[Congressional Record Volume 142, Number 90 (Tuesday, June 18, 1996)]
[House]
[Pages H6436-H6449]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     SECURITIES AMENDMENTS OF 1996

  Mr. BLILEY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 3005) 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, as amended.
  The Clerk read as follows:

                               H.R. 3005

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.

        TITLE I--CAPITAL MARKETS DEREGULATION AND LIBERALIZATION

Sec. 101. Short title.
Sec. 102. Creation of national securities markets.
Sec. 103. Margin requirements.
Sec. 104. Prospectus delivery.
Sec. 105. Exemptive authority.
Sec. 106. Promotion of efficiency, competition, and capital formation.
Sec. 107. Privatization of EDGAR.
Sec. 108. Coordination of Examining Authorities.
Sec. 109. Foreign press conferences.
Sec. 110. Report on Trust Indenture Act of 1939.

              TITLE II--INVESTMENT COMPANY ACT AMENDMENTS

Sec. 201. Short title.
Sec. 202. Funds of funds.
Sec. 203. Registration of securities.
Sec. 204. Investment company advertising prospectus.
Sec. 205. Variable insurance contracts.
Sec. 206. Reports to the Commission and shareholders.
Sec. 207. Books, records and inspections.
Sec. 208. Investment company names.
Sec. 209. Exceptions from definition of investment company.

      TITLE III--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION

Sec. 301. Short title.
Sec. 302. Purposes.
Sec. 303. Authorization of appropriations.
Sec. 304. Registration fees.
Sec. 305. Transaction fees.
Sec. 306. Time for payment.
Sec. 307. Sense of the Congress concerning fees.
        TITLE I--CAPITAL MARKETS DEREGULATION AND LIBERALIZATION

     SEC. 101. SHORT TITLE.

       This title may be cited as the ``Capital Markets 
     Deregulation and Liberalization Act of 1996''.

     SEC. 102. CREATION OF NATIONAL SECURITIES MARKETS.

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

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

       ``(a) Scope of Exemption.--Except as otherwise provided in 
     this section, no law, rule, regulation, or 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 registration or qualification 
     of securities transactions, shall directly or indirectly 
     apply to a security that--
       ``(A) is a covered security; or
       ``(B) will be a covered security upon completion of the 
     transaction;
       ``(2) shall directly or indirectly prohibit, limit, or 
     impose conditions upon the use of--
       ``(A) with respect to a covered security described in 
     subsection (b)(1) or (c)(1)--
       ``(i) any offering document that is prepared by the issuer; 
     or
       ``(ii) any offering document that is not prepared by the 
     issuer if such offering document is required to be and is 
     filed with the Commission or any national securities 
     organization registered under section 15A of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78o-3);
       ``(B) with respect to a covered security described in 
     paragraph (2), (3), or (4) of subsection (b), any offering 
     document; or
       ``(C) any proxy statement, report to shareholders, or other 
     disclosure document relating to a covered security or the 
     issuer thereof that is required to be and is filed with the

[[Page H6437]]

