119-s2840

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2840 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 2840

 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.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 September 17 (legislative day, September 16), 2025

 Mr. Hagerty (for himself and Mr. Gallego) introduced the following 
 bill; which was read twice and referred to the Committee on Banking, 
 Housing, and Urban Affairs

_______________________________________________________________________

 A BILL

 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.

 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 ``Financial Exploitation Prevention 
Act of 2025''.

SEC. 2. REDEMPTION OF CERTAIN SECURITIES POSTPONED.

    (a) In General.--

Section 22 of the Investment Company Act of 1940 
(15 U.S.C. 80a-22) is amended by adding at the end the following:
 ``

    (h) Requirements With Respect to Non-Institutional Direct At-Fund 
Accounts.--
 ``

    (1) Election.--
 ``
        (A) In general.--A registered open-end investment 
 company and a transfer agent described in paragraph

    (2) may elect to comply with the requirements under 
 paragraph

    (2) and subsection
            (i) by notifying the 
 Commission of that election.
 ``
        (B) Effect of election.--Paragraph

    (2) and 
 subsection
            (i) shall only apply to a registered open-
 end investment company and a transfer agent that have 
 made an election under subparagraph
        (A) .
 ``

    (2) Requirements.--In the case of a customer who is a 
 holder of a non-institutional account held directly with a 
 registered open-end investment company and serviced by a 
 transfer agent (commonly known as a `direct-at-fund account'), 
 the company and transfer agent shall--
 ``
        (A) request from that customer the name and 
 contact information of at least 1 individual who--
 ``
            (i) is, at the time of that request, an 
 adult; and
 ``
            (ii) may be contacted with respect to 
 that account;
 ``
        (B) document and retain the information received 
 under subparagraph
        (A) ; and
 ``
            (C) disclose to that customer in writing 
 (including through electronic delivery) that such 
 company or transfer agent may contact an individual 
 specified under subparagraph
        (A) with respect to the 
 account of that customer to--
 ``
            (i) address possible financial 
 exploitation of that customer;
 ``
            (ii) confirm the contact information or 
 health status of that customer; or
 ``
            (iii) identify any legal guardian, 
 executor, trustee, or holder of a power of 
 attorney with respect to the customer.
 ``
            (i) Redemption of Certain Securities Postponed.--
 ``

    (1) In general.--Notwithstanding subsection

    (e) , a 
 registered open-end investment company or a transfer agent 
 acting on behalf of such a company may postpone the date of 
 payment or satisfaction upon redemption of any redeemable 
 security in accordance with its terms for more than seven days 
 after the tender of such security to such company or its agent 
 designated for that purpose for redemption if such company or 
 agent reasonably believes that--
 ``
        (A) that redemption is requested by a security 
 holder who is a specified adult; and
 ``
        (B) financial exploitation has occurred, is 
 occurring, or has been attempted with respect to that 
 redemption.
 ``

    (2) Duration.--
 ``
        (A) In general.--Except as provided in 
 subparagraphs
        (B) and
            (C) , a registered open-end 
 investment company or a transfer agent acting on behalf 
 of such company may postpone the date of payment or 
 satisfaction upon redemption of a redeemable security 
 under paragraph

    (1) for a period of not more than 15 
 business days.
 ``
        (B) Extension upon determination of 
 exploitation.--The period described in subparagraph
        (A) may be extended by an additional 10 business days if 
 the registered open-end investment company or a 
 transfer agent acting on behalf of such a company--
 ``
            (i) reasonably believes that--
 ``
            (I) the redemption is requested 
 by a security holder who is a specified 
 adult; and
 ``
            (II) financial exploitation has 
 occurred, is occurring, or has been 
 attempted with respect to such 
 redemption;
 ``
            (ii) subject to subparagraph
            (D) , not 
 later than 2 days after making a determination 
 under clause
            (i) , notifies the individuals 
 specified by that security holder under 
 subsection

    (h)

    (2)
        (A) in writing (including 
 through electronic delivery) of the extension 
 of the period described in subparagraph
        (A) under this subparagraph and the reason for that 
 extension;
 ``
            (iii) initiates an internal review of the 
 facts and circumstances relating to the 
 determination under clause
            (i) ;
 ``
            (iv) holds amounts relating to the 
 delayed payment or satisfaction upon redemption 
 of the redeemable security in a demand deposit 
 account; and
 ``
            (v) documents and retains records related 
 to carrying out clause
            (iv) and includes those 
 records in the first required account statement 
 of the security holder provided after the date 
 on which the determination is made under clause
            (i) .
 ``
            (C) Extension by government.--A State regulator, 
 administrative agency of competent jurisdiction, or 
 court of competent jurisdiction may extend the period 
 described in subparagraph
        (A) .
 ``
            (D) Notification.--
 ``
            (i) Exception.--Subparagraph
        (B)
            (ii) shall not apply if a registered open-end 
 investment company or transfer agent acting on 
 behalf of such a company reasonably believes 
 that an individual required to be notified 
 under that subparagraph is, has been, or will 
 subject the security holder who identified that 
 individual under subsection

