Designing Accounting Safeguards To Help Broaden Oversight and Regulations on Data

II 116TH CONGRESS 1ST SESSION S. 1951 To require the Securities and Exchange Commission to promulgate regulations relating to the disclosure of certain commercial data, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 25, 2019 Mr. WARNER (for himself and Mr. HAWLEY) introduced the following bill; which was read twice and referred to the Committee on Banking, Hous- ing, and Urban Affairs A BILL To require the Securities and Exchange Commission to pro- mulgate regulations relating to the disclosure of certain commercial data, 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 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Designing Accounting 4 Safeguards To Help Broaden Oversight and Regulations 5 on Data’’. 6 SEC. 2. DEFINITIONS. 7 In this Act: 8 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 2 •S 1951 IS (1) COMMERCIAL DATA OPERATOR.—The term 1 ‘‘commercial data operator’’ means an entity acting 2 in its capacity as a consumer online services provider 3 or data broker that— 4 (A) generates a material amount of rev- 5 enue from the use, collection, processing, sale, 6 or sharing of the user data; and 7 (B) has more than 100,000,000 unique 8 monthly visitors or users in the United States 9 for a majority of months during the previous 1- 10 year period. 11 (2) COMMISSION.—The term ‘‘Commission’’ 12 means the Securities and Exchange Commission. 13 (3) ISSUER.—The term ‘‘issuer’’ has the mean- 14 ing given the term in section 3(a) of the Securities 15 and Exchange Act of 1934 (15 U.S.C. 78c(a)). 16 (4) USER.—The term ‘‘user’’ means an indi- 17 vidual consumer who uses an online service designed 18 for consumer use by a commercial data operator. 19 (5) USER DATA.—The term ‘‘user data’’ means 20 any information that identifies, relates to, describes, 21 is capable of being associated with, or could reason- 22 ably be linked with an individual user, whether di- 23 rectly submitted to the commercial data operator by 24 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 3 •S 1951 IS the user or derived from the observed activity of the 1 user by the commercial data operator. 2 SEC. 3. COMMERCIAL DATA OPERATORS. 3 (a) REQUIREMENTS.— 4 (1) IN GENERAL.—A commercial data operator 5 shall— 6 (A) on a routine basis, and not less fre- 7 quently than once every 90 days— 8 (i) provide each user of the commer- 9 cial data operator with an assessment of 10 the economic value that the commercial 11 data operator places on the data of that 12 user; and 13 (ii) in a clear and conspicuous man- 14 ner, in accordance with paragraph (3), 15 identify to each user of the commercial 16 data operator— 17 (I) the types of data collected 18 from users of the commercial data op- 19 erator, whether by the commercial 20 data operator or another person pur- 21 suant to an agreement with the com- 22 mercial data operator; and 23 (II) the ways that the data of a 24 user of the commercial data operator 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 4 •S 1951 IS is used if the use is not directly or ex- 1 clusively related to the online service 2 that the commercial data operator 3 provides to the user; and 4 (B) except as provided in paragraph (2), 5 provide a user of the commercial data operator 6 with the ability to delete all data, in the aggre- 7 gate and for an individual field, that the com- 8 mercial data operator possesses, or maintains 9 control or access to with respect to the user, 10 through— 11 (i) a single setting; or 12 (ii) another clear and conspicuous 13 mechanism by which the user may make 14 such a deletion. 15 (2) DELETION EXCEPTIONS.— 16 (A) IN GENERAL.—A commercial data op- 17 erator shall comply with a user directive to de- 18 lete, in whole or in part, the data of the user 19 except— 20 (i) in cases where there is a legal obli- 21 gation of the commercial data operator to 22 maintain the data; 23 (ii) for the establishment, exercise, or 24 defense of legal claims; or 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 5 •S 1951 IS (iii) if the data is necessary to detect 1 security incidents, protect against mali- 2 cious, deceptive, fraudulent, or illegal activ- 3 ity, or assist in the prosecution of those re- 4 sponsible for such activity. 