     Commission or any national securities organization registered 
     under section 15A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o-3); or
       ``(3) shall directly or indirectly prohibit, limit, or 
     impose conditions, based on the merits of such offering or 
     issuer, upon the offer or sale of any security described in 
     paragraph (1).
       ``(b) Covered Securities.--For purposes of this section, 
     the following are covered securities:
       ``(1) Exclusive federal registration of nationally traded 
     securities.--A security is a covered security if such 
     security is--
       ``(A) listed, or authorized for listing, on the New York 
     Stock Exchange or the American Stock Exchange, or included or 
     qualified for inclusion in the National Market System of the 
     National Association of Securities Dealers Automated 
     Quotation System (or any successor to such entities);
       ``(B) listed, or authorized for listing, on a national 
     securities exchange (or tier or segment thereof) that has 
     listing standards that the Commission determines by rule (on 
     its own initiative or on the basis of a petition) are 
     substantially similar to the listing standards applicable to 
     securities described in subparagraph (A); or
       ``(C) is a security of the same issuer that is equal in 
     seniority or senior to a security described in subparagraph 
     (A) or (B).
       ``(2) Exclusive federal registration of investment 
     companies.--A security is a covered security if such security 
     is a security issued by an investment company that is 
     registered under the Investment Company Act of 1940 (15 
     U.S.C. 80a et seq.).
       ``(3) Sales to qualified purchasers.--A security is a 
     covered security with respect to the offer or sale of the 
     security to qualified purchasers, as defined by the 
     Commission by rule. In prescribing such rule, the Commission 
     may define qualified purchaser differently with respect to 
     different categories of securities, consistent with the 
     public interest and the protection of investors.
       ``(4) Exemption in connection with certain exempt 
     offerings.--A security is a covered security if--
       ``(A) the offer or sale of such security is exempt from 
     registration under this title pursuant to section 4(1) or 
     4(3), and--
       ``(i) the issuer of such security files reports with the 
     Commission pursuant to section 13 or 15(d) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or
       ``(ii) the issuer is exempt from filing such reports;
       ``(B) such security is exempt from registration under this 
     title pursuant to section 4(4);
       ``(C) the offer or sale of such security is exempt from 
     registration under this title pursuant to section 3(a), other 
     than the offer or sale of a security that is exempt from such 
     registration pursuant to paragraph (4) or (11) of such 
     section, except that a municipal security that is exempt from 
     such registration pursuant to paragraph (2) of such section 
     is not a covered security with respect to the offer or sale 
     of such security in the State in which the issuer of such 
     security is located; or
       ``(D) the offer or sale of such security is exempt from 
     registration under this title pursuant to Commission rule or 
     regulation under section 4(2) of this title.
       ``(c) Conditionally Covered Securities.--
       ``(1) Federally registered offerings.--Subject to the 
     limitations contained in paragraphs (2) and (3), a security 
     is a covered security if--
       ``(A) the issuer of such security has (or will have upon 
     conclusion of the transaction) total assets exceeding 
     $10,000,000;
       ``(B) such security is the subject of a registration 
     statement that is filed with the Commission pursuant to this 
     title; and
       ``(C) the issuer files with such registration statement 
     audited financial statements for each of the two most recent 
     fiscal years of its operations ending before the filing of 
     the registration statement.
       ``(2) Limitations for certain offerings.--Notwithstanding 
     paragraph (1), a security is not a covered security if such 
     security is--
       ``(A) a security of an issuer which is a blank check 
     company (as defined in section 7(b) of this title), a 
     partnership, a limited liability company, or a direct 
     participation investment program;
       ``(B) a penny stock (as such term is defined in section 
     3(a)(51) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(51)); or
       ``(C) a security issued in an offering relating to a rollup 
     transaction (as such term is defined in paragraphs (4) and 
     (5) of section 14(h) of such Act (15 U.S.C. 78n(h)(4), (5)).
       ``(3) Limitations based on misconduct.--Notwithstanding 
     paragraph (1), a security is not a covered security--
       ``(A) with respect to any State, if the issuer, or a 
     principal officer or principal shareholder thereof--
       ``(i) is subject to a statutory disqualification, as 
     defined in subparagraph (A), (B), (C), or (D) of section 
     3(a)(39) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(39));
       ``(ii) has been convicted within 5 years prior to the 
     offering of any felony under Federal or State law in 
     connection with the offer, purchase, or sale of any security, 
     or any felony under Federal or State law involving fraud or 
     deceit; or
       ``(iii) is currently named in and subject to any order, 