    (h)

    (2)
        (A) to 
 financial exploitation.
 ``
            (ii) Reasonable efforts.--An open-end 
 investment company or transfer agent acting on 
 behalf of such a company shall be considered in 
 compliance with subparagraph
        (B)
            (ii) if that 
 company or transfer agent makes a reasonable 
 effort to contact the individuals specified by 
 a security holder under subsection

    (h)

    (2)
        (A) .
 ``
        (E) Internal procedures.--An open-end investment 
 company or transfer agent acting on behalf of such a 
 company shall establish procedures to carry out the 
 requirements under this subsection, including 
 procedures--
 ``
            (i) relating to the identification and 
 reporting of matters relating to the financial 
 exploitation of specified adults;
 ``
            (ii) to determine whether to release or 
 reinvest delayed redemption proceeds, taking 
 into account the facts and circumstances of 
 each case, should the internal review under 
 subparagraph
        (B)
            (iii) support the reasonable 
 belief described in subparagraph
        (B)
            (i) ;
 ``
            (iii) identifying each employee of the 
 company or transfer agent with authority to 
 establish, extend, or terminate a period 
 described in paragraph

    (1) or subparagraph
        (A) ;
 ``
            (iv) in the case of a transfer agent, 
 that are reasonably designed to ensure that the 
 employees of the transfer agent comply with 
 this subsection; and
 ``
            (v) in the case of an open-end investment 
 company, establishing periodic reporting 
 requirements under which a transfer agent 
 acting on behalf of the company shall notify 
 the company of--
 ``
            (I) each extension under 
 subparagraph
        (B) authorized by the 
 transfer agent;
 ``
            (II) each finding by the transfer 
 agent under subparagraph
        (B)
            (i) ;
 ``
            (III) each notification under 
 subparagraph
        (B)
            (ii) carried out by the 
 transfer agent; and
 ``
            (IV) the results of each internal 
 review initiated by the transfer agent 
 under subparagraph
        (B)
            (iii) .
 ``
        (F) Information included in certain statements.--
 An open-end investment company shall include in each 
 prospectus or statement of additional information a 
 notification that the company or a transfer agent 
 acting on behalf of the company may postpone redemption 
 of certain securities under this subsection.
 ``
        (G) Record retention.--An open-end investment 
 company or transfer agent acting on behalf of such a 
 company shall--
 ``
            (i) document and retain records of--
 ``
            (I) each postponement of 
 redemption under subparagraphs
        (A) ,
        (B) , and
            (C) ;
 ``
            (II) each finding under 
 subparagraph
        (B)
            (i) ;
 ``
            (III) the name and position of 
 each employee described in subparagraph
        (E)
            (iii) ;
 ``
            (IV) each notification carried 
 out under subparagraph
        (B)
            (ii) ; and
 ``
            (V) the results of each internal 
 review initiated under subparagraph
        (B)
            (iii) ; and
 ``
            (ii) make the records described in clause
            (i) available to the Commission at the request 
 of the Commission.
 ``

    (3) Specified adult defined.--In this subsection, the 
 term `specified adult' means an individual who--
 ``
        (A) is not younger than 65 years of age; or
 ``
        (B) is not younger than 18 years of age and who a 
 registered open-end investment company or a transfer 
 agent acting on behalf of such a company reasonably 
 believes has a mental or physical impairment that 
 renders the individual unable to protect the interests 
 of the individual.''.

    (b) Recommendations.--

    (1) In general.--Not later than 1 year after the date of 
 enactment of this Act, the Securities and Exchange Commission, 
 in consultation with the entities specified in paragraph

    (2) , 
 shall submit to Congress a report that includes recommendations 
 regarding the regulatory and legislative changes necessary to 
 address the financial exploitation of security holders who are 
 specified adults (as defined in subsection
            (i) (3) of 

section 22 
 of the Investment Company Act of 1940 (15 U.S.C. 80a-22), as 
 added by this section).

    (2) Consultation.--The entities specified in this paragraph 
 are as follows:
        (A) The Commodity Futures Trading Commission.
        (B) The Director of the Bureau of Consumer 
 Financial Protection.
            (C) The Financial Industry Regulatory Authority.
            (D) The North American Securities Administrators 
 Association.
        (E) The Board of Governors of the Federal Reserve 
 System.
        (F) The Comptroller of the Currency.
        (G) The Federal Deposit Insurance Corporation.
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