attorney General shall designate a person as liaison and take such steps as are necessary to facilitate communications described in clause (i).'.

SEC. 7. SINGLE STOCK FUTURES MARGINING PILOT PROGRAM.

Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended--

(1) in subparagraph (C)(v)--

(A) in subclause (I)--

(i) by striking `other than' both places it appears and inserting `or'; and

(ii) by striking `contract or option' and inserting `contract, option, or security futures product';

(B) in the first sentence of subclause (II), by striking `other than' and inserting `or'; and

(C) in subclause (III), by striking `other than' and inserting `or'; and

(2) in subparagraph (D)(i)--

(A) by striking `(XI) The margin requirements' and inserting the following:

`(XI) MARGIN REQUIREMENTS-

`(aa) IN GENERAL- The margin requirement;'; and

(B) by adding at the end the following:

`(bb) PILOT PROGRAM FOR MARGINING SECURITY FUTURES PRODUCTS- Notwithstanding any other provision of law, for a period of 2 years beginning on the date of enactment of this item, an entity that is designated or registered as a contract market or derivatives transaction execution facility under section 5 and that is also notice-registered as a national securities exchange under section 6(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)), and its clearing organization, a futures commission merchant registered under this Act, and a broker or dealer registered under section 15(b) of that Act (15 U.S.C. 78o(b)), shall not be required to comply with item (aa) or subparagraph (C)(v)(IV).

`(cc) ACTING IN RELIANCE- Any entity acting in reliance upon item (bb) shall not be required to comply with regulations promulgated under section 7(c)(2)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78g(c)(2)(B)), or with the rules of a self-regulatory organization (as defined in section 3(a)(26) of that Act (15 U.S.C. 78c(a)(26)), pertaining to levels of initial and maintenance margin, or with any regulation that operates to preclude the implementation of risk-based portfolio margining systems.

`(dd) PROMULGATION OF FINAL RULES- Subject to item (ee), an entity designated or registered as a contract market or derivatives transaction execution facility under section 5 and that is notice-registered as a national securities exchange under section 6(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)) and its clearing organization shall be permitted to promulgate final rules to--

`(AA) set margin requirements for security futures products, held in any account, in accordance with subparagraph (C)(v)(I); and

`(BB) permit futures commission merchants registered under this Act, and brokers and dealers registered under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)), to collect initial and maintenance margin for security futures products, held in any account, in accordance with the rules.

`(ee) EFFECTIVE DATE AND REVIEWABILITY OF FINAL RULES- Final rules promulgated by any entity under item (dd) shall become effective in accordance with section 5c(c), and, notwithstanding any other provision of law, shall not be subject to any other approval or review requirements.

`(ff) REPORT- Not later than 2 years after the date of enactment of this item, the Board of Governors of the Federal Reserve System, after consultation with the Commission and the Securities and Exchange Commission, shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report describing the results of the pilot program for margining security futures products.

`(gg) CONTINUATION OF PILOT PROGRAM- The pilot program for margining security futures products shall continue to apply unless the report under item (ff) concludes that the pilot program has resulted in undue risks to the financial integrity of the relevant contract markets or derivatives transaction execution facilities, or to their respective clearing systems, or has resulted in systemic risk to financial markets or undue risk to customers.'.

SEC. 8. BROAD-BASED INDEX DEFINITIONS.

(a) In General- Not later than 180 days after the date of enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall exercise the authority described in section 1a(25)(B)(vi) of the Commodity Exchange Act (7 U.S.C. 1a(25)(B)(vi)) and section 3(a)(55)(C)(vi) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(55)(C)(vi)) jointly to promulgate a final rule, regulation, or order to exclude from the definition of the term `narrow-based security index' indexes based on--

(1) United States debt instruments;

(2) other United States securities;

(3) foreign equities; and

(4) foreign debt instruments.

(b) Requirements- The final rule, regulation, or order established under subsection (a) shall--

(1) be consistent with the capitalization, trading patterns, and trade reporting conditions in the market for securities described in subsection (a); and

(2) exclude from the definition of the term `narrow-based security index' indexes that include a representative sample of a class of securities in the relevant market if the index is not readily susceptible to manipulation.

Calendar No. 191

To reauthorize the Commodity Exchange Act, and for other purposes.

July 29, 2005

THIS SEARCH     THIS DOCUMENT     GO TO
Next Hit        Forward           New Bills Search
Prev Hit        Back              HomePage
Hit List        Best Sections     Help
                Contents Display