[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3005 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                         June 27, 1996.
      Resolved, That the bill from the House of Representatives (H.R. 
3005) entitled ``An Act to amend the Federal securities laws in order 
to promote efficiency and capital formation in the financial markets, 
and to amend the Investment Company Act of 1940 to promote more 
efficient management of mutual funds, protect investors, and provide 
more effective and less burdensome regulation.'', do pass with the 
following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Securities 
Investment Promotion Act of 1996''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Severability.

       TITLE I--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

Sec. 101. Short title.
Sec. 102. Funding for enhanced enforcement priority.
Sec. 103. Improved supervision through State and Federal cooperation.
Sec. 104. Interstate cooperation.
Sec. 105. Disqualification of convicted felons.
Sec. 106. Continued State authority.
Sec. 107. Effective date.

           TITLE II--FACILITATING INVESTMENT IN MUTUAL FUNDS

Sec. 201. Short title.
Sec. 202. Funds of funds.
Sec. 203. Flexible registration of securities.
Sec. 204. Facilitating use of current information in advertising.
Sec. 205. Variable insurance contracts.
Sec. 206. Prohibition on deceptive investment company names.
Sec. 207. Excepted investment companies.
Sec. 208. Performance fees exemptions.
Sec. 209. Reports to the Commission and shareholders.
Sec. 210. Books, records, and inspections.

         TITLE III--REDUCING THE COST OF SAVING AND INVESTMENT

Sec. 301. Exemption for economic, business, and industrial development 
                            companies.
Sec. 302. Intrastate closed-end investment company exemption.
Sec. 303. Definition of eligible portfolio company.
Sec. 304. Definition of business development company.
Sec. 305. Acquisition of assets by business development companies.
Sec. 306. Capital structure amendments.
Sec. 307. Filing of written statements.
Sec. 308. Facilitating national securities markets.
Sec. 309. Regulatory flexibility.
Sec. 310. Analysis of economic effects of regulation.
Sec. 311. Privatization of EDGAR.
Sec. 312. Improving coordination of supervision.
Sec. 313. Increased access to foreign business information.
Sec. 314. Short-form registration.
Sec. 315. Church employee pension plans.
Sec. 316. Promoting global preeminence of American securities markets.
Sec. 317. Broker-dealer exemption from State law for certain de minimis 
                            transactions.
Sec. 318. Studies and reports.

SEC. 2. SEVERABILITY.

    If any provision of this Act, an amendment made by this Act, or the 
application of such provision or amendment to any person or 
circumstance is held to be unconstitutional, the remainder of this Act, 
the amendments made by this Act, and the application of the provisions 
of such to any person or circumstance shall not be affected thereby.

       TITLE I--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Investment Advisers Supervision 
Coordination Act''.

SEC. 102. FUNDING FOR ENHANCED ENFORCEMENT PRIORITY.

    There are authorized to be appropriated to the Securities and 
Exchange Commission, for the enforcement of the Investment Advisers Act 
of 1940, not more than $16,000,000 in each of fiscal years 1997 and 
1998.

SEC. 103. IMPROVED SUPERVISION THROUGH STATE AND FEDERAL COOPERATION.

    (a) State and Federal Responsibilities.--The Investment Advisers 
Act of 1940 (15 U.S.C. 80b-1 et seq.) is amended by inserting after 
section 203 the following new section:

``SEC. 203A. STATE AND FEDERAL RESPONSIBILITIES.

    ``(a) Advisers Subject to State Authorities.--
            ``(1) In general.--No investment adviser that is regulated 
        or required to be regulated as an investment adviser in the 
        State in which it maintains its principal office and place of 
        business shall register under section 203, unless the 
        investment adviser--
                    ``(A) has assets under management of not less than 
                $25,000,000, or such higher amount as the Commission 
                may, by rule, deem appropriate in accordance with the 
                purposes of this title; or
                    ``(B) is an adviser to an investment company 
                registered under title I of this Act, or a company that 
                has elected to be a business development company 
                pursuant to section 54 of title I of this Act.
            ``(2) Definition.--For purposes of this subsection, the 
        term `assets under management' means the securities portfolios 
        with respect to which an investment adviser provides continuous 
        and regular supervisory or management services.
    ``(b) Advisers Subject to Commission Authority.--
            ``(1) In general.--No law of any State or political 
        subdivision thereof requiring the registration, licensing, or 
        qualification as an investment adviser or supervised person of 
        an investment adviser shall apply to any person--
                    ``(A) that is registered under section 203 as an 
                investment adviser, or that is a supervised person of 
                such a person; or
                    ``(B) that is not registered under section 203 
                because that person is excepted from the definition of 
                an investment adviser under section 202(a)(11).
            ``(2) Limitation.--Nothing in this subsection shall 
        prohibit the securities commission (or any agency or office 
        performing like functions) of any State from--
                    ``(A) requiring the filing with such commission, 
                agency, or office of any document filed with the 
                Commission by an investment adviser, together with a 
                consent to service of process and requisite fees; or
                    ``(B) investigating and bringing enforcement 
                actions with respect to fraud or deceit against an 
                investment adviser or person associated with an 
                investment adviser.
    ``(c) Exemptions.--Notwithstanding subsection (a), the Commission, 
by rule or regulation upon its own motion, or by order upon 
application, may permit the registration with the Commission of any 
person or class of persons to which the application of subsection (a) 
would be unfair, a burden on interstate commerce, or otherwise 
inconsistent with the purposes of this section.
    ``(d) Filing Depositories.--The Commission may, by rule, require an 
investment adviser--
            ``(1) to file with the Commission any fee, application, 
        report, or notice required by this title or by the rules issued 
        under this title through any entity designated by the 
        Commission for that purpose; and
            ``(2) to pay the reasonable costs associated with such 
        filing.
    ``(e) State Assistance.--Upon request of the securities 
commissioner (or any agency or officer performing like functions) of 
any State, the Commission may provide such training, technical 
assistance, or other reasonable assistance in connection with the 
regulation of investment advisers by the State.''.
    (b) Advisers Not Eligible To Register.--Section 203 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-3) is amended--
            (1) in subsection (c), in the matter immediately following 
        paragraph (2), by inserting ``and that the applicant is not 
        prohibited from registering as an investment adviser under 
        section 203A'' after ``satisfied''; and
            (2) in subsection (h), in the second sentence--
                    (A) by striking ``existence or'' and inserting 
                ``existence,''; and
                    (B) by inserting ``or is prohibited from 
                registering as an investment adviser under section 
                203A,'' after ``adviser,''.
    (c) Definition of ``Supervised Person''.--Section 202(a) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended--
            (1) by striking ``requires--'' and inserting ``requires, 
        the following definitions shall apply:''; and
            (2) by adding at the end the following new paragraph:
            ``(25) `Supervised person' means any partner, officer, 
        director (or other person occupying a similar status or 
        performing similar functions), or employee of an investment 
        adviser, or other person who provides investment advice on 
        behalf of the investment adviser and is subject to the 
        supervision and control of the investment adviser.''.
    (d) Conforming Amendment.--Section 203(a) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-3(a)) is amended by striking 
``subsection (b) of this section'' and inserting ``subsection (b) and 
section 203A''.

SEC. 104. INTERSTATE COOPERATION.

    Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
18a) is amended to read as follows:

``SEC. 222. STATE REGULATION OF INVESTMENT ADVISERS.

    ``(a) Jurisdiction of State Regulators.--Nothing in this title 
shall affect the jurisdiction of the securities commissioner (or any 
agency or officer performing like functions) of any State over any 
security or any person insofar as it does not conflict with the 
provisions of this title or the rules and regulations thereunder.
    ``(b) Dual Compliance Purposes.--No State may enforce any law or 
regulation that would require an investment adviser to maintain any 
books or records in addition to those required under the laws of the 
State in which it maintains its principal place of business, if the 
investment adviser--
            ``(1) is registered or licensed as such in the State in 
        which it maintains its principal place of business; and
            ``(2) is in compliance with the applicable books and 
        records requirements of the State in which it maintains its 
        principle place of business.
    ``(c) Limitation on Capital and Bond Requirements.--No State may 
enforce any law or regulation that would require an investment adviser 
to maintain a higher minimum net capital or to post any bond in 
addition to any that is required under the laws of the State in which 
it maintains its principal place of business, if the investment 
adviser--
            ``(1) is registered or licensed as such in the State in 
        which it maintains its principal place of business; and
            ``(2) is in compliance with the applicable net capital or 
        bonding requirements of the State in which it maintains its 
        principal place of business.''.

SEC. 105. DISQUALIFICATION OF CONVICTED FELONS.