     judgment, or decree of any court of competent jurisdiction 
     acting pursuant to Federal or State law temporarily or 
     permanently restraining or enjoining such issuer, officer, or 
     shareholder from engaging in or continuing any conduct or 
     practice in connection with a security; or
       ``(B) with respect to a particular State, if the issuer, or 
     a principal officer or principal shareholder thereof--
       ``(i) has filed a registration statement which is the 
     subject of a currently effective stop order entered pursuant 
     to that State's securities laws within 5 years prior to the 
     offering;
       ``(ii) is currently named in and subject to any 
     administrative enforcement order or judgment of that State's 
     securities commission (or any agency or office performing 
     like functions) entered within 5 years prior to the offering, 
     or is currently named in and subject to any other 
     administrative enforcement order or judgment of that State 
     entered within 5 years prior to the offering that finds fraud 
     or deceit; or
       ``(iii) is currently named in and subject to any 
     administrative enforcement order or judgment of that State 
     which prohibits or denies registration, or revokes the use of 
     any exemption from registration, in connection with the 
     offer, purchase, or sale of securities.
       ``(4) Exceptions to limitations.--
       ``(A) Debt security exemption.--The limitations in 
     paragraph (2)(A) shall not apply with respect to the debt 
     securities of any issuer that is a partnership or limited 
     liability company, provided that (i) the issuer is either a 
     registered dealer or an affiliate of such a dealer, (ii) the 
     issuer has, both before and after the offering, capital or 
     equity (each computed in accordance with United States 
     generally accepted accounting principles) of not less than 
     $75,000,000, and (iii) if the issuer is not a registered 
     dealer, such issuer does not use the proceeds of the offering 
     primarily to fund the nonfinancial business of the issuer or 
     any of its affiliates that are not registered dealers.
       ``(B) Misconduct exemptions.--The limitations in paragraph 
     (3)(A) shall not apply if the Commission has exempted the 
     subject person from the application of such paragraph by rule 
     or order, and the limitations in paragraph (3)(B) shall not 
     apply if the securities commission (or any agency or office 
     performing like functions) of the affected State has exempted 
     the subject person from the application of such paragraph by 
     rule or order.
       ``(C) Reasonable steps.--The provisions of paragraph (3) 
     shall not apply if the issuer has taken reasonable steps to 
     ascertain whether any principal officer or principal 
     shareholder is subject to such paragraph, and such steps do 
     not reveal a person who is subject to such paragraph. An 
     issuer shall be considered to have taken reasonable steps if 
     such issuer or its agent has conducted a search of any 
     centralized data bases that the Commission may designate by 
     rule, and has received an affidavit under oath by each such 
     principal officer or principal shareholder stating that such 
     officer or shareholder is not subject to the provisions of 
     paragraph (3).
       ``(D) Effect of limitations on remedies.--Notwithstanding 
     paragraph (3), an issuer shall not be subject to a right of 
     rescission under State securities laws solely as a result of 
     the operation of such paragraph.
       ``(5) No effect under subsection (b).--No limitation under 
     this subsection shall affect the treatment of a security that 
     qualifies as a covered security under subsection (b).
       ``(d) Preservation of Authority.--
       ``(1) Fraud authority.--Consistent with this section, 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, shall retain 
     jurisdiction under the laws of such State, Territory, or 
     District to investigate and bring enforcement actions with 
     respect to fraud or deceit in connection with securities or 
     securities transactions.
       ``(2) Preservation of filing requirements.--
       ``(A) Notice filings permitted.--Nothing contained 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, 
     together with any required fee.
       ``(B) Preservation of fees.--Until otherwise provided by 
     State law enacted after the date of enactment of the 
     Securities Amendments of 1996, filing or registration fees 
     with respect to securities or securities transactions may 
     continue to be collected in amounts determined pursuant to 
     State law as in effect on the day before such date.
       ``(C) Fees not permitted on listed securities.--
     Notwithstanding subparagraphs (A) and (B), no filing or fee 
     may be required with respect to any security that is a 
     covered security pursuant to subsection (b)(1) of this 
     section, or will be such a covered security upon completion 
     of the transaction, or is a security of the same issuer that 
     is equal in seniority or senior to a security that is a 
     covered security pursuant to such subsection.
       ``(3) Enforcement of requirements.--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 
     suspending the offer or sale of securities within such State, 
     Territory, or District as a result of the failure to submit 
     any filing or fee required under law and permitted under this 
     section.
       ``(e) Definitions.--For purposes of this section:

[[Page H6438]]

       ``(1) Principal officer.--The term `principal officer' 
     means a director, chief executive officer, or chief financial 
     officer of an issuer, or any other officer performing like 
     functions.
       ``(2) Principal shareholder.--The term `principal 
     shareholder' means any person who is directly or indirectly 
     the beneficial owner of more than 20 percent of any class of 
     equity security of an issuer. When two or more persons act as 
     a partnership, limited partnership, syndicate, or other group 
     for the purpose of acquiring, holding, or disposing of 
     securities of an issuer, such syndicate or group shall be 
     deemed a `person' for purposes of this paragraph. In 
     determining, for purposes of this paragraph, any percentage 
     of a class of any security, such class shall be deemed to 
     consist of the amount of the outstanding securities of such 
     class, exclusive of any securities of such class held by or 
     for the account of the issuer or a subsidiary of the issuer.
       ``(3) Offering document.--The term `offering document' has 
     the meaning given the term `prospectus' by section 2(10), but 
     without regard to the provisions of clauses (a) and (b) of 
     such section, except that, with respect to a security 
     described in subsection (b)(2) of this section, such term 
     also includes a communication that is not deemed to offer 
     such a security pursuant to a rule of the Commission.
       ``(4) Prepared by the issuer.--Within 6 months after the 
     date of enactment of the Securities Amendments of 1996, the 
     Commission shall, by rule, define the term `prepared by the 
     issuer' for purposes of this section.''.
       (2) Study of uniformity.--The Securities Exchange 
     Commission shall conduct a study after consultation with 
     States, issuers, brokers, and dealers on the extent to which 
     uniformity of State regulatory requirements for securities or 
     securities transactions has been achieved for securities that 
     are not covered securities (within the meaning of section 18 
     of the Securities Act of 1933 as amended by paragraph (1) of 
     this subsection). Such study shall specifically focus on the 
     impact of such uniformity or lack thereof on the cost of 
     capital, innovation and technological development in 
     securities markets, and duplicative regulation with respect 
     to securities issuers (including small business), brokers, 
     and dealers and the effect on investor protection. The 
     Commission shall submit to the Congress a report on the 
     results of such study within one year after the date of 
     enactment of this Act.
       (b) Broker/Dealer Regulation.--
       (1) Amendment.--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) Limitations on State Law.--
       ``(1) Capital, margin, books and records, bonding, and 
     reports.--No law, rule, regulation, or order, or other 
     administrative action of any State or political subdivision 
     thereof shall establish capital, custody, margin, financial 
     responsibility, making and keeping records, bonding, or 
     financial or operational reporting requirements for brokers, 
     dealers, municipal securities dealers, government securities 
     brokers, or government securities dealers that differ from, 
     or are in addition to, the requirements in those areas 
     established under this title. The Commission shall consult 
     periodically the securities commissions (or any agency or 
     office performing like functions) of the States concerning 
     the adequacy of such requirements as established under this 
     title.
       ``(2) Exemption to permit service to customers.--No law, 
     rule, regulation, or order, or other administrative action of 
     any State or political subdivision thereof shall require an 
     associated person to register with such State prior to 
     effecting a transaction described in paragraph (3) for a 
     customer in such State if--
       ``(A) such transaction is effected on behalf of a customer 
     that, for 30 days prior to the day of the transaction, 
     maintains an account with the broker or dealer;
       ``(B) such associated person is not ineligible to register 
     with such State for any reason other than such a transaction;
       ``(C) such associated person is registered with a 
     registered securities association and at least one State; and
       ``(D) the broker or dealer with which such person is 
     associated is registered with such State.
       ``(3) Described transactions.--A transaction is described 
     in this paragraph if--
       ``(A) such transaction is effected by an associated person 
     (i) to which the customer was assigned for 14 days prior to 
     the day of the transaction, and (ii) 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 transaction; except that, 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, 
     such transaction is not described in this subparagraph unless 
     the associated person files with such State an application 
     for registration within 10 calendar days of the later of the 
     date of the transaction or the date of the discovery of the 
     presence of the customer in the State for 30 or more 
     consecutive days or the change in the customer's residence;
       ``(B) the transaction is effected within the period 
     beginning on the date on which such associated person files 
     with the State in which the transaction is effected an 
     application for registration and ending on the earlier of (i) 
     60 days after the date the application is filed, or (ii) the 
     time at 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; or
       ``(C) the transaction is one of 10 or fewer transactions in 
     a calendar year (excluding any transactions described in 
     subparagraph (A) or (B)) which the associated person effects 
     in the States in which the associated person is not 
     registered.
       ``(4) Alternate associated persons.--For purposes of 
     paragraph (3)(A)(ii), each of up to 3 associated persons 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 for purposes of such paragraph.''.
       (2) Study.--Within 6 months after the date of enactment of 
     this Act, the Commission, after consultation with registered 
     securities associations, national securities exchanges, and 
     States, shall conduct a study of--
       (A) the impact of disparate State licensing requirements on 
     associated persons of registered brokers or dealers; and
       (B) methods for States to attain uniform licensing 
     requirements for such persons.
       (3) Report.--Within one year after the date of enactment of 
     this Act, the Commission shall submit to the Congress a 
     report on the study conducted under paragraph (2). Such 
     report shall include recommendations concerning appropriate 
     methods described in paragraph (2)(B), including any 
     necessary legislative changes to implement such 
     recommendations.
       (4) 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 elsewhere in this title, nothing''.

     SEC. 103. MARGIN REQUIREMENTS.

       (a) Margin Requirements.--
       (1) Extensions of credit by broker-dealers.--Section 7(c) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78g(c)) is 
     amended to read as follows:
       ``(c) Unlawful Credit Extension to Customers.--
       ``(1) Prohibition.--It shall be unlawful for any member of 
     a national securities exchange or any broker or dealer, 
     directly or indirectly, to extend or maintain credit or 
     arrange for the extension or maintenance of credit to or for 
     any customer--
       ``(A) on any security (other than an exempted security), in 
     contravention of the rules and regulations which the Board of 
     Governors of the Federal Reserve System shall prescribe under 
     subsections (a) and (b) of this section;
       ``(B) without collateral or on any collateral other than 
     securities, except in accordance with such rules and 
     regulations as the Board of Governors of the Federal Reserve 
     System may prescribe--
       ``(i) to permit under specified conditions and for a 
     limited period any such member, broker, or dealer to maintain 
     a credit initially extended in conformity with the rules and 
     regulations of the Board of governors of the Federal Reserve 
     System; and
       ``(ii) to permit the extension or maintenance of credit in 
     cases where the extension or maintenance of credit is not for 
     the purpose of purchasing or carrying securities or of 
     evading or circumventing the provisions of subparagraph (A) 
     of this paragraph.
       ``(2) Exception.--This subsection and the rules and 
     regulations thereunder shall not apply to any credit 
     extended, maintained, or arranged by a member of a national 
     securities exchange or a broker or dealer to or for a member 
     of a national securities exchange or a registered broker or 
     dealer--
       ``(A) a substantial portion of whose business consists of 
     transactions with persons other than brokers or dealers; or
       ``(B) to finance its activities as a market maker or an 
     underwriter;

