118THCONGRESS
1
STSESSION H. R. 500
AN ACT
To amend the Investment Company Act of 1940 to postpone
the date of payment or satisfaction upon redemption
of certain securities in the case of the financial exploi-
tation of specified adults, and for other purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2 2
•HR 500 EH
SECTION 1. SHORT TITLE. 1
This Act may be cited as the ‘‘Financial Exploitation 2
Prevention Act of 2023’’. 3
SEC. 2. REDEMPTION OF CERTAIN SECURITIES POST-4
PONED. 5
(a) I
NGENERAL.—Section 22 of the Investment 6
Company Act of 1940 (15 U.S.C. 80a–22) is amended by 7
adding at the end the following: 8
‘‘(h) R
EQUIREMENTSWITHRESPECT TONON-INSTI-9
TUTIONALDIRECTAT-FUNDACCOUNTS.— 10
‘‘(1) E
LECTION.— 11
‘‘(A) I
N GENERAL.—A registered open-end 12
investment company and a transfer agent de-13
scribed under paragraph (2) may elect to com-14
ply with the requirements under paragraph (2) 15
and subsection (i) by notifying the Commission 16
of such election. 17
‘‘(B) E
FFECT OF ELECTION .—Paragraph 18
(2) and subsection (i) shall only apply to a reg-19
istered open-end investment company and a 20
transfer agent that have made the election 21
under subparagraph (A). 22
‘‘(2) R
EQUIREMENTS.—In the case of a cus-23
tomer who is a holder of a non-institutional account 24
held directly with a registered open-end investment 25
company and serviced by a transfer agent (a ‘direct- 26 3
•HR 500 EH
at-fund account’), the company and transfer agent 1
shall— 2
‘‘(A) request from such customer the name 3
and contact information of at least one indi-4
vidual who— 5
‘‘(i) is at the time of such request an 6
adult; and 7
‘‘(ii) may be contacted with respect to 8
such account; 9
‘‘(B) document and retain the information 10
received pursuant to subparagraph (A); and 11
‘‘(C) disclose to such customer in writing 12
(including through electronic delivery) that such 13
company or transfer agent may contact an indi-14
vidual specified pursuant to subparagraph (A) 15
with respect to the account of such customer 16
to— 17
‘‘(i) address possible financial exploi-18
tation of such customer; 19
‘‘(ii) confirm the contact information 20
or health status of the customer; or 21
‘‘(iii) identify any legal guardian, ex-22
ecutor, trustee, or holder of a power of at-23
torney of the customer. 24 4
•HR 500 EH
‘‘(i) REDEMPTION OF CERTAINSECURITIESPOST-1
PONED.— 2
‘‘(1) I
N GENERAL.—Notwithstanding subsection 3
(e), a registered open-end investment company or a 4
transfer agent acting on behalf of such company 5
may postpone the date of payment or satisfaction 6
upon redemption of any redeemable security in ac-7
cordance with its terms for more than seven days 8
after the tender of such security to such company or 9
its agent designated for that purpose for redemption 10
if such company or agent reasonably believes that— 11
‘‘(A) the redemption is requested by a se-12
curity holder who is a specified adult; and 13
‘‘(B) financial exploitation has occurred, is 14
occurring, or has been attempted with respect 15
to such redemption. 16
‘‘(2) D
URATION.— 17
‘‘(A) I
N GENERAL.—Except as provided in 18
subparagraphs (B) and (C), a registered open- 19
end investment company or a transfer agent 20
acting on behalf of such company may postpone 21
the date of payment or satisfaction upon re-22
demption of a redeemable security under para-23
graph (1) for a period of not more than 15 24
business days. 25 5
•HR 500 EH
‘‘(B) EXTENSION UPON DETERMINATION 1
OF EXPLOITATION.—The period described in 2
subparagraph (A) may be extended by an addi-3
tional 10 business days if the registered open- 4
end investment company or a transfer agent 5
acting on behalf of such company— 6
‘‘(i) reasonably believes that— 7
‘‘(I) the redemption is requested 8
by a security holder who is a specified 9
adult; and 10
‘‘(II) financial exploitation has 11
occurred, is occurring, or has been at-12
tempted with respect to such redemp-13
tion; 14
‘‘(ii) subject to subparagraph (D), not 15
later than 2 days after making a deter-16
mination under clause (i), notifies the indi-17
viduals specified by such security holder 18
under subsection (h)(2)(A) in writing (in-19
cluding through electronic delivery) of the 20
extension of the period described in sub-21
paragraph (A) under this subparagraph 22
and the reason for such extension; 23 6
•HR 500 EH
‘‘(iii) initiates an internal review of 1
the facts and circumstances relating to the 2
determination under clause (i); 3
‘‘(iv) holds amounts related to the de-4
layed payment or satisfaction upon re-5
demption of the redeemable security in a 6
demand deposit account; and 7
‘‘(v) documents and retains records 8
related to carrying out clause (iv) and in-9
cludes such records in the first required 10
account statement of the security holder 11
provided after the date on which the deter-12
mination is made under clause (i). 13
‘‘(C) E
XTENSION BY GOVERNMENT .—A 14
State regulator, administrative agency of com-15
petent jurisdiction, or court of competent juris-16
diction may extend the period described in sub-17
paragraph (A). 18
‘‘(D) N
OTIFICATION.— 19
‘‘(i) E
XCEPTION.—Subparagraph 20