    (a) Amendment.--Section 203(e) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-3(e)) is amended--
            (1) by redesignating paragraphs (3) through (7) as 
        paragraphs (4) through (8), respectively; and
            (2) by inserting after paragraph (2) the following new 
        paragraph:
            ``(3) has been convicted during the 10-year period 
        preceding the date of filing of any application for 
        registration, or at any time thereafter, of--
                    ``(A) any crime that is punishable by imprisonment 
                for 1 or more years, and that is not described in 
                paragraph (2); or
                    ``(B) a substantially equivalent crime by a foreign 
                court of competent jurisdiction.''.
    (b) Conforming Amendments.--Section 203 of the Investment Advisers 
Act of 1940 (15 U.S.C. 80b-3) is amended--
            (1) in subsection (e)(6) (as redesignated by subsection (a) 
        of this section), by striking ``this paragraph (5)'' and 
        inserting ``this paragraph'';
            (2) in subsection (f)--
                    (A) by striking ``paragraph (1), (4), (5), or (7) 
                of subsection (e) of this section'' and inserting 
                ``paragraph (1), (5), (6), or (8) of subsection (e)'';
                    (B) by striking ``paragraph (3)'' and inserting 
                ``paragraph (4)''; and
                    (C) by striking ``said subsection'' each place that 
                term appears and inserting ``subsection''; and
            (3) in subsection (i)(1)(D), by striking ``section 
        203(e)(5) of this title'' and inserting ``subsection (e)(6)''.

SEC. 106. CONTINUED STATE AUTHORITY.

    Notwithstanding any other provision of this title, or any amendment 
made by this title, a State or Territory of the United States, or the 
District of Columbia may continue to collect filing, registration, or 
licensing fees in amounts determined pursuant to State law as in effect 
on the day before the date of enactment of this Act, until otherwise 
specifically provided under a State law enacted on or after that date 
of enactment.

SEC. 107. EFFECTIVE DATE.

    This title and the amendments made by this title shall take effect 
180 days after the date of enactment of this Act.

           TITLE II--FACILITATING INVESTMENT IN MUTUAL FUNDS

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Investment Company Amendments Act 
of 1996''.

SEC. 202. FUNDS OF FUNDS.

    Section 12(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 
80a-12(d)(1)) is amended--
            (1) in subparagraph (E)(iii)--
                    (A) by striking ``in the event such investment 
                company is not a registered investment company,''; and
                    (B) by inserting ``in the event that such 
                investment company is not a registered investment 
                company,'' after ``(bb)'';
            (2) by redesignating subparagraphs (G) and (H) as 
        subparagraphs (H) and (I), respectively;
            (3) by striking ``this paragraph (1)'' each place that term 
        appears and inserting ``this paragraph'';
            (4) by inserting after subparagraph (F) the following new 
        subparagraph:
    ``(G)(i) This paragraph does not apply to securities of a 
registered open-end investment company or a registered unit investment 
trust (hereafter in this subparagraph referred to as the `acquired 
company') purchased or otherwise acquired by a registered open-end 
investment company or a registered unit investment trust (hereafter in 
this subparagraph referred to as the `acquiring company') if--
            ``(I) the acquired company and the acquiring company are 
        part of the same group of investment companies;
            ``(II) the securities of the acquired company, securities 
        of other registered open-end investment companies and 
        registered unit investment trusts that are part of the same 
        group of investment companies, Government securities, and 
        short-term paper are the only investments held by the acquiring 
        company;
            ``(III)(aa) the acquiring company does not pay and is not 
        assessed any charges or fees for distribution-related 
        activities with respect to securities of the acquired company, 
        unless the acquiring company does not charge a sales load or 
        other fees or charges for distribution-related activities; or
            ``(bb) any sales loads and other distribution-related fees 
        charged with respect to securities of the acquiring company, 
        when aggregated with any sales load and distribution-related 
        fees paid by the acquiring company with respect to securities 
        of the acquired fund, are not excessive under rules adopted 
        pursuant to section 22(b) or section 22(c) by a securities 
        association registered under section 15A of the Securities 
        Exchange Act of 1934 or the Commission;
            ``(IV) the acquired company has a policy that prohibits it 
        from acquiring any securities of registered open-end investment 
        companies or registered unit investment trusts in reliance on 
        this subparagraph or subparagraph (F); and
            ``(V) such acquisition is not in contravention of such 
        rules and regulations as the Commission may from time to time 
        prescribe with respect to acquisitions in accordance with this 
        subparagraph, as necessary and appropriate for the protection 
        of investors.
    ``(ii) For purposes of this subparagraph, the term `group of 
investment companies' means any 2 or more registered investment 
companies that hold themselves out to investors as related companies 
for purposes of investment and investor services.''; and
            (5) by adding at the end the following new subparagraph:
    ``(J) The Commission, by rules and regulations, upon its own 
motion, or by order upon application, may conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class or classes of persons, securities, or transactions from any 
provision of this subsection, if and to the extent that such exemption 
is consistent with the public interest and the protection of 
investors.''.

SEC. 203. FLEXIBLE REGISTRATION OF SECURITIES.

    (a) Amendments to Registration Statements.--Section 24(e) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-24(e)) is amended--
            (1) by striking paragraphs (1) and (2);
            (2) by striking ``(3) For'' and inserting ``For''; and
            (3) by striking ``pursuant to this subsection or 
        otherwise''.
    (b) Registration of Indefinite Amount of Securities.--Section 24(f) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-24(f)) is amended 
to read as follows:
    ``(f) Registration of Indefinite Amount of Securities.--
            ``(1) Registration of securities.--Upon the effective date 
        of its registration statement, as provided by section 8 of the 
        Securities Act of 1933, a face-amount certificate company, 
        open-end management company, or unit investment trust, shall be 
        deemed to have registered an indefinite amount of securities.
            ``(2) Payment of registration fees.--Not later than 90 days 
        after the end of the fiscal year of an entity referred to in 
        paragraph (1), the entity shall pay a registration fee to the 
        Commission, calculated in the manner specified in section 6(b) 
        of the Securities Act of 1933, based on the aggregate sales 
        price for which its securities (including, for purposes of this 
        paragraph, all securities issued pursuant to a dividend 
        reinvestment plan) were sold pursuant to a registration of an 
        indefinite amount of securities under this subsection during 
        the previous fiscal year of the entity, reduced by--
                    ``(A) the aggregate redemption or repurchase price 
                of the securities of the entity during that year; and
                    ``(B) the aggregate redemption or repurchase price 
                of the securities of the entity during any prior fiscal 
                year ending not more than 1 year before the date of 
                enactment of the Investment Company Amendments Act of 
                1996, that were not used previously by the entity to 
                reduce fees payable under this section.
            ``(3) Interest due on late payment.--An entity paying the 
        fee required by this subsection or any portion thereof more 
        than 90 days after the end of the fiscal year of the entity 
        shall pay to the Commission interest on unpaid amounts, 
        compounded daily, at the underpayment rate established by the 
        Secretary of the Treasury pursuant to section 3717 of title 31, 
        United States Code. The payment of interest pursuant to this 
        paragraph shall not preclude the Commission from bringing an 
        action to enforce the requirements of paragraph (2).
            ``(4) Rulemaking authority.--The Commission may adopt rules 
        and regulations to implement this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
become effective on the earlier of--
            (1) 1 year after the date of enactment of this Act; or
            (2) the effective date of final rules or regulations issued 
        in accordance with section 24(f) of the Investment Company Act 
        of 1940, as amended by this section.

SEC. 204. FACILITATING USE OF CURRENT INFORMATION IN ADVERTISING.

    Section 24 of the Investment Company Act of 1940 (15 U.S.C. 80a-24) 
is amended by adding at the end the following new subsection:
    ``(g) Additional Prospectuses.--In addition to any prospectus 
permitted or required by section 10(a) of the Securities Act of 1933, 
the Commission shall permit, by rules or regulations deemed necessary 
or appropriate in the public interest or for the protection of 
investors, the use of a prospectus for the purposes of section 5(b)(1) 
of that Act with respect to securities issued by a registered 
investment company. Such a prospectus, which may include information 
the substance of which is not included in the prospectus specified in 
section 10(a) of the Securities Act of 1933, shall be deemed to be 
permitted by section 10(b) of that Act.''.

SEC. 205. VARIABLE INSURANCE CONTRACTS.

