Sec. 601. Customer protection and market integrity authority
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Chapter 98 of title 31, United States Code, as amended by section 208, is amended by adding at the end the following: In this section: The term nonmember professional means any person that— is a crypto asset intermediary; and is a not a member of a customer protection and market integrity authority or affiliated organization. The term registration information means the information reported in connection with the licensing, registration, or other authorization of crypto asset intermediaries and their associated persons, including— disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information required by law or authority rule; and the source and status of the information described in subparagraph (A).
An association of crypto asset intermediaries may be registered as a customer protection and market integrity authority, under the terms and conditions provided in this section, and in accordance with the provisions of this section and section 9810, by jointly filing with the Securities and Exchange Commission and the Commodity Futures Trading Commission an application for registration, in such form as the commissions may require, containing the rules of the authority and such other information and documents that may be prescribed as necessary or appropriate in the public interest or for customer protection.
An association of crypto asset intermediaries may not be registered as a customer protection and market integrity authority under subsection
(b)unless a majority of the members of each of the Securities and Exchange Commission and the Commodity Futures Trading Commission, voting separately, determine that each of the following is satisfied: By reason of the number and the scope of the transactions of the authority, the authority will be able to carry out the purposes of this section. The authority is so organized, and has the capacity, to— be able to carry out the purposes of this section and other applicable State and Federal laws; and subject to any rule or order of the appropriate commission, enforce compliance by members of the authority (and persons associated with those members) with the provisions of applicable law, the rules under those provisions, and the rules of the authority. The rules of the authority provide that any crypto asset intermediary may become a member of the authority and any person may become associated with a member of the authority. The rules of the authority provide for the following allocation of a 13-member board of directors: 3 governmental directors, as follows: The Director of the Office of Financial Innovation of the Commodity Futures Trading Commission, or the designee of the Director. The Director of the Office of Financial Innovation of the Securities and Exchange Commission, or the designee of the Director. The Director of the Financial Crimes Enforcement Network, or the designee of the Director. 4 independent directors— who are appointed by the President, with specializations in financial technology, consumer protection, and financial markets, except that those 4 directors shall not be affiliated, through a close relative or a financial interest with any member of the authority; and 1 of whom is designated by the President as chair of the authority. 6 directors appointed by the members of the prospective authority. The rules of the authority provide for the equitable allocation of reasonable dues, fees, and other charges among members of the authority and other persons using any facility or system that the authority operates or controls. The rules of the authority— are designed to— prevent fraudulent and manipulative acts and practices in order to promote just and equitable principles of trade; foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in crypto assets; remove impediments to, and perfect the mechanism of, a free and open market; and protect customers and the public interest; and are not designed to— permit unfair discrimination between customers and crypto asset intermediaries; fix minimum profits; impose any schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by the members of the authority; or regulate by virtue of any authority conferred by law matters not related to the purposes of this section or the administration of the authority. The rules of the authority provide that, subject to any rule or order of the appropriate commission, the members of the authority (and persons associated with those members) shall be appropriately disciplined for a violation of any provision of applicable law, the rules under such a provision, or the rules of the authority by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, a suspension or bar from being associated with a member, or any other fitting sanction. The rules of the authority are consistent with the provisions of subsection
(h)and, in general, provide a fair procedure for— the disciplining of members and persons associated with members; the denial of membership to any person seeking membership in the authority; the barring of any person from becoming associated with a member of the authority; and the prohibition or limitation by the authority of any person with respect to access to services offered by the authority or a member of the authority. The rules of the authority do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this section. The requirements of subsection (d), as applicable, are satisfied. The rules of the authority include provisions governing the form and content of quotations relating to crypto assets, which shall be designed to— produce fair and informative quotations; prevent fictitious or misleading quotations; and promote orderly procedures for collecting, distributing, and publishing quotations. The Securities and Exchange Commission and the Commodity Futures Trading Commission may permit or require the rules of an authority applying for registration under subsection