(B)(ii) shall not apply if a registered open- 21
end investment company or transfer agent 22
acting on behalf of such company reason-23
ably believes that an individual required to 24
be notified under such subparagraph is, 25 7
•HR 500 EH
has been, or will subject the security holder 1
who identified such individual under sub-2
section (h)(2)(A) to financial exploitation. 3
‘‘(ii) R
EASONABLE EFFORTS .—An 4
open-end investment company or transfer 5
agent acting on behalf of such company 6
shall be considered in compliance with sub-7
paragraph (B)(ii) if such company or 8
transfer agent makes a reasonable effort to 9
contact the individuals specified by a secu-10
rity holder under subsection (h)(2)(A). 11
‘‘(E) I
NTERNAL PROCEDURES .—An open- 12
end investment company or transfer agent act-13
ing on behalf of such company shall establish 14
procedures to carry out the requirements under 15
this subsection, including procedures— 16
‘‘(i) related to the identification and 17
reporting of matters related to the finan-18
cial exploitation of specified adults; 19
‘‘(ii) to determine whether to release 20
or reinvest delayed redemption proceeds, 21
taking into account the facts and cir-22
cumstances of each case, should the inter-23
nal review under subparagraph (B)(iii) 24 8
•HR 500 EH
support the reasonable belief described in 1
subparagraph (B)(i); 2
‘‘(iii) identifying each employee of the 3
company or transfer agent with authority 4
to establish, extend, or terminate a period 5
described in paragraph (1) or subpara-6
graph (A); 7
‘‘(iv) in the case of a transfer agent, 8
that are reasonably designed to ensure that 9
the employees of such transfer agent com-10
ply with this subsection; and 11
‘‘(v) in the case of an open-end invest-12
ment company, establishing periodic re-13
porting requirements under which a trans-14
fer agent acting on behalf of such company 15
shall notify such company of— 16
‘‘(I) each extension under sub-17
paragraph (B) authorized by such 18
transfer agent; 19
‘‘(II) each finding by the transfer 20
agent under subparagraph (B)(i); 21
‘‘(III) each notification under 22
subparagraph (B)(ii) carried out by 23
such transfer agent; and 24 9
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‘‘(IV) the results of each internal 1
review initiated by the transfer agent 2
under subparagraph (B)(iii). 3
‘‘(F) I
NFORMATION INCLUDED IN CERTAIN 4
STATEMENTS.—An open-end investment com-5
pany shall include in each prospectus or state-6
ment of additional information a notification 7
that the company or transfer agent acting on 8
behalf of such company may postpone redemp-9
tion of certain securities under this subsection. 10
‘‘(G) R
ECORD RETENTION .—An open-end 11
investment company or transfer agent acting on 12
behalf of such company shall— 13
‘‘(i) document and retain records of— 14
‘‘(I) each postponement of re-15
demption under subparagraph (A), 16
(B), and (C); 17
‘‘(II) each finding under subpara-18
graph (B)(i); 19
‘‘(III) the name and position of 20
each employee described in subpara-21
graph (E)(iii); 22
‘‘(IV) each notification carried 23
out under subparagraph (B)(ii); and 24 10
•HR 500 EH
‘‘(V) the results of each internal 1
review initiated under subparagraph 2
(B)(iii); and 3
‘‘(ii) make such records available to 4
the Commission at the request of the Com-5
mission. 6
‘‘(3) S
PECIFIED ADULT DEFINED .—In this sub-7
section, the term ‘specified adult’ means— 8
‘‘(A) an individual age 65 or older; or 9
‘‘(B) an individual age 18 or older who a 10
registered open-end investment company or a 11
transfer agent acting on behalf of such com-12
pany reasonably believes has a mental or phys-13
ical impairment that renders the individual un-14
able to protect the individual’s own interests.’’. 15
(b) R
ECOMMENDATIONS .— 16
(1) I
N GENERAL.—Not later than 1 year after 17
the date of the enactment of this section, the Securi-18
ties and Exchange Commission, in consultation with 19
the entities specified in paragraph (2), shall submit 20
to Congress a report that includes recommendations 21
regarding the regulatory and legislative changes nec-22
essary to address the financial exploitation of secu-23
rity holders who are specified adults (as defined in 24
subsection (i)(3) of section 22 of the Investment 25 11
•HR 500 EH
Company Act of 1940 (15 U.S.C. 80a–22), as added 1
by this section). 2
(2) C
ONSULTATION.—The entities specified in 3
this paragraph are as follows: 4
(A) The Commodity Futures Trading 5
Commission. 6
(B) The Director of the Bureau of Con-7
sumer Financial Protection. 8
(C) The Financial Industry Regulatory Au-9
thority. 10
(D) The North American Securities Ad-11
ministrators Association. 12
(E) The Board of Governors of the Fed-13
eral Reserve System. 14
(F) The Comptroller of the Currency. 15
(G) The Federal Deposit Insurance Cor-16
poration. 17
Passed the House of Representatives January 30,
2023.
Attest:
Clerk. 118
TH
CONGRESS
1
ST
S
ESSION
H. R. 500
AN ACT
To amend the Investment Company Act of 1940 to
postpone the date of payment or satisfaction
upon redemption of certain securities in the case
of the financial exploitation of specified adults,
and for other purposes.