    (a) Unit Investment Trust Treatment.--Section 26 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-26) is amended by adding at the end 
the following new subsection:
    ``(e) Exemption.--
            ``(1) In general.--Subsection (a) does not apply to any 
        registered separate account funding variable insurance 
        contracts, or to the sponsoring insurance company and principal 
        underwriter of such account.
            ``(2) Limitation on sales.--It shall be unlawful for any 
        registered separate account funding variable insurance 
        contracts, or for the sponsoring insurance company of such 
        account, to sell any such contract, unless--
                    ``(A) the fees and charges deducted under the 
                contract, in the aggregate, are reasonable in relation 
                to the services rendered, the expenses expected to be 
                incurred, and the risks assumed by the insurance 
                company, and the insurance company so represents in the 
                registration statement for the contract; and
                    ``(B) the insurance company--
                            ``(i) complies with all other applicable 
                        provisions of this section, as if it were a 
                        trustee or custodian of the registered separate 
                        account;
                            ``(ii) files with the insurance regulatory 
                        authority of the State or territory of the 
                        United States or of the District of Columbia in 
                        which is located the principal place of 
                        business of the insurance company, an annual 
                        statement of its financial condition, which 
                        most recent statement indicates that the 
                        insurance company has a combined capital and 
                        surplus, if a stock company, or an unassigned 
                        surplus, if a mutual company, of not less than 
                        $1,000,000, or such other amount as the 
                        Commission may from time to time prescribe by 
                        rule, as necessary or appropriate in the public 
                        interest or for the protection of investors; 
                        and
                            ``(iii) together with its registered 
                        separate accounts, is supervised and examined 
                        periodically by the insurance authority of such 
                        State, territory, or the District of Columbia.
            ``(3) Fees and charges.--For purposes of paragraph (2), the 
        fees and charges deducted under the contract shall include all 
        fees and charges imposed for any purpose and in any manner.
            ``(4) Regulatory authority.--The Commission may issue such 
        rules and regulations to carry out paragraph (2)(A) as it 
        determines are necessary or appropriate in the public interest 
        or for the protection of investors.''.
    (b) Periodic Payment Plan Treatment.--Section 27 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-27) is amended by adding at the end 
the following new subsection:
    ``(i)(1) This section does not apply to any registered separate 
account funding variable insurance contracts, or to the sponsoring 
insurance company and principal underwriter of such account, except as 
provided in paragraph (2).
    ``(2) It shall be unlawful for any registered separate account 
funding variable insurance contracts, or for the sponsoring insurance 
company of such account, to sell any such contract unless--
            ``(A) such contract is a redeemable security; and
            ``(B) the insurance company complies with section 26(e) and 
        any rules or regulations issued by the Commission under section 
        26(e).''.

SEC. 206. PROHIBITION ON DECEPTIVE INVESTMENT COMPANY NAMES.

    Section 35(d) of the Investment Company Act of 1940 (15 U.S.C. 80a-
34(d)) is amended to read as follows:
    ``(d) It shall be unlawful for any registered investment company to 
adopt as a part of the name or title of such company, or of any 
securities of which it is the issuer, any word or words that the 
Commission finds are materially deceptive or misleading. The Commission 
is authorized, by rule, regulation, or order, to define such names or 
titles as are materially deceptive or misleading.''.

SEC. 207. EXCEPTED INVESTMENT COMPANIES.

    (a) Amendments.--Section 3(c) of the Investment Company Act of 1940 
(15 U.S.C. 80a-3(c)) is amended--
            (1) in paragraph (1), by inserting after the first sentence 
        the following: ``Such issuer shall be deemed to be an 
        investment company for purposes of the limitations set forth in 
        subparagraphs (A)(i) and (B)(i) of section 12(d)(1) governing 
        the purchase or other acquisition by such issuer of any 
        security issued by any registered investment company and the 
        sale of any security issued by any registered open-end 
        investment company to any such issuer.'';
            (2) in subparagraph (A) of paragraph (1)--
                    (A) by inserting after ``issuer,'' the first place 
                that term appears, the following: ``and is or, but for 
                the exception provided for in this paragraph or 
                paragraph (7), would be an investment company,''; and
                    (B) by striking ``unless, as of'' and all that 
                follows through the end of the subparagraph and 
                inserting a period;
            (3) in paragraph (2)--
                    (A) by striking ``and acting as broker,'' and 
                inserting ``acting as broker, and acting as market 
                intermediary,'';
                    (B) by inserting ``(A)'' after ``(2)''; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(B) For purposes of this paragraph--
                    ``(i) the term `market intermediary' means any 
                person that regularly holds itself out as being willing 
                contemporaneously to engage in, and that is regularly 
                engaged in, the business of entering into transactions 
                on both sides of the market for a financial contract or 
                one or more such financial contracts; and
                    ``(ii) the term `financial contract' means any 
                arrangement that--
                            ``(I) takes the form of an individually 
                        negotiated contract, agreement, or option to 
                        buy, sell, lend, swap, or repurchase, or other 
                        similar individually negotiated transaction 
                        commonly entered into by participants in the 
                        financial markets;
                            ``(II) is in respect of securities, 
                        commodities, currencies, interest or other 
                        rates, other measures of value, or any other 
                        financial or economic interest similar in 
                        purpose or function to any of the foregoing; 
                        and
                            ``(III) is entered into in response to a 
                        request from a counter party for a quotation, 
                        or is otherwise entered into and structured to 
                        accommodate the objectives of the counter party 
                        to such arrangement.''; and
            (4) by striking paragraph (7) and inserting the following:
            ``(7)(A) Any issuer, the outstanding securities of which 
        are owned exclusively by persons who, at the time of 
        acquisition of such securities, are qualified purchasers, and 
        which is not making and does not at that time propose to make a 
        public offering of such securities. Securities that are owned 
        by persons who received the securities from a qualified 
        purchaser as a gift or bequest, or in a case in which the 
        transfer was caused by legal separation, divorce, death, or 
        other involuntary event, shall be deemed to be owned by a 
        qualified purchaser, subject to such rules, regulations, and 
        orders as the Commission may prescribe as necessary or 
        appropriate in the public interest or for the protection of 
        investors.
            ``(B) Notwithstanding subparagraph (A), an issuer is within 
        the exception provided by this paragraph if--
                    ``(i) in addition to qualified purchasers, 
                outstanding securities of that issuer are beneficially 
                owned by not more than 100 persons who are not 
                qualified purchasers, if--
                            ``(I) such persons acquired such securities 
                        on or before April 30, 1996; and
                            ``(II) at the time such securities were 
                        acquired by such persons, the issuer was 
                        excepted by paragraph (1); and
                    ``(ii) prior to availing itself of the exception 
                provided by this paragraph--
                            ``(I) such issuer has disclosed to each 
                        beneficial owner that future investors will be 
                        limited to qualified purchasers, and that 
                        ownership in such issuer is no longer limited 
                        to not more than 100 persons; and
                            ``(II) concurrently with or after such 
                        disclosure, such issuer has provided each 
                        beneficial owner with a reasonable opportunity 
                        to redeem any part or all of their interests in 
                        the issuer, notwithstanding any agreement to 
                        the contrary between the issuer and such 
                        persons, for that person's proportionate share 
                        of the issuer's net assets.
            ``(C) Each person that elects to redeem under subparagraph 
        (B)(ii)(II) shall receive an amount in cash equal to that 
        person's proportionate share of the issuer's net assets, unless 
        the issuer elects to provide such person with the option of 
        receiving, and such person agrees to receive, all or a portion 
        of such person's share in assets of the issuer. If the issuer 
        elects to provide such persons with such an opportunity, 
        disclosure concerning such opportunity shall be made in the 
        disclosure required by subparagraph (B)(ii)(I).
            ``(D) An issuer that is excepted under this paragraph shall 
        nonetheless be deemed to be an investment company for purposes 
        of the limitations set forth in subparagraphs (A)(i) and (B)(i) 
        of section 12(d)(1) relating to the purchase or other 
        acquisition by such issuer of any security issued by any 
        registered investment company and the sale of any security 
        issued by any registered open-end investment company to any 
        such issuer.
            ``(E) For purposes of determining compliance with this 
        paragraph and paragraph (1), an issuer that is otherwise 
        excepted under this paragraph and an issuer that is otherwise 
        excepted under paragraph (1) shall not be treated by the 
        Commission as being a single issuer for purposes of determining 
        whether the outstanding securities of the issuer excepted under 
        paragraph (1) are beneficially owned by not more than 100 
        persons or whether the outstanding securities of the issuer 
        excepted under this paragraph are owned by persons that are not 
        qualified purchasers. Nothing in this subparagraph shall be 
        construed to establish that a person is a bona fide qualified 
        purchaser for purposes of this paragraph or a bona fide 
        beneficial owner for purposes of paragraph (1).''.
    (b) Definition of Qualified Purchaser.--Section 2(a) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)) is amended by 
adding at the end the following new paragraph:
            ``(51)(A) `Qualified purchaser' means--
                    ``(i) any natural person (including any person who 
                holds a joint, community property, or other similar 
                shared ownership interest in an issuer that is excepted 
                under section 3(c)(7) with that person's qualified 
                purchaser spouse) who owns not less than $5,000,000 in 
                investments, as defined by the Commission;
                    ``(ii) any company that owns not less than 
                $5,000,000 in investments and that is owned directly or 
                indirectly by or for 2 or more natural persons who are 
                related as siblings or spouse (including former 
                spouses), or direct lineal descendants by birth or 
                adoption, spouses of such persons, the estates of such 
                persons, or foundations, charitable organizations, or 
                trusts established by or for the benefit of such 
                persons;
                    ``(iii) any trust that is not covered by 
                subparagraph (B) and that was not formed for the 
                specific purpose of acquiring the securities offered, 
                as to which the trustee or other person authorized to 
                make decisions with respect to the trust, and each 
                settlor or other person who has contributed assets to 
                the trust, is a person described in clause (i), (ii), 
                or (iv);
                    ``(iv) any person, acting for its own account or 
                the accounts of other qualified purchasers, who in the 
                aggregate owns and invests on a discretionary basis, 
                not less than $25,000,000 in investments; or
                    ``(v) any person that the Commission, by rule or 
                regulation, has determined does not need the 
                protections of this title, after consideration of 
                factors such as--
                            ``(I) a high degree of financial 
                        sophistication, including extensive knowledge 
                        of and experience in financial matters;
                            ``(II) a substantial amount of assets owned 
                        or under management;
                            ``(III) relationship with an issuer; and
                            ``(IV) such other factors as the Commission 
                        may determine to be consistent with the 
                        purposes of this paragraph.
            ``(B) The Commission may adopt such rules and regulations 
        applicable to the persons and trusts specified in clauses (i) 
        through (v) of subparagraph (A) as it determines are necessary 
        or appropriate in the public interest or for the protection of 
        investors.
            ``(C) The term `qualified purchaser' does not include a 
        company that, but for the exceptions provided for in paragraph 
        (1) or (7) of section 3(c), would be an investment company 
        (hereafter in this paragraph referred to as an `excepted 
        investment company'), unless all beneficial owners of its 
        outstanding securities (other than short-term paper), 
        determined in accordance with section 3(c)(1)(A), that acquired 
        such securities on or before April 30, 1996 (hereafter in this 
        paragraph referred to as `pre-amendment beneficial owners'), 
        and all pre-amendment beneficial owners of the outstanding 
        securities (other than short-term paper) of any excepted 
        investment company that, directly or indirectly, owns any 
        outstanding securities of such excepted investment company, 
        have consented to its treatment as a qualified purchaser. 
        Unanimous consent of all trustees, directors, or general 
        partners of a company or trust referred to in clause (ii) or 
        (iii) of subparagraph (A) shall constitute consent for purposes 
        of this subparagraph.''.
    (c) Conforming Amendments.--Section 3(a) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-3(a)) is amended--
            (1) by striking ``(1)'' and inserting ``(A)'';
            (2) by striking ``(2)'' and inserting ``(B)'';
            (3) by striking ``(3)'' and inserting ``(C)'';
            (4) by inserting ``(1)'' after ``(a)'';
            (5) by striking ``As used'' and inserting ``(2) As used''; 
        and
            (6) in paragraph (2)(C), as designated by paragraph (5) of 
        this subsection--
                    (A) by striking ``which are'' and inserting the 
                following: ``which (i) are''; and
                    (B) by inserting before the period at the end, the 
                following: ``, and (ii) are not relying on the 
                exception from the definition of investment company in 
                paragraph (1) or (7) of subsection (c)''.
    (d) Rulemaking Required.--
            (1) Implementation of section 3(c)(1)(b).--Not later than 1 
        year after the date of enactment of this Act, the Commission 
        shall prescribe rules to implement the requirements of section 
        3(c)(1)(B) of the Investment Company Act of 1940 (15 U.S.C. 
        80a-3(c)(1)(B)).
            (2) Identification of investments.--Not later than 180 days 
        after the date of enactment of this Act, the Commission shall 
        prescribe rules defining the term, or otherwise identifying, 
        ``investments'' for purposes of section 2(a)(51) of the 
        Investment Company Act of 1940, as added by this Act.
            (3) Employee exception.--Not later than 1 year after the 
        date of enactment of this Act, the Commission shall prescribe 
        rules pursuant to its authority under section 6 of the 
        Investment Company Act of 1940 to permit the ownership of 
        securities by knowledgeable employees of the issuer of the 
        securities or an affiliated person without loss of the 
        exception of the issuer under paragraph (1) or (7) of section 
        3(c) of that Act from treatment as an investment company under 
        that Act.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the earlier of--
            (1) 180 days after the date of enactment of this Act; or
            (2) the date on which the rulemaking required under 
        subsection (d)(2) is completed.

