S. 2840

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

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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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