     except that the Board of Governors of the Federal Reserve 
     System may impose such rules and regulations, in whole or in 
     part, on any credit otherwise exempted by this paragraph if 
     it determines that such action is necessary or appropriate in 
     the public interest or for the protection of investors.''.
       (2) Extensions of credit by other lenders.--Section 7(d) of 
     the Securities Exchange Act of 1934 (78 U.S.C. 78g(d)) is 
     amended to read as follows:
       ``(d) Unlawful Credit Extension in Violation of Rules and 
     Regulations; Exception to Application of Rules, Etc.--
       ``(1) Prohibition.--It shall be unlawful for any person not 
     subject to subsection (c) of this section to extend or 
     maintain credit or to arrange for the extension or 
     maintenance of credit for the purpose of purchasing or 
     carrying any security, in contravention of such rules and 
     regulations as the Board of Governors of the Federal Reserve 
     System shall prescribe to prevent the excessive use of credit 
     for the purchasing or carrying of or trading in securities in 
     circumvention of the other provisions of this section. Such 
     rules and regulations may impose upon all loans made for the 
     purpose of purchasing or carrying securities limitations 
     similar to those imposed upon members, brokers, or dealers by 
     subsection (c) of this section and the rules and regulations 
     thereunder.
       ``(2) Exceptions.--This subsection and the rules and 
     regulations thereunder shall not apply to any credit 
     extended, maintained, or arranged--
       ``(A) by a person not in the ordinary course of business;

[[Page H6439]]

       ``(B) on an exempted security;
       ``(C) to or for a member of a national securities exchange 
     or a registered broker or dealer--
       ``(i) a substantial portion of whose business consists of 
     transactions with persons other than brokers or dealers; or
       ``(ii) to finance its activities as a market maker or an 
     underwriter;
       ``(D) by a bank on a security other than an equity 
     security; or
       ``(E) as the Board of Governors of the Federal Reserve 
     System shall, by such rules, regulations, or orders as it may 
     deem necessary or appropriate in the public interest or for 
     the protection of investors, exempt, either unconditionally 
     or upon specified terms and conditions or for stated periods, 
     from the operation of this subsection and the rules and 
     regulations thereunder;

     except that the Board of Governors of the Federal Reserve 
     System may impose such rules and regulations, in whole or in 
     part, on any credit otherwise exempted by subparagraph (C) of 
     this paragraph if it determines that such action is necessary 
     or appropriate in the public interest or for the protection 
     of investors.''.
       (b) Borrowing by Members, Brokers, and Dealers.--Section 8 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78h) is 
     amended--
       (1) by striking subsection (a), and
       (2) by redesignating subsections (b) and (c) as subsections 
     (a) and (b), respectively.

     SEC. 104. PROSPECTUS DELIVERY.

       (a) Report on Electronic Delivery.--Within six months after 
     the date of enactment of this Act, the Commission shall 
     report to Congress on the steps the Commission has taken, or 
     anticipates taking, to facilitate the electronic delivery of 
     prospectuses to institutional and other investors.
       (b) Report on Advisory Committee Recommendations.--Within 
     one year after the date of enactment of this Act, the 
     Commission shall report to Congress on the Commission's views 
     on the recommendations of the Advisory Committee on Capital 
     Formation, including any actions taken to implement the 
     recommendations of the Advisory Committee.

     SEC. 105. EXEMPTIVE AUTHORITY.

       (a) General Exemptive Authority 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 rules and regulations, 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 thereunder, to the 
     extent that such exemption is necessary or appropriate in the 
     public interest, and is consistent with the protection of 
     investors.''.
       (b) General Exemptive Authority 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) Authority.--Except as provided in subsection (b) but 
     notwithstanding any other provision of this title, 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 thereunder, 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 rules and regulations 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 shall not exercise 
     authority under this section to exempt any person, security, 
     or transaction, or any class or classes of persons, 
     securities, or transactions, from section 15C of this title 
     or the rules or regulations thereunder, or (for purposes of 
     such section 15C or such rules or regulations) from the 
     definitions in paragraphs (42) through (45) of section 3(a) 
     of this title.''.

     SEC. 106. PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL 
                   FORMATION.

       (a) Securities Act of 1933.--Section 2 of the Securities 
     Act of 1933 (15 U.S.C. 77b) is amended--
       (1) by inserting ``(a) Definitions.--'' after ``Sec. 2.''; 
     and
       (2) by adding at the end the following new subsection:
       ``(b) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.
       (b) Securities Exchange Act of 1934.--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) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking, or in the 
     review of a rule of a self-regulatory organization, and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.
       (c) Investment Company Act of 1940.--Section 2 of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-2) is amended 
     by adding at the end the following new subsection:
       ``(c) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     consistent with the public interest, the Commission shall 
     also consider, in addition to the protection of investors, 
     whether the action will promote efficiency, competition, and 
     capital formation.''.