SEC. 208. PERFORMANCE FEES EXEMPTIONS.

    Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
5) is amended--
            (1) in subsection (b)--
                    (A) in paragraph (2), by striking ``or'' at the 
                end;
                    (B) in paragraph (3), by striking the period at the 
                end and inserting a semicolon; and
                    (C) by adding at the end the following new 
                paragraphs:
            ``(4) apply to an investment advisory contract with a 
        company excepted from the definition of an investment company 
        under section 3(c)(7) of title I of this Act; or
            ``(5) apply to an investment advisory contract with a 
        person who is not a resident of the United States.''; and
            (2) by adding at the end the following new subsection:
    ``(e) The Commission, by rule or regulation, upon its own motion, 
or by order upon application, may conditionally or unconditionally 
exempt any person or transaction, or any class or classes of persons or 
transactions, from subsection (a)(1), if and to the extent that the 
exemption relates to an investment advisory contract with any person 
that the Commission determines does not need the protections of 
subsection (a)(1), on the basis of such factors as financial 
sophistication, net worth, knowledge of and experience in financial 
matters, amount of assets under management, relationship with a 
registered investment adviser, and such other factors as the Commission 
determines are consistent with this section.''.

SEC. 209. REPORTS TO THE COMMISSION AND SHAREHOLDERS.

    Section 30 of the Investment Company Act of 1940 (15 U.S.C. 80a-29) 
is amended--
            (1) in subsection (b), by striking paragraph (1) and 
        inserting the following:
            ``(1) such information, documents, and reports (other than 
        financial statements), as the Commission may require to keep 
        reasonably current the information and documents contained in 
        the registration statement of such company filed under this 
        title;'';
            (2) by redesignating subsections (c), (d), (e), and (f) as 
        subsections (d), (e), (g), and (h), respectively;
            (3) by inserting after subsection (b) the following new 
        subsection:
    ``(c)(1) The Commission shall take such action as it deems 
necessary or appropriate, consistent with the public interest and the 
protection of investors, to avoid unnecessary reporting by, and 
minimize the compliance burdens on, registered investment companies and 
their affiliated persons in exercising its authority--
            ``(A) under subsection (f); and
            ``(B) under subsection (b)(1), if the Commission requires 
        the filing of information, documents, and reports under that 
        subsection on a basis more frequently than semiannually.
    ``(2) Action taken by the Commission under paragraph (1) shall 
include considering, and requesting public comment on--
            ``(A) feasible alternatives that minimize the reporting 
        burdens on registered investment companies; and
            ``(B) the utility of such information, documents, and 
        reports to the Commission in relation to the costs to 
        registered investment companies and their affiliated persons of 
        providing such information, documents, and reports.'';
            (4) by inserting after subsection (e) (as redesignated by 
        paragraph (2) of this section), the following new subsection:
    ``(f) The Commission may, by rule, require that semi-annual reports 
containing the information set forth in subsection (e) include such 
other information as the Commission deems necessary or appropriate in 
the public interest or for the protection of investors.''; and
            (5) in subsection (g) (as redesignated by paragraph (2) of 
        this section), by striking ``subsections (a) and (d)'' and 
        inserting ``subsections (a) and (e)''.

SEC. 210. BOOKS, RECORDS, AND INSPECTIONS.

    Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a-30) 
is amended--
            (1) by striking subsections (a) and (b) and inserting the 
        following:
    ``(a)(1) Each registered investment company, and each underwriter, 
broker, dealer, or investment adviser that is a majority-owned 
subsidiary of such a company, shall maintain and preserve such records 
(as defined in section 3(a)(37) of the Securities Exchange Act of 1934) 
for such period or periods as the Commission, by rules and regulations, 
may prescribe as necessary or appropriate in the public interest or for 
the protection of investors. Each investment adviser that is not a 
majority-owned subsidiary of, and each depositor of any registered 
investment company, and each principal underwriter for any registered 
investment company other than a closed-end company, shall maintain and 
preserve for such period or periods as the Commission shall prescribe 
by rules and regulations, such records as are necessary or appropriate 
to record such person's transactions with such registered company.
    ``(2) In exercising its authority under this subsection, the 
Commission shall take such steps as it deems necessary or appropriate, 
consistent with the public interest and for the protection of 
investors, to avoid unnecessary recordkeeping by, and minimize the 
compliance burden on, persons required to maintain records under this 
subsection (hereafter in this section referred to as `subject 
persons'). Such steps shall include considering, and requesting public 
comment on--
            ``(A) feasible alternatives that minimize the recordkeeping 
        burdens on subject persons;
            ``(B) the necessity of such records in view of the public 
        benefits derived from the independent scrutiny of such records 
        through Commission examination;
            ``(C) the costs associated with maintaining the information 
        that would be required to be reflected in such records; and
            ``(D) the effects that a proposed recordkeeping requirement 
        would have on internal compliance policies and procedures.
    ``(b) All records required to be maintained and preserved in 
accordance with subsection (a) shall be subject at any time and from 
time to time to such reasonable periodic, special, and other 
examinations by the Commission, or any member or representative 
thereof, as the Commission may prescribe. For purposes of such 
examinations, any subject person shall make available to the Commission 
or its representatives any copies or extracts from such records as may 
be prepared without undue effort, expense, or delay as the Commission 
or its representatives may reasonably request. The Commission shall 
exercise its authority under this subsection with due regard for the 
benefits of internal compliance policies and procedures and the 
effective implementation and operation thereof.'';
            (2) by redesignating subsections (c) and (d) as subsections 
        (e) and (f), respectively; and
            (3) by inserting after subsection (b) the following new 
        subsections:
    ``(c) Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any internal compliance or audit 
records, or information contained therein, provided to the Commission 
under this section. Nothing in this subsection shall authorize the 
Commission to withhold information from the Congress or prevent the 
Commission from complying with a request for information from any other 
Federal department or agency requesting the information for purposes 
within the scope of the jurisdiction of that department or agency, or 
complying with an order of a court of the United States in an action 
brought by the United States or the Commission. For purposes of section 
552 of title 5, United States Code, this section shall be considered a 
statute described in subsection (b)(3)(B) of such section 552.
    ``(d) For purposes of this section--
            ``(1) the term `internal compliance policies and 
        procedures' means policies and procedures designed by subject 
        persons to promote compliance with the Federal securities laws; 
        and
            ``(2) the term `internal compliance and audit record' means 
        any record prepared by a subject person in accordance with 
        internal compliance policies and procedures.''.

         TITLE III--REDUCING THE COST OF SAVING AND INVESTMENT

SEC. 301. EXEMPTION FOR ECONOMIC, BUSINESS, AND INDUSTRIAL DEVELOPMENT 
              COMPANIES.

    Section 6(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
6(a)) is amended by adding at the end the following new paragraph:
            ``(5)(A) Any company that is not engaged in the business of 
        issuing redeemable securities, the operations of which are 
        subject to regulation by the State in which the company is 
        organized under a statute governing entities that provide 
        financial or managerial assistance to enterprises doing 
        business, or proposing to do business, in that State if--
                    ``(i) the organizational documents of the company 
                state that the activities of the company are limited to 
                the promotion of economic, business, or industrial 
                development in the State through the provision of 
                financial or managerial assistance to enterprises doing 
                business, or proposing to do business, in that State, 
                and such other activities that are incidental or 
                necessary to carry out that purpose;
                    ``(ii) immediately following each sale of the 
                securities of the company by the company or any 
                underwriter for the company, not less than 80 percent 
                of the securities of the company being offered in such 
                sale, on a class-by-class basis, are held by persons 
                who reside or who have a substantial business presence 
                in that State;
                    ``(iii) the securities of the company are sold, or 
                proposed to be sold, by the company or by any 
                underwriter for the company, solely to accredited 
                investors, as that term is defined in section 2(15) of 
                the Securities Act of 1933, or to such other persons 
                that the Commission, as necessary or appropriate in the 
                public interest and consistent with the protection of 
                investors, may permit by rule, regulation, or order; 
                and
                    ``(iv) the company does not purchase any security 
                issued by an investment company or by any company that 
                would be an investment company except for the 
                exclusions from the definition of the term `investment 
                company' under paragraph (1) or (7) of section 3(c), 
                other than--
                            ``(I) any debt security that is rated 
                        investment grade by not less than 1 nationally 
                        recognized statistical rating organization; or
                            ``(II) any security issued by a registered 
                        open-end investment company that is required by 
                        its investment policies to invest not less than 
                        65 percent of its total assets in securities 
                        described in subclause (I) or securities that 
                        are determined by such registered open-end 
                        investment company to be comparable in quality 
                        to securities described in subclause (I).
            ``(B) Notwithstanding the exemption provided by this 
        paragraph, section 9 (and, to the extent necessary to enforce 
        section 9, sections 38 through 51) shall apply to a company 
        described in this paragraph as if the company were an 
        investment company registered under this title.
            ``(C) Any company proposing to rely on the exemption 
        provided by this paragraph shall file with the Commission a 
        notification stating that the company intends to do so, in such 
        form and manner as the Commission may prescribe by rule.
            ``(D) Any company meeting the requirements of this 
        paragraph may rely on the exemption provided by this paragraph 
        upon filing with the Commission the notification required by 
        subparagraph (C), until such time as the Commission determines 
        by order that such reliance is not in the public interest or is 
        not consistent with the protection of investors.
            ``(E) The exemption provided by this paragraph may be 
        subject to such additional terms and conditions as the 
        Commission may by rule, regulation, or order determine are 
        necessary or appropriate in the public interest or for the 
        protection of investors.''.

SEC. 302. INTRASTATE CLOSED-END INVESTMENT COMPANY EXEMPTION.

    Section 6(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 
80a-6(d)(1)) is amended by striking ``$100,000'' and inserting 
``$10,000,000, or such other amount as the Commission may set by rule, 
regulation, or order''.

SEC. 303. DEFINITION OF ELIGIBLE PORTFOLIO COMPANY.

    Section 2(a)(46)(C) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(46)(C)) is amended--
            (1) in clause (ii), by striking ``or'' at the end;
            (2) by redesignating clause (iii) as clause (iv); and
            (3) by inserting after clause (ii) the following:
                            ``(iii) it has total assets of not more 
                        than $4,000,000, and capital and surplus 
                        (shareholders' equity less retained earnings) 
                        of not less than $2,000,000, except that the 
                        Commission may adjust such amounts by rule, 
                        regulation, or order to reflect changes in 1 or 
                        more generally accepted indices or other 
                        indicators for small businesses; or''.

SEC. 304. DEFINITION OF BUSINESS DEVELOPMENT COMPANY.

    Section 2(a)(48)(B) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(48)(B)) is amended by adding at the end the following: 
``provided further that a business development company need not make 
available significant managerial assistance with respect to any company 
described in paragraph (46)(C)(iii), or with respect to any other 
company that meets such criteria as the Commission may by rule, 
regulation, or order permit, as consistent with the public interest, 
the protection of investors, and the purposes of this title; and''.

SEC. 305. ACQUISITION OF ASSETS BY BUSINESS DEVELOPMENT COMPANIES.

    Section 55(a)(1)(A) of the Investment Company Act of 1940 (15 
U.S.C. 80a-54(a)(1)(A)) is amended--
            (1) by striking ``or from any person'' and inserting ``from 
        any person''; and
            (2) by inserting before the semicolon ``, or from any other 
        person, subject to such rules and regulations as the Commission 
        may prescribe as necessary or appropriate in the public 
        interest or for the protection of investors''.

SEC. 306. CAPITAL STRUCTURE AMENDMENTS.

    Section 61(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
60(a)) is amended--
            (1) in paragraph (2), by striking ``if such business 
        development company'' and all that follows through the end of 
        the paragraph and inserting a period;
            (2) in paragraph (3)(A)--
                    (A) by striking ``senior securities representing 
                indebtedness accompanied by'';
                    (B) by inserting ``accompanied by securities,'' 
                after ``of such company,''; and
                    (C) in clause (ii), by striking ``senior''; and
            (3) in paragraph (3)--
                    (A) in subparagraph (A), by striking ``and'' at the 
                end;
                    (B) in subparagraph (B), by striking the period at 
                the end of clause (iv) and inserting ``; and''; and
                    (C) by inserting immediately after subparagraph (B) 
                the following new subparagraph:
                    ``(C) a business development company may issue 
                warrants, options, or rights to subscribe to, convert 
                to, or purchase voting securities not accompanied by 
                securities, if--
                            ``(i) such warrants, options, or rights 
                        satisfy the conditions in clauses (i) and (iii) 
                        of subparagraph (A); and
                            ``(ii) the proposal to issue such warrants, 
                        options, or rights is authorized by the 
                        shareholders or partners of such business 
                        development company, and such issuance is 
                        approved by the required majority (as defined 
                        in section 57(o)) of the directors of or 
                        general partners in such company on the basis 
                        that such issuance is in the best interests of 
                        the company and its shareholders or 
                        partners.''.

SEC. 307. FILING OF WRITTEN STATEMENTS.

    Section 64(b)(1) of the Investment Company Act of 1940 (15 U.S.C. 
80a-63(b)(1)) is amended by inserting ``and capital structure'' after 
``portfolio''.

SEC. 308. FACILITATING NATIONAL SECURITIES MARKETS.

