§5231a — Title 12 Banks and Banking | U.S. Code

Summary

Require any federal program that creates a public-private investment fund to put strong conflict-of-interest rules in place for fund managers. Managers must buy securities in fair, arms‑length deals, promise in writing to act in the best interest of both public and private investors, keep full records (including emails), make and follow a strong ethics policy, screen investors carefully, and regularly tell the Treasury which investors own 10 percent or more (including related parties or special investment vehicles). Each fund must send the Treasury a quarterly report listing its 10 biggest holdings; the Treasury can make those reports public when it won’t hurt the fund’s business. The Special Inspector General for the Troubled Asset Relief Program must be allowed full access to all books and transaction records (including machine-readable data) and must keep that information confidential. The Treasury must work with the Special Inspector General to write rules for how the Public-Private Investment Program, the Term Asset-Backed Securities Loan Facility (TALF), and similar programs interact, including limits to avoid too much leverage. The Special Inspector General must report to Congress within 60 days after a program starts. The law also provides $15,000,000 from Emergency Economic Stabilization Act funds to the Special Inspector General for extra audits and investigations, with priority on non-recourse loan recipients to check for collusion or conflicts that overstated collateral value. FDIC actions for insured banks are not covered. A “public-private investment fund” here means a fund set up by the federal government to buy pools of loans or assets from certain financial institutions and paid for by a mix of private investor money and Treasury or Emergency Act funds. The Treasury can issue more rules to carry out these requirements.

Title 12, §5231a

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(a)This section may be cited as the “Public-Private Investment Program Improvement and Oversight Act of 2009”.

(b)(1)Any program established by the Federal Government to create a public-private investment fund shall—

(A)in consultation with the Special Inspector General of the Trouble 11 So in original. Probably should be “Troubled”. Asset Relief Program (in this section referred to as the “Special Inspector General”), impose strict conflict of interest rules on managers of public-private investment funds to ensure that securities bought by the funds are purchased in arms-length transactions, that fiduciary duties to public and private investors in the fund are not violated, and that there is full disclosure of relevant facts and financial interests (which conflict of interest rules shall be implemented by the manager of a public-private investment fund prior to such fund receiving Federal Government financing);

(B)require each public-private investment fund to make a quarterly report to the Secretary of the Treasury (in this section referred to as the “Secretary”) that discloses the 10 largest positions of such fund (which reports shall be publicly disclosed at such time as the Secretary of the Treasury determines that such disclosure will not harm the ongoing business operations of the fund);

(C)allow the Special Inspector General access to all books and records of a public-private investment fund, including all records of financial transactions in machine readable form, and the confidentiality of all such information shall be maintained by the Special Inspector General;

(D)require each manager of a public-private investment fund to retain all books, documents, and records relating to such public-private investment fund, including electronic messages;

(E)require each manager of a public-private investment fund to acknowledge, in writing, a fiduciary duty to both the public and private investors in such fund;

(F)require each manager of a public-private investment fund to develop a robust ethics policy that includes methods to ensure compliance with such policy;

(G)require strict investor screening procedures for public-private investment funds; and

(H)require each manager of a public-private fund to identify for the Secretary, on a periodic basis, each investor that, individually or together with affiliates, directly or indirectly, holds equity interests equal to at least 10 percent of the equity interest of the fund including if such interests are held in a vehicle formed for the purpose of directly or indirectly investing in the fund.

(2)The Secretary shall consult with the Special Inspector General and shall issue regulations governing the interaction of the Public-Private Investment Program, the Term-Asset Backed Securities Loan Facility, and other similar public-private investment programs. Such regulations shall address concerns regarding the potential for excessive leverage that could result from interactions between such programs.

(3)Not later than 60 days after the date of the establishment of a program described in paragraph (1), the Special Inspector General shall submit a report to Congress on the implementation of this section.

(c)(1)Of amounts made available under section 115(a) of the Emergency Economic Stabilization Act of 2008 (Public Law 110–343) [12 U.S.C. 5225(a)], $15,000,000 shall be made available to the Special Inspector General, which shall be in addition to amounts otherwise made available to the Special Inspector General.

(2)In utilizing funds made available under this section, the Special Inspector General shall prioritize the performance of audits or investigations of recipients of non-recourse Federal loans made under any program that is funded in whole or in part by funds appropriated under the Emergency Economic Stabilization Act of 2008 [12 U.S.C. 5201 et seq.], to the extent that such priority is consistent with other aspects of the mission of the Special Inspector General. Such audits or investigations shall determine the existence of any collusion between the loan recipient and the seller or originator of the asset used as loan collateral, or any other conflict of interest that may have led the loan recipient to deliberately overstate the value of the asset used as loan collateral.

(d)Notwithstanding any other provision of law, nothing in this section shall be construed to apply to any activity of the Federal Deposit Insurance Corporation in connection with insured depository institutions, as described in section 1823(c)(2)(B) of this title.

(e)In this section, the term “public-private investment fund” means a financial vehicle that is—

(1)established by the Federal Government to purchase pools of loans, securities, or assets from a financial institution described in section 101(a)(1) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5211(a)(1)); and

(2)funded by a combination of cash or equity from private investors and funds provided by the Secretary of the Treasury or funds appropriated under the Emergency Economic Stabilization Act of 2008 [12 U.S.C. 5201 et seq.].

(f)

(g)The Secretary of the Treasury may prescribe such regulations or other guidance as may be necessary or appropriate to define terms or carry out the authorities or purposes of this section.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Emergency Economic Stabilization Act of 2008, referred to in subsecs. (c)(2) and (e)(2), is div. A of Pub. L. 110–343, Oct. 3, 2008, 122 Stat. 3765, which is classified principally to this chapter. For complete classification of this Act to the Code, see

Short Title

note set out under section 5201 of this title and Tables. Codification Section was enacted as part of the Helping Families Save Their Homes Act of 2009, and not as part of the Emergency Economic Stabilization Act of 2008 which comprises this chapter. Section is comprised of section 402 of Pub. L. 111–22. Subsec. (f) of section 402 of Pub. L. 111–22 amended section 5225 of this title.

§5231a Public-private Investment Program; Additional Appropriations for the Special Inspector General for the Troubled Asset Relief Program