[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
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AMENDMENT
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