    Section 18 of the Securities Act of 1933 (15 U.S.C. 77r) is amended 
to read as follows:

``SEC. 18. EXEMPTION FROM STATE CONTROL OF SECURITIES OFFERINGS.

    ``(a) Exemption From State Law for Registered Securities.--Except 
with respect to offerings described in subsection (b) and as otherwise 
specifically provided in this section, no law, rule, regulation, order, 
or other administrative action of any State or Territory of the United 
States, or the District of Columbia, or any political subdivision 
thereof--
            ``(1) requiring, or with respect to, registration or 
        qualification of securities or securities transactions shall 
        directly or indirectly apply to an offering subject to a 
        registration statement filed pursuant to this title;
            ``(2) shall directly or indirectly prohibit, limit, or 
        impose conditions upon the use of any offering document, 
        including any prospectus contained in a registration statement 
        that has been filed with the Commission; or
            ``(3) shall directly or indirectly prohibit, limit, or 
        impose conditions upon the offer or sale of any security 
        registered with the Commission under this title based on the 
        merits of such offering or issuer.
    ``(b) Special Rules for Certain Offerings.--Except with respect to 
a security of an investment company that is registered under the 
Investment Company Act of 1940, the provisions of subsection (a) shall 
not apply to--
            ``(1) an offering--
                    ``(A) by an issuer that is a blank check company, 
                as defined in section 7(b), or a direct participation 
                investment program;
                    ``(B) of penny stock; or
                    ``(C) giving effect to a limited partnership rollup 
                transaction;
            ``(2) an offering of a security, if a person associated 
        with the offering is subject to a statutory disqualification, 
        as defined in section 3(a)(39) of the Securities Exchange Act 
        of 1934, or any substantially equivalent State law; or
            ``(3) an offering of a security that--
                    ``(A) is not listed on the New York Stock Exchange, 
                the American Stock Exchange, or the National Market 
                Segment of the National Association of Securities 
                Dealers Automated Quotation System Stock Market;
                    ``(B) is not listed, authorized for listing, or 
                authorized for trading on a national securities 
                exchange (or tier or segment thereof) that has 
                standards for listing or for trading authorization that 
                the Commission determines, by rule (on its own 
                initiative or on the basis of a petition), are 
                substantially similar to the standards for listing or 
                for trading authorization that are applicable to 
                securities described in subparagraph (A); or
                    ``(C) will not be listed or authorized for trading 
                as described in subparagraph (A) or (B) upon completion 
                of the transaction.
    ``(c) Exemption From State Law for Transactions in Securities With 
Qualified Purchasers.--Notwithstanding subsection (b), subsection (a) 
shall apply with respect to offers and sales to qualified purchasers, 
as defined by the Commission.
    ``(d) Preservation of Filing Requirements.--
            ``(1) In general.--Nothing in this section shall prohibit 
        the securities commission (or any agency or office performing 
        like functions) of any State or Territory of the United States, 
        or the District of Columbia, from requiring the filing of any 
        documents filed with the Commission pursuant to this title 
        solely for notice purposes, along with a consent to service of 
        process and requisite fee, except that no such filing, consent, 
        or fee may be required with respect to securities, or 
        transactions relating to securities that are of the same class, 
        or are senior to such a class, as securities described in 
        subsection (b)(3).
            ``(2) Continued state authority.--Notwithstanding paragraph 
        (1), a State or Territory of the United States, or the District 
        of Columbia may continue to collect filing or registration fees 
        with respect to securities or securities transactions in 
        amounts determined pursuant to State law as in effect on the 
        day before the date of enactment of the Securities Investment 
        Promotion Act of 1996, until otherwise specifically provided 
        under a State law enacted on or after that date of enactment.
    ``(e) Preservation of State Authority.--Nothing in this section 
shall affect the jurisdiction of the securities commission (or any 
agency or office performing like functions) of any State or Territory 
of the United States, or the District of Columbia pursuant to the laws 
of such State or Territory, with respect to any fraud or broker-dealer 
conduct in connection with securities or securities transactions.''.

SEC. 309. REGULATORY FLEXIBILITY.

    (a) Under the Securities Act of 1933.--Title I of the Securities 
Act of 1933 (15 U.S.C. 77a et seq.) is amended by adding at the end the 
following new section:

``SEC. 28. GENERAL EXEMPTIVE AUTHORITY.

    ``The Commission, by rule or regulation, may conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class or classes of persons, securities, or transactions, from any 
provision or provisions of this title or of any rule or regulation 
issued under this title, to the extent that such exemption is necessary 
or appropriate in the public interest, and is consistent with the 
protection of investors.''.
    (b) Under the Securities Exchange Act of 1934.--Title I of the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
adding at the end the following new section:

``SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

    ``(a) In General.--Except as provided in subsection (b), the 
Commission, by rule, regulation, or order, may conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class or classes of persons, securities, or transactions, from any 
provision or provisions of this title or of any rule or regulation 
issued under this title, to the extent that such exemption is necessary 
or appropriate in the public interest, and is consistent with the 
protection of investors. The Commission shall, by rule or regulation, 
determine the procedures under which an exemptive order under this 
section shall be granted and may, in its sole discretion, decline to 
entertain any application for an order of exemption under this section.
    ``(b) Limitation.--The Commission may not, under this section, 
exempt any person, security, or transaction, or any class or classes of 
persons, securities, or transactions from section 15C or the rules or 
regulations issued thereunder or (for purposes of section 15C and the 
rules and regulations issued thereunder) from the definitions in 
paragraphs (42), (43), (44), or (45) of section 3(a).''.

SEC. 310. ANALYSIS OF ECONOMIC EFFECTS OF REGULATION.

    (a) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out the Economic Analysis Program, including 
funding for the Office of Economic Analysis of the Securities and 
Exchange Commission, $6,000,000 for fiscal year 1997, and $6,000,000 
for fiscal year 1998.
    (b) Analysis of Economic Effects of Regulation.--
            (1) In general.--The Chief Economist of the Commission 
        shall prepare a report on each proposed regulation of the 
        Commission. Such report shall be provided to each Commissioner 
        and shall be published in the Federal Register before any such 
        regulation of the Commission may become effective.
            (2) Report contents.--The report required by this 
        subsection shall include--
                    (A) an analysis of the likely effects of the 
                proposed regulation on the economy of the United 
                States, and particularly upon the securities markets 
                and the participants in those markets; and
                    (B) the estimated impact of the proposed regulation 
                upon economic and market behavior, including any impact 
                on market liquidity, the costs of investment, and the 
                financial risks of investment.

SEC. 311. PRIVATIZATION OF EDGAR.

    Not later than 180 days after the date of enactment of this Act, 
the Commission shall submit to the Congress a report on the Electronic 
Data Gathering Analysis and Retrieval System consisting of the 
Commission's plan for promoting competition and innovation of the 
system through privatization of all or any part of the system. Such 
plan shall include such recommendations for action as may be necessary 
to implement the plan.

SEC. 312. IMPROVING COORDINATION OF SUPERVISION.

    Section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q) 
is amended by adding at the end the following new subsection:
    ``(i) Coordination of Examining Authorities.--
            ``(1) Objective.--The Commission and the examining 
        authorities shall promote effective and efficient oversight of 
        the activities of brokers and dealers, avoiding redundancy, 
        while maintaining the highest level of examination and 
        oversight quality.
            ``(2) Elimination of duplication.--The Commission and the 
        examining authorities, through cooperation and coordination of 
        examination and oversight activities, shall eliminate any 
        unnecessary and burdensome duplication in the examination 
        process.
            ``(3) Coordination of examinations.--The Commission and the 
        examining authorities shall share such information, including 
        reports of examinations, customer complaint information, and 
        other nonpublic regulatory information, as appropriate to 
        foster a coordinated approach to regulatory oversight of 
        brokers and dealers that are subject to examination by more 
        than one examining authority.
            ``(4) Examinations for cause.--At any time, any examining 
        authority may conduct an examination for cause of any broker or 
        dealer subject to its jurisdiction.
            ``(5) Confidentiality.--
                    ``(A) In general.--The provisions of section 24 
                shall apply to the sharing of information in accordance 
                with this subsection. The Commission shall take 
                appropriate action under section 24(c) to assure that 
                such information is not inappropriately disclosed.
                    ``(B) Appropriate disclosure not prohibited.--
                Nothing in this paragraph shall authorize the 
                Commission or any examining authority to withhold 
                information from the Congress, or prevent the 
                Commission or any examining authority from complying 
                with a request for information from any other Federal 
                department or agency requesting the information for 
                purposes within the scope of its jurisdiction, or 
                complying with an order of a court of the United States 
                in an action brought by the United States or the 
                Commission.
            ``(6) Definition.--For purposes of this subsection, the 
        term `examining authority' means the self-regulatory 
        organizations registered with the Commission under this title 
        (other than registered clearing agencies) with the authority to 
        examine, inspect, and otherwise oversee the activities of a 
        registered broker or dealer.''.