(b)to provide for the admission of an organization registered as an affiliated organization pursuant to subsection (e), to participate in the applicant authority as an affiliate of the applicant authority, under terms permitting powers and responsibilities to the affiliate, and under such other appropriate terms and conditions, as may be provided by the rules of the applicant authority, if those rules appear to the commissions jointly to be necessary or appropriate in the public interest or for customer protection and to carry out the purposes of this section. The duties and powers of the Securities and Exchange Commission and the Commodity Futures Trading Commission with respect to any authority or affiliate organization shall in no way be limited by reason of any such affiliation. An applicant organization shall not be registered as an affiliated organization, unless— the organization, notwithstanding that the organization does not satisfy the requirements under subsection (c)(1), will, upon the registration of the organization under this subsection, be admitted to affiliation with an organization registered as an authority pursuant to subsection (c), in the manner and under the terms and conditions provided by the rules of the customer protection and market integrity authority in accordance with subsection (d); and the organization and the rules of the organization satisfy the requirements under paragraphs
(2)through
(11)of subsection (c). Any restrictions upon membership of an applicant organization shall not be less stringent than in the case of the customer protection and market integrity authority with which the organization is to be affiliated. The rules of a customer protection and market integrity authority may provide that no member of the authority may deal with any nonmember professional except at the same prices, for the same commissions or fees, and on the same terms and conditions the member accords to the general public. Nothing in this subsection may be construed to prevent any member of a customer protection and market integrity authority from granting to any other member of any other such authority any discount, allowance, commission, or special terms in connection with a crypto asset transaction. Membership in a customer protection and market integrity authority under this section shall be limited to crypto asset intermediaries. A customer protection and market integrity authority may, and the appropriate commission, by order, may direct such an authority to, as necessary or appropriate in the public interest or for customer protection, deny membership to any person, and bar from becoming associated with a member any person, that is subject to a statutory disqualification within the laws under the jurisdiction of that commission. A customer protection and market integrity authority shall file notice with the appropriate commission, in such form and containing such information as the appropriate commission shall require, not less than 30 days before admitting any person to membership or permitting any person to become associated with a member, if the authority knew, or in the exercise of reasonable care should have known, that such person was subject to a statutory disqualification. A customer protection and market integrity authority may— deny membership to, or condition the membership of, a crypto asset intermediary, if— the intermediary does not meet such standards of financial responsibility or operational capability, or such intermediary or any individual associated with the intermediary does not meet such standards of training, experience, and competence, as are prescribed by the rules of the authority; or the intermediary or person associated with the intermediary has engaged, and there is a reasonable likelihood the intermediary or person will again engage, in acts or practices inconsistent with just and equitable principles of trade; and examine and verify the qualifications of an applicant to become a member and the individuals associated with the applicant in accordance with procedures established by the rules of the authority. A customer protection and market integrity authority may— bar an individual from becoming associated with a member, or condition the association of an individual with a member, if that individual— does not meet such standards of training, experience, and competence as are prescribed by the rules of the authority; or has engaged, and there is a reasonable likelihood the individual will again engage, in acts or practices inconsistent with just and equitable principles of trade; examine and verify the qualifications of an applicant to become a person associated with a member in accordance with procedures established by the rules of the authority; and require an individual associated with a member, or any class of such individuals, to be registered with the authority in accordance with procedures so established. A customer protection and market integrity authority may bar any person from becoming associated with a member if that person does not agree— to supply the authority with such information with respect to the relationship and dealings of the person with the member as may be specified in the rules of the authority; and to permit examination of the records of the person to verify the accuracy of any information supplied by the person under clause (i). Subject to subparagraph (B), a customer protection and market integrity authority may deny membership to a crypto asset intermediary not engaged in a type of business in which the rules of the authority require members to be engaged. No customer protection and market integrity authority may deny membership to a crypto asset intermediary by reason of the amount of such type of business done by such intermediary or the other types of business in which the intermediary is engaged. In any proceeding by a customer protection and market integrity authority to determine whether a member, or a person associated with a member, should be disciplined (other than a summary proceeding pursuant to paragraph (3)), the authority shall bring specific charges, notify such member or person of (and give the person an opportunity to defend against) those charges, and keep a record. A determination by a customer protection and market integrity authority to impose discipline in a proceeding under subparagraph