5 (B) RETENTION.—A commercial data op- 6 erator may not retain any more user data than 7 is necessary to carry out an activity described 8 in clauses (i) through (iii) of subparagraph (A). 9 (3) AVAILABILITY.—A commercial data oper- 10 ator shall ensure that all disclosures required under 11 subsection (a) are available to a user of the commer- 12 cial data operator— 13 (A) on and after the date on which the 14 commercial data operator makes the identifica- 15 tion; and 16 (B) through any normal mechanism by 17 which a user may interact with the online serv- 18 ice provided by the commercial data operator. 19 (4) UNFAIR AND DECEPTIVE ACTS OR PRAC- 20 TICES.— 21 (A) UNFAIR OR DECEPTIVE ACTS OR PRAC- 22 TICES.—A violation of this subsection shall be 23 treated as a violation of a rule defining an un- 24 fair or deceptive act or practice prescribed 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 6 •S 1951 IS under section 18(a)(1)(B) of the Federal Trade 1 Commission Act (15 U.S.C. 57a(a)(1)(B)). 2 (B) POWERS OF FEDERAL TRADE COMMIS- 3 SION.— 4 (i) IN GENERAL.—The Federal Trade 5 Commission shall enforce this subsection in 6 the same manner, by the same means, and 7 with the same jurisdiction, powers, and du- 8 ties as though all applicable terms and pro- 9 visions of the Federal Trade Commission 10 Act (15 U.S.C. 41 et seq.) were incor- 11 porated into and made a part of this sub- 12 section. 13 (ii) PRIVILEGES AND IMMUNITIES.— 14 Any person who violates this subsection 15 shall be subject to the penalties and enti- 16 tled to the privileges and immunities pro- 17 vided in the Federal Trade Commission 18 Act (15 U.S.C. 41 et seq.). 19 (b) REGULATIONS.—Not later than 1 year after the 20 date of enactment of this Act, the Federal Trade Commis- 21 sion shall promulgate regulations carrying out subsection 22 (a). 23 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 7 •S 1951 IS SEC. 4. SEC DISCLOSURES. 1 (a) IN GENERAL.—Section 13 of the Securities Ex- 2 change Act of 1934 (15 U.S.C. 78m) is amended by add- 3 ing at the end the following: 4 ‘‘(s) DISCLOSURE RELATING TO AGGREGATE VALUE 5 OF USER DATA HELD BY COMMERCIAL DATA OPERA- 6 TORS.— 7 ‘‘(1) DEFINITIONS.—In this subsection: 8 ‘‘(A) COMMERCIAL DATA OPERATOR.—The 9 term ‘commercial data operator’ means an enti- 10 ty acting in its capacity as a consumer online 11 services provider or data broker that— 12 ‘‘(i) generates a material amount of 13 revenue directly from the use, collection, 14 processing, sale, or sharing of the user 15 data; and 16 ‘‘(ii) has more than 100,000,000 17 unique monthly visitors or users in the 18 United States for a majority of months 19 during the previous 1-year period; 20 ‘‘(B) USER.—The term ‘user’ means an in- 21 dividual consumer who uses an online service 22 designed for consumer use by a commercial 23 data operator. 24 ‘‘(C) USER DATA.—The term ‘user data’ 25 means any information that identifies, relates 26 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 8 •S 1951 IS to, describes, is capable of being associated 1 with, or could reasonably be linked with an in- 2 dividual user, whether directly submitted to the 3 commercial data operator by the user or derived 4 from the observed activity of the user by the 5 commercial data operator. 6 ‘‘(2) DISCLOSURE.—Each issuer that is, or is a 7 consolidated subsidiary of, a commercial data oper- 8 ator and is required to file an annual or quarterly 9 report under subsection (a) shall disclose in that re- 10 port the aggregate value, if material, of— 11 ‘‘(A) user data that the commercial data 12 operator holds; 13 ‘‘(B) contracts with third parties for the 14 collection of user data through the online serv- 15 ice provided by the commercial data operator; 16 and 17 ‘‘(C) any other item that the Commission 18 determines, by rule, is necessary or useful for 19 the protection of investors and in the public in- 20 terest. 