SEC. 313. INCREASED ACCESS TO FOREIGN BUSINESS INFORMATION.

    (a) The Securities Act of 1993.--Section 2(3) of the Securities Act 
of 1933 (15 U.S.C. 77b(3)) is amended in the third sentence--
            (1) by striking ``not include preliminary'' and inserting 
        ``not include (A) preliminary''; and
            (2) by inserting before the period ``; or (B) solely for 
        purposes of section 5, press conferences held outside of the 
        United States, public meetings with issuer representatives 
        conducted outside of the United States, or press related 
        materials released outside of the United States in which an 
        offshore offering is discussed, irrespective of whether 
        journalists from the United States or journalists for 
        publications (including on-line services) with circulation in 
        the United States attend such press conferences or meetings or 
        receive such press related materials.''.
    (b) The Securities Exchange Act of 1934.--Section 14 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78n) is amended by adding at 
the end the following new subsection:
    ``(i) Treatment of Press Related Materials.--
            ``(1) In general.--Any person making a tender offer for, or 
        a request or invitation for tenders of, the securities of a 
        foreign issuer may grant journalists from the United States or 
        journalists for publications (including on-line services) with 
        circulation in the United States access to press conferences 
        occurring outside of the United States, meetings with its 
        representatives conducted outside of the United States, or 
        press related materials released outside of the United States 
        in which an offshore tender offer is discussed, without being 
        deemed to have used the jurisdictional means specified in 
        subsection (d)(1) or becoming subject to any regulations 
        promulgated by the Commission, pursuant to subsection (e) of 
        this section or section 13(e), or otherwise, that relate to 
        tender offers or requests or invitations for tenders.
            ``(2) Definition.--For purposes of this subsection, the 
        term `foreign issuer' means any corporation or other 
        organization--
                    ``(A) that is incorporated or organized under the 
                laws of any foreign country; or
                    ``(B) the principal place of business of which is 
                located in a foreign country.''.

SEC. 314. SHORT-FORM REGISTRATION.

    (a) In General.--Not later than 180 days after the date of 
enactment of this Act, the Commission shall amend Form S-3 (17 C.F.R. 
239.13, relating to registration under the Securities Act of 1933, of 
securities of certain issuers offered pursuant to certain types of 
transactions) to allow such form, or its equivalent, to be used for 
primary offerings by a registrant if--
            (1) the outstanding stock of the registrant held by 
        nonaffiliates of the registrant has an adequate aggregate 
        market value, as determined by the Commission; and
            (2) such registrant otherwise meets the eligibility 
        requirements for registration using such form, or its 
        equivalent.
    (b) Adjustments.--Any adjustment to the adequate aggregate market 
value threshold referred to in subsection (a)(1) by the Commission 
following the date of enactment of this Act shall apply equally to 
voting and nonvoting common shares and such other securities as the 
Commission shall establish.
    (c) Definition.--For purposes of this section, the term ``stock'' 
includes voting and nonvoting common shares, and such other securities 
as the Commission shall establish.

SEC. 315. CHURCH EMPLOYEE PENSION PLANS.

    (a) Amendment to the Investment Company Act of 1940.--Section 3(c) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) is amended 
by adding at the end the following new paragraph:
            ``(14) Any church plan described in section 414(e) of the 
        Internal Revenue Code of 1986, if, under any such plan, no part 
        of the assets may be used for, or diverted to, purposes other 
        than the exclusive benefit of plan participants or 
        beneficiaries, or any company or account that is--
                    ``(A) established by a person that is eligible to 
                establish and maintain such a plan under section 414(e) 
                of the Internal Revenue Code of 1986; and
                    ``(B) substantially all of the activities of which 
                consist of--
                            ``(i) managing or holding assets 
                        contributed to such church plans or other 
                        assets which are permitted to be commingled 
                        with the assets of church plans under the 
                        Internal Revenue Code of 1986; or
                            ``(ii) administering or providing benefits 
                        pursuant to church plans.''.
    (b) Amendment to the Securities Act of 1933.--Section 3(a) of the 
Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding at the 
end the following new paragraph:
            ``(13) Any security issued by or any interest or 
        participation in any church plan, company or account that is 
        excluded from the definition of an investment company under 
        section 3(c)(14) of the Investment Company Act of 1940.''.
    (c) Amendments to the Securities Exchange Act of 1934.--
            (1) Exempted securities.--Section 3(a)(12)(A) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)) is 
        amended--
                    (A) in clause (v), by striking ``and'' at the end;
                    (B) by redesignating clause (vi) as clause (vii); 
                and
                    (C) by inserting after clause (v) the following new 
                clause:
                            ``(vi) solely for purposes of sections 12, 
                        13, 14, and 16 of this title, any security 
                        issued by or any interest or participation in 
                        any church plan, company, or account that is 
                        excluded from the definition of an investment 
                        company under section 3(c)(14) of the 
                        Investment Company Act of 1940; and''.
            (2) Exemption from broker-dealer provisions.--Section 3 of 
        the Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended 
        by adding at the end the following new subsection:
    ``(f) Church Plans.--No church plan described in section 414(e) of 
the Internal Revenue Code of 1986, no person or entity eligible to 
establish and maintain such a plan under the Internal Revenue Code of 
1986, no company or account that is excluded from the definition of an 
investment company under section 3(c)(14) of the Investment Company Act 
of 1940, and no trustee, director, officer or employee of or volunteer 
for such plan, company, account person, or entity, acting within the 
scope of that person's employment or activities with respect to such 
plan, shall be deemed to be a `broker', `dealer', `municipal securities 
broker', `municipal securities dealer', `government securities broker', 
`government securities dealer', `clearing agency', or `transfer agent' 
for purposes of this title--
            ``(1) solely because such plan, company, person, or entity 
        buys, holds, sells, trades in, or transfers securities or acts 
        as an intermediary in making payments in connection with 
        transactions in securities for its own account in its capacity 
        as trustee or administrator of, or otherwise on behalf of, or 
        for the account of, any church plan, company, or account that 
        is excluded from the definition of an investment company under 
        section 3(c)(14) of the Investment Company Act of 1940; and
            ``(2) if no such person or entity receives a commission or 
        other transaction-related sales compensation in connection with 
        any activities conducted in reliance on the exemption provided 
        by this subsection.''.
    (d) Amendment to the Investment Advisers Act of 1940.--Section 
203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(b)) is 
amended--
            (1) in paragraph (3), by striking ``or'' at the end;
            (2) in paragraph (4), by striking the period at the end and 
        inserting ``; or''; and
            (3) by adding at the end the following new paragraph:
            ``(5) any plan described in section 414(e) of the Internal 
        Revenue Code of 1986, any person or entity eligible to 
        establish and maintain such a plan under the Internal Revenue 
        Code of 1986, or any trustee, director, officer, or employee of 
        or volunteer for any such plan or person, if such person or 
        entity provides investment advice exclusively to any plan, 
        person, or entity or any company, account, or fund that is 
        excluded from the definition of an investment company under 
        section 3(c)(14) of the Investment Company Act of 1940.''.
    (e) Amendment to the Trust Indenture Act of 1939.--Section 
304(a)(4)(A) of the Trust Indenture Act of 1939 (15 U.S.C. 77ddd(4)(A)) 
is amended by striking ``or (11)'' and inserting ``(11), or (14)''.
    (f) Protection of Church Employee Benefit Plans Under State Law.--
            (1) Registration requirements.--Any security issued by or 
        any interest or participation in any church plan, company, or 
        account that is excluded from the definition of an investment 
        company under section 3(c)(14) of the Investment Company Act of 
        1940, as added by subsection (a) of this section, and any 
        offer, sale, or purchase thereof, shall be exempt from any law 
        of a State that requires registration or qualification of 
        securities.
            (2) Treatment of church plans.--No church plan described in 
        section 414(e) of the Internal Revenue Code of 1986, no person 
        or entity eligible to establish and maintain such a plan under 
        the Internal Revenue Code of 1986, no company or account that 
        is excluded from the definition of an investment company under 
        section 3(c)(14) of the Investment Company Act of 1940, as 
        added by subsection (a) of this section, and no trustee, 
        director, officer, or employee of or volunteer for any such 
        plan, person, entity, company, or account shall be required to 
        qualify, register, or be subject to regulation as an investment 
        company or as a broker, dealer, investment adviser, or agent 
        under the laws of any State solely because such plan, person, 
        entity, company, or account buys, holds, sells, or trades in 
        securities for its own account or in its capacity as a trustee 
        or administrator of or otherwise on behalf of, or for the 
        account of, or provides investment advice to, for, or on behalf 
        of, any such plan, person, or entity or any company or account 
        that is excluded from the definition of an investment company 
        under section 3(c)(14) of the Investment Company Act of 1940, 
        as added by subsection (a) of this section.
    (g) Amendment to the Investment Company Act of 1940.--Section 30 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-29) is amended by 
adding at the end the following new subsections:
    ``(g) Disclosure to Church Plan Participants.--A person that 
maintains a church plan that is excluded from the definition of an 
investment company solely by reason of section 3(c)(14) shall provide 
disclosure to plan participants, in writing, and not less frequently 
than annually, and for new participants joining such a plan after May 
31, 1996, prior to joining such plan, that--
            ``(1) the plan, or any company or account maintained to 
        manage or hold plan assets and interests in such plan, company, 
        or account, are not subject to registration, regulation, or 
        reporting under this title, the Securities Act of 1933, the 
        Securities Exchange Act of 1934, or State securities laws; and
            ``(2) plan participants and beneficiaries therefore will 
        not be afforded the protections of those provisions.
    ``(h) Notice to Commission.--The Commission may issue rules and 
regulations to require any person that maintains a church plan that is 
excluded from the definition of an investment company solely by reason 
of section 3(c)(14) to file a notice with the Commission containing 
such information and in such form as the Commission may prescribe as 
necessary or appropriate in the public interest or consistent with the 
protection of investors.''.