(A)shall be supported by a statement setting forth— any act or practice in which the member, or person associated with a member, has been found to have engaged, or that such member or person has been found to have omitted; the specific provision of law, the rules under such a provision, or the rules of the authority that an act or practice described in clause (i), or omission to act, is charged with violating; and the sanction imposed and a justification for the sanction. In any proceeding by a customer protection and market integrity authority 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 authority or a member of the authority (other than a summary proceeding pursuant to paragraph (3)), the authority shall— notify that person and give the person an opportunity to be heard; provide the person the specific grounds for denial, bar, or prohibition or limitation under consideration; and maintain a record. A determination by a customer protection and market integrity authority 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 authority or a member under subparagraph
(A)shall be supported by a statement setting forth the specific grounds on which the denial, bar, or prohibition or limitation is based. A customer protection and market integrity authority may summarily— suspend a member of the authority, or a person associated with such a member, that is— expelled or suspended from any other authority or entity delegated regulatory and disciplinary authority by a governmental agency; or barred or suspended from being associated with a member of another authority; suspend a member of the authority that is in such financial or operating difficulty that the authority determines (and so notifies the appropriate commission) that the member cannot be permitted to continue to do business as a member, in order to protect customers, creditors, other members, or the authority; or limit or prohibit any person from accessing services offered by the authority if clause
(i)or
(ii)is applicable to that person, or, in the case of a person that is not a member of the authority, if the authority determines that the person— does not meet the qualification requirements or other prerequisites for that access; and cannot be permitted to continue to have such access with safety, in order to protect customers, creditors, members, or the authority. Any person aggrieved by a summary action under subparagraph
(A)shall be promptly afforded an opportunity for a hearing by the applicable authority in accordance with the provisions of paragraph
(1)or (2). The appropriate commission, by order, may stay a summary action described in subparagraph
(A)on the motion of the commission or upon application by any person aggrieved by the summary action, if the commission determines summarily or after notice and opportunity for hearing (which may consist solely of the submission of affidavits or presentation of oral arguments) that the stay is consistent with the public interest and customer protection. A customer protection and market integrity authority shall establish and maintain— a system for collecting and retaining registration information; and a website, including an application programming interface, to receive and promptly respond to inquiries regarding registration information on the members of the authority and associated persons with respect to those members. A customer protection and market integrity authority may charge persons making inquiries described in paragraph (1)(B), other than individual customers of crypto asset intermediaries, reasonable fees for responses. Each customer protection and market integrity authority shall adopt rules establishing a process for disputing the accuracy of information provided in response to inquiries under this subsection. A customer protection and market integrity authority, or any crypto asset intermediary reporting information to such an authority, shall not have any liability to any person for any actions taken or omitted in good faith under this subsection. Each customer protection and market integrity authority registered under subsection
(b)shall issue rules as necessary to avoid duplicative or conflicting rules applicable to any crypto asset intermediary that is a member of a national securities exchange, board of trade, contract market, registered securities association, registered futures association, or similar entity. A crypto asset intermediary shall not be required to become a member of another entity delegated regulatory and disciplinary authority by a governmental agency unless the intermediary performs activities with financial assets other than crypto assets. The Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly prescribe rules under which a crypto asset intermediary that is a member or affiliate of a customer protection and market integrity authority registered under this section may perform activities with financial assets other than crypto assets, if those activities are not a majority of the business of an intermediary and are conducted in a responsible manner, without membership in another entity delegated regulatory and disciplinary authority by a governmental agency. A customer protection and market integrity authority under this section shall adopt rules governing activities with financial assets other than crypto assets, which shall be consistent with existing law, rule, guidance or industry best practices or the rules of other entities delegated regulatory and disciplinary authority by a governmental agency. . The table of sections for chapter 98 of title 31, United States Code, as amended by section 208, is amended by adding at the end the following: 9809. Customer protection and market integrity authorities. .