     SEC. 107. PRIVATIZATION OF EDGAR.

       (a) Examination.--The Securities and Exchange Commission 
     shall examine proposals for the privatization of the EDGAR 
     system. Such examination shall promote competition in the 
     automation and rapid collection and dissemination of 
     information required to be disclosed. Such examination shall 
     include proposals that maintain free public access to data 
     filings in the EDGAR system.
       (b) Review and Report.--Within 180 days after the date of 
     enactment of this Act, the Commission shall submit to the 
     Congress a report on the examination under subsection (a). 
     Such report shall include such recommendations for such 
     legislative action as may be necessary to implement the 
     proposal that the Commission determines most effectively 
     achieves the objectives described in subsection (a).

     SEC. 108. COORDINATION OF EXAMINING AUTHORITIES.

       (a) Amendments.--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) Elimination of duplication.--The Commission and the 
     examining authorities, through cooperation and coordination 
     of examination and oversight as required by this subsection, 
     shall eliminate any unnecessary and burdensome duplication in 
     the examination process.
       ``(2) Planning conferences.--
       ``(A) The Commission and the examining authorities shall 
     meet at least annually for a national general planning 
     conference to discuss coordination of examination schedules 
     and priorities and other areas of interest relevant to 
     examination coordination and cooperation.
       ``(B) Within each geographic region designated by the 
     Commission, the Commission and the relevant examining 
     authorities shall meet at least annually for a regional 
     planning conference to discuss examination schedules and 
     priorities and other areas of related interest, and to 
     encourage information-sharing and to avoid unnecessary 
     duplication of examinations.
       ``(3) Coordination tracking system for broker-dealer 
     examinations.--
       ``(A) The Commission and the examining authorities shall 
     prepare, on a periodic basis in a uniform computerized 
     format, information on registered broker and dealer 
     examinations and shall submit such information to the 
     Commission.
       ``(B) The Commission shall maintain a computerized database 
     of consolidated examination information to be used for 
     examination planning and scheduling and for monitoring 
     coordination of registered broker and dealer examinations 
     under this section.
       ``(4) Coordination of examinations.--
       ``(A) The examining authorities shall share among 
     themselves such information, including reports of 
     examinations, customer complaint information, and other non-
     public regulatory information, as appropriate to foster a 
     coordinated approach to regulatory oversight of registered 
     brokers and dealers subject to examination by more than one 
     examining authority.
       ``(B) To the extent practicable, the examining authorities 
     shall assure that each registered broker and dealer subject 
     to examination by more than one examining authority that 
     requests a coordinated examination shall have all requested 
     aspects of the examination conducted simultaneously and 
     without duplication of the areas covered. The examining 
     authorities shall also prepare an advance schedule of all 
     such coordinated examinations.
       ``(5) Prohibited non-coordinated examinations.--Any 
     examining authority that does not participate in a 
     coordinated examination pursuant to paragraph (4) of this 
     subsection shall not conduct a routine examination other than 
     a coordinated examination of that broker or dealer within 9 
     months of the conclusion of a scheduled coordinated 
     examination.
       ``(6) Examinations for cause.--At any time, any examining 
     authority may conduct an examination for cause of any broker 
     or dealer subject to its jurisdiction.
       ``(7) Broker-dealer examination evaluation panel.--The 
     Commission shall establish an examination evaluation panel 
     composed of representatives of registered brokers and dealers 
     that are members of more than one self-regulatory 
     organization that conducts routine examinations. Prior to 
     each national general planning conference required by

[[Page H6440]]

     paragraph (2)(A) of this subsection, the Commission shall 
     convene the examination evaluation panel to review 
     consolidated and statistical information on the coordination 
     of examinations and information on examinations that are not 
     coordinated, including the findings of Commission examiners 
     on the effectiveness of the examining authorities in 
     achieving coordinated examinations. The Commission shall 
     present any findings and recommendations of the examination 
     evaluation panel to the next meeting of the national general 
     planning conference, and shall report back to the examination 
     evaluation panel on the actions taken by the examining 
     authorities regarding those findings and recommendations. The 
     examination evaluation panel shall not be subject to the 
     Federal Advisory Committee Act (5 U.S.C. App.).
       ``(8) Report to congress.--Within one year after the date 
     of enactment of this Act, the Commission shall report to the 
     Congress on the progress it and the examining authorities 
     have made in reducing duplication and improving coordination 
     in registered broker and dealer examinations, and on the 
     activities of the examination evaluation panel. Such report 
     shall also indicate whether the Commission has identified 
     additional redundancies that have failed to be addressed in 
     the coordination of examining authorities, or any 
     recommendations of the examination evaluation panel 
     established under paragraph (7) of this subsection that have 
     not been addressed by the examining authorities or the 
     Commission.''.
       (b) Definition.--Section 3(a) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78e) is amended by adding at the end 
     the following paragraph:
       ``(54) The term `examining authority' means any self-
     regulatory organization 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. 109. FOREIGN PRESS CONFERENCES.