21 ‘‘(3) VALUATION METHODOLOGY.— 22 ‘‘(A) IN GENERAL.—The Commission, in 23 consultation with appropriate standards set- 24 tings organizations, shall develop a method or 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 9 •S 1951 IS methods for calculating the value of user data 1 required to be disclosed under paragraph (2). 2 ‘‘(B) CONSIDERATIONS.—In developing the 3 method under subparagraph (A), the Commis- 4 sion shall promote comparability in calculating 5 the value of data across commercial data opera- 6 tors that utilize user data in a similar manner 7 while taking into account the potential need to 8 develop distinct methods for calculating the 9 value of data for different uses, sectors, and 10 business models.’’. 11 (b) QUALITATIVE DISCLOSURE.—Not later than 1 12 year after the date of enactment of this subsection, the 13 Commission shall amend section 229.306 of title 17, Code 14 of Federal Regulations, to require a commercial data oper- 15 ator that is an issuer subject to section 13 or 15(d) of 16 the Securities Exchange Act of 1934 (15 U.S.C. 78m, 17 78o(d)) to provide quantitative and qualitative disclosures 18 about the value of user data held, including— 19 (1) technical and legal measures in place to 20 protect user data held by the commercial data oper- 21 ator; 22 (2) an assessment of financial and legal risks 23 associated with storing the type and quantity of user 24 data held by the commercial data operator; 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 10 •S 1951 IS (3) each source of user data held by the com- 1 mercial data operator, whether by sale, a direct con- 2 sumer relationship, an indirect consumer relation- 3 ship, or other means; 4 (4) each discrete revenue generating operation 5 of the commercial data operator and any subsidiary 6 or affiliate that relies on user data; 7 (5) the entry into any contract valued at more 8 than $10,000,000 with a third party for the collec- 9 tion, licensing, or sharing by the third party pursu- 10 ant to an agreement with the commercial data oper- 11 ator; 12 (6) the amount of revenue derived from obtain- 13 ing, collecting, processing, selling, using or sharing 14 user data during the reporting period; 15 (7) how changes in the measurement of aggre- 16 gate fair value of user data affect the reported per- 17 formance and cash flows of the issuer; and 18 (8) any acquisition of user data in the pre- 19 ceding reporting period valued at more than 20 $100,000,000. 21 (c) REPORT.— 22 (1) IN GENERAL.—Not later than 3 years after 23 the date of enactment of this Act, the Commission 24 shall submit to the Committee on Banking, Housing, 25 VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS 11 •S 1951 IS and Urban Affairs of the Senate and the Committee 1 on Financial Services of the House of Representa- 2 tives a report on— 3 (A) the nature, timing, and extent of the 4 disclosure practices of commercial data opera- 5 tors; 6 (B) an assessment of the valuation meth- 7 odologies and practices employed by commercial 8 data operators in developing and submitting 9 disclosures to the public; 10 (C) an evaluation of the methods of deliv- 11 ery and presentation of the disclosures required 12 by this Act, and the amendments made by this 13 Act; and 14 (D) recommendations for the improvement 15 of the methods described in paragraph (3), in- 16 cluding developing standards to enhance com- 17 parability and utility for investors. 18 (2) RULEMAKING.—Not later than 180 days 19 after the date on which the report required under 20 paragraph (1) is submitted, the Commission shall 21 promulgate a proposed regulation implementing the 22 recommendations described in paragraph (1)(D). 23 Æ VerDate Sep 11 2014 20:47 Jun 27, 2019 Jkt 034408 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\S1951.IS S1951 pbinns on DSK79D2C42PROD with BILLS