SEC. 316. PROMOTING GLOBAL PREEMINENCE OF AMERICAN SECURITIES MARKETS.

    It is the sense of the Congress that--
            (1) the United States and foreign securities markets are 
        increasingly becoming international securities markets, as 
        issuers and investors seek the benefits of new capital and 
        secondary market opportunities without regard to national 
        borders;
            (2) as issuers seek to raise capital across national 
        borders, they confront differing accounting requirements in the 
        various regulatory jurisdictions;
            (3) the establishment of a high-quality comprehensive set 
        of generally accepted international accounting standards in 
        cross-border securities offerings would greatly facilitate 
        international financing activities and, most significantly, 
        would enhance the ability of foreign corporations to access and 
        list in United States markets;
            (4) in addition to the efforts made before the date of 
        enactment of this Act by the Commission to respond to the 
        growing internationalization of securities markets, the 
        Commission should enhance its vigorous support for the 
        development of high-quality international accounting standards 
        as soon as practicable; and
            (5) the Commission, in view of its clear authority under 
        law to facilitate the access of foreign corporations to list 
        their securities in United States markets, should report to the 
        Congress, not later than 1 year after the date of enactment of 
        this Act, on progress in the development of international 
        accounting standards and the outlook for successful completion 
        of a set of international standards that would be acceptable to 
        the Commission for offerings and listings by foreign 
        corporations in United States markets.

SEC. 317. BROKER-DEALER EXEMPTION FROM STATE LAW FOR CERTAIN DE MINIMIS 
              TRANSACTIONS.

    (a) In General.--Section 15 of the Securities Exchange Act of 1934 
(15 U.S.C. 78o) is amended by adding at the end the following new 
subsection:
    ``(h) Exemption From State Law for Certain de Minimis 
Transactions.--
            ``(1) In general.--No law, rule, regulation, or order, or 
        other administrative action of any State or political 
        subdivision thereof may prohibit an associated person of a 
        broker or dealer from affecting a transaction described in 
        paragraph (2) for a customer in such State if--
                    ``(A) such associated person is not ineligible to 
                register with such State for any reason other than such 
                a transaction;
                    ``(B) such associated person is registered with a 
                registered securities association and at least one 
                State; and
                    ``(C) the broker or dealer with which such person 
                is associated is registered with such State.
            ``(2) Described transactions.--
                    ``(A) In general.--A transaction is described in 
                this paragraph if--
                            ``(i) such transaction is effected--
                                    ``(I) on behalf of a customer that, 
                                for 30 days prior to the day of the 
                                transaction, maintained an account with 
                                the broker or dealer; and
                                    ``(II) by an associated person of 
                                the broker or dealer--
                                            ``(aa) to which the 
                                        customer was assigned for 14 
                                        days prior to the day of the 
                                        transaction; and
                                            ``(bb) who is registered 
                                        with a State in which the 
                                        customer was a resident or was 
                                        present for at least 30 
                                        consecutive days during the 
                                        one-year period prior to the 
                                        day of the transaction;
                            ``(ii) the transaction is effected--
                                    ``(I) on behalf of a customer that, 
                                for 30 days prior to the day of the 
                                transaction, maintains an account with 
                                the broker or dealer; and
                                    ``(II) within the period beginning 
                                on the date on which such associated 
                                person files an application for 
                                registration with the State in which 
                                the transaction is effected and ending 
                                on the earlier of--
                                            ``(aa) 60 days after the 
                                        date on which the application 
                                        is filed; or
                                            ``(bb) the date on which 
                                        such State notifies the 
                                        associated person that it has 
                                        denied the application for 
                                        registration or has stayed the 
                                        pendency of the application for 
                                        cause.
                    ``(B) Rules of construction.--For purposes of 
                subparagraph (A)(i)(II)--
                            ``(i) each of up to 3 associated persons of 
                        a broker or dealer who are designated to effect 
                        transactions during the absence or 
                        unavailability of the principal associated 
                        person for a customer may be treated as an 
                        associated person to which such customer is 
                        assigned; and
                            ``(ii) if the customer is present in 
                        another State for 30 or more consecutive days 
                        or has permanently changed his or her residence 
                        to another State, a transaction is not 
                        described in this paragraph, unless the 
                        association person of the broker or dealer 
                        files an application for registration with such 
                        State not later than 10 business days after the 
                        later of the date of the transaction, or the 
                        date of the discovery of the presence of the 
                        customer in the other State for 30 or more 
                        consecutive days or the change in the 
                        customer's residence.''.
    (b) Technical Amendment.--Section 28(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78bb(a)) is amended by striking ``Nothing'' and 
inserting ``Except as otherwise specifically provided in this title, 
nothing''.

SEC. 318. STUDIES AND REPORTS.

    (a) Impact of Technological Advances.--
            (1) Study.--
                    (A) In general.--The Commission shall conduct a 
                study of--
                            (i) the impact of technological advances 
                        and the use of on-line information systems on 
                        the securities markets;
                            (ii) how such technologies have changed the 
                        way in which the securities markets operate; 
                        and
                            (iii) any steps taken by the Commission to 
                        address such changes.
                    (B) Considerations.--In conducting the study under 
                subparagraph (A), the Commission shall consider how the 
                Commission has adapted its enforcement policies and 
                practices in response to technological developments 
                with regard to--
                            (i) disclosure, prospectus delivery, and 
                        other customer protection regulations;
                            (ii) intermediaries and exchanges in the 
                        domestic and international financial services 
                        industry;
                            (iii) reporting by issuers, including 
                        communications with holders of securities;
                            (iv) the relationship of the Commission 
                        with other national regulatory authorities and 
                        organizations to improve coordination and 
                        cooperation; and
                            (v) the relationship of the Commission with 
                        State regulatory authorities and organizations 
                        to improve coordination and cooperation.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Commission shall submit a report to 
        the Congress on the results of the study conducted under 
        paragraph (1).
    (b) Shareholder Proposals.--
            (1) Study.--The Commission shall conduct a study of--
                    (A) whether shareholder access to proxy statements 
                pursuant to section 14 of the Securities Exchange Act 
                of 1934 has been impaired by recent statutory, 
                judicial, or regulatory changes; and
                    (B) the ability of shareholders to have proposals 
                relating to corporate practices and social issues 
                included as part of proxy statements.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Commission shall submit a report to 
        the Congress on the results of the study conducted under 
        paragraph (1), together with any recommendations for regulatory 
        or legislative changes that it considers necessary to improve 
        shareholder access to proxy statements.
    (c) Preferencing.--
            (1) Study.--The Commission shall conduct a study of the 
        impact on investors and the national market system of the 
        practice known as ``preferencing'' on one or more registered 
        securities exchanges, including consideration of--
                    (A) how preferencing impacts--
                            (i) the execution prices received by retail 
                        securities customers whose orders are 
                        preferenced; and
                            (ii) the ability of retail securities 
                        customers in all markets to obtain executions 
                        of their limit orders in preferenced 
                        securities; and
                    (B) the costs of preferencing to such customers.
            (2) Report.--Not later than 6 months after the date of 
        enactment of this Act, the Commission shall submit a report to 
        the Congress on the results of the study conducted under 
        paragraph (1).
            (3) Definition.--For purposes of this subsection, the term 
        ``preferencing'' refers to the practice of a broker acting as a 
        dealer on a national securities exchange, directing the orders 
        of customers to buy or sell securities to itself for execution 
        under rules that permit the broker to take priority in 
        execution over same-priced orders or quotations entered prior 
        in time.

            Attest:

                                                             Secretary.
104th CONGRESS

  2d Session

                               H. R. 3005

_______________________________________________________________________

                               AMENDMENT

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