       No later than one year after the date of enactment of this 
     Act, the Commission shall adopt rules under the Securities 
     Act of 1933 concerning the status under the registration 
     provisions of the Securities Act of 1933 of foreign press 
     conferences and foreign press releases by persons engaged in 
     the offer and sale of securities.

     SEC. 110. REPORT ON TRUST INDENTURE ACT OF 1939.

       Within 6 months after the date of enactment of this Act, 
     the Securities and Exchange Commission shall submit to the 
     Congress a report on the benefits of, the continuing need 
     for, and, if necessary, options for the modification or 
     elimination of, the Trust Indenture Act of 1939 (15 U.S.C. 
     77aaa et seq.).
              TITLE II--INVESTMENT COMPANY ACT AMENDMENTS

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``Investment Company Act 
     Amendments 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 such investment company is 
     not a registered investment company'' after ``(bb)'';
       (2) by redesignating existing subparagraphs (G) and (H) as 
     subparagraphs (H) and (I), respectively;
       (3) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G) The provisions of this paragraph (1) shall not apply 
     to securities of a registered open-end company (the `acquired 
     company') purchased or otherwise acquired by a registered 
     open-end company (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 companies 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)(I) 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
       ``(II) 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 company, are not excessive under rules 
     adopted pursuant to either section 22(b) or section 22(c) of 
     this title by a securities association registered under 
     section 15A of the Securities Exchange Act of 1934 or the 
     Commission;
       ``(iv) the acquired company shall have a fundamental policy 
     that prohibits it from acquiring any securities of registered 
     open-end companies in reliance on this subparagraph or 
     subparagraph (F) of this subsection; 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.

     For purposes of this subparagraph, a `group of investment 
     companies' shall mean any two or more registered investment 
     companies that hold themselves out to investors as related 
     companies for purposes of investment and investor 
     services.''; and
       (4) 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 provisions of this subsection, if and 
     to the extent such exemption is consistent with the public 
     interest and the protection of investors.''.

     SEC. 203. 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 redesignating paragraph (3) as subsection (e); and
       (3) in subsection (e) (as so redesignated) 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) Indefinite registration of securities.--Upon the 
     effectiveness of its registration statement under 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.--Within 90 days after 
     the end of the company's fiscal year, the company 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 this purpose, 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 company's previous fiscal year reduced 
     by--
       ``(A) the aggregate redemption or repurchase price of the 
     securities of the company during that year, and
       ``(B) the aggregate redemption or repurchase price of the 
     securities of the company during any prior fiscal year ending 
     not more than 1 year before the date of enactment of the 
     Investment Company Act Amendments of 1996 that were not used 
     previously by the company to reduce fees payable under this 
     section.
       ``(3) Interest due on late payment.--A company paying the 
     fee or any portion thereof more than 90 days after the end of 
     the company's fiscal year 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(a) of title 31, United 
     States Code. The payment of interest pursuant to the 
     requirement of this paragraph shall not preclude the 
     Commission from bringing an action to enforce the 
     requirements of paragraph (2) of this subsection.
       ``(4) Rulemaking authority.--The Commission may adopt rules 
     and regulations to implement the provisions of this 
     subsection.''.
       (c) Effective Date.--The amendments made by this section 
     shall be effective 6 months after the date of enactment of 
     this Act or on such earlier date as the Commission may 
     specify by rule.

     SEC. 204. INVESTMENT COMPANY ADVERTISING PROSPECTUS.

       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) In addition to the prospectuses permitted or required 
     in section 10 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 such 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 such 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)(1) Subsection (a) shall not apply to any registered 
     separate account funding variable insurance contracts, or to 
     the sponsoring insurance company and principal underwriter of 
     such account.
       ``(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) 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

[[Page H6441]]

       ``(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 a State an annual 
     statement of its financial condition, which most recent 
     statement indicates that it 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.
       ``(3) The Commission may adopt such rules and regulations 
     under paragraph (2)(A) as it determines are necessary or 
     appropriate in the public interest or for the protection of 
     investors. For the purposes of such paragraph, the fees and 
     charges deducted under the contract shall include all fees 
     and charges imposed for any purpose and in any manner.''.
       (b) Periodic Payment Plan Treatment.--Section 27 of such 
     Act (15 U.S.C. 80a-27) is amended by adding at the end the 
     following new subsection:
       ``(i)(1) This section shall 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 adopted by the Commission 
     thereunder.''.

     SEC. 206. REPORTS TO THE COMMISSION AND SHAREHOLDERS.

       Section 30 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-29) is amended--
       (1) by striking paragraph (1) of subsection (b) 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; and'';
       (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) In exercising its authority under subsection (b)(1) 
     to require the filing of information, documents, and reports 
     on a basis more frequently than semi-annually, the Commission 
     shall take such steps 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. Such steps shall include 
     considering and requesting public comment on--
       ``(1) feasible alternatives that minimize the reporting 
     burdens on registered investment companies; and
       ``(2) 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. 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 the protection of investors, to avoid 
     unnecessary reporting by, and minimize the compliance burdens 
     on, registered investment companies and their affiliated 
     persons. Such steps shall include considering and requesting 
     public comment on--
       ``(1) feasible alternatives that minimize the reporting 
     burdens on registered investment companies; and
       ``(2) the utility of such information to shareholders in 
     relation to the costs to registered investment companies and 
     their affiliated persons of providing such information to 
     shareholders.''; and
       (5) in subsection (g) (as so redesignated) by striking 
     ``subsections (a) and (d)'' and inserting ``subsections (a) 
     and (e)''.

     SEC. 207. 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) Every registered investment company, and every 
     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. Every investment adviser 
     not a majority-owned subsidiary of, and every depositor of 
     any registered investment company, and every 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. 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 (hereinafter in 
     this section referred to as `subject persons'). Such steps 
     shall include considering, and requesting public comment on--
       ``(1) feasible alternatives that minimize the recordkeeping 
     burdens on subject persons;
       ``(2) the necessity of such records in view of the public 
     benefits derived from the independent scrutiny of such 
     records through Commission examination;
       ``(3) the costs associated with maintaining the information 
     that would be required to be reflected in such records; and
       ``(4) 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) of this section 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 existing 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 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 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. 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) `internal compliance policies and procedures' means 
     policies and procedures designed by subject persons to 
     promote compliance with the Federal securities laws; and
       ``(2) `internal compliance and audit record' means any 
     record prepared by a subject person in accordance with 
     internal compliance policies and procedures.''.

     SEC. 208. 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. 209. EXCEPTIONS FROM DEFINITION OF INVESTMENT COMPANY.

       (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 new sentence: ``Such issuer nonetheless is 
     deemed to be an investment company for purposes of the 
     limitations set forth in section 12(d)(1)(A)(i) and (B)(i) 
     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 
     company to any such issuer.'';
       (2) in subparagraph (A) of paragraph (1)--
       (A) by inserting after ``issuer,'' the first place it 
     appears the following: ``and is or, but for the exception in 
     this paragraph or paragraph (7), would be an investment 
     company,''; and
       (B) by striking all that follows ``(other than short-term 
     paper)'' 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,''; and
       (B) by adding at the end of such paragraph the following 
     new sentences: ``For the purposes of this paragraph, the term 
     `market

[[Page H6442]]

     intermediary' means any person that regularly holds itself 
     out as being willing contemporaneously to engage in, and 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. For 
     purposes of the preceding sentence, the term `financial 
     contract' means any arrangement that (A) 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; (B) 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 (C) is entered into in response to a request 
     from a counterparty for a quotation or is otherwise entered 
     into and structured to accommodate the objectives of the 
     counterparty to such arrangement.''; and
       (4) by striking paragraph (7) and inserting the following:
       ``(7)(A) Any issuer (i) whose outstanding securities are 
     owned exclusively by persons who, at the time of acquisition 
     of such securities, are qualified purchasers, and (ii) who is 
     not making and does not presently 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 where 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, its outstanding 
     securities are beneficially owned by not more than 100 
     persons who are not qualified purchasers if (I) such persons 
     acquired such securities on or before December 31, 1995, and 
     (II) at the time such securities were acquired by such 
     persons, the issuer was excepted by paragraph (1) of this 
     subsection; and
       ``(ii) prior to availing itself of the exception provided 
     by this paragraph--
       ``(I) such issuer has disclosed to such persons 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 such persons with a reasonable 
     opportunity to redeem any part or all of their interests in 
     the issuer for their proportionate share of the issuer's 
     current net assets, or the cash equivalent thereof.
       ``(C) 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 section 
     12(d)(1)(A)(i) and (B)(i) 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 company to any such issuer.
       ``(D) For purposes of determining compliance with this 
     paragraph and paragraph (1) of this subsection, 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 provision shall be deemed 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) of this subsection.''.
       (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 inserting after paragraph (50) the following new 
     paragraph:
       ``(51) `Qualified purchaser' means--
       ``(A) any natural person who owns at least $10,000,000 in 
     securities of issuers that are not controlled by such person, 
     except that securities of such a controlled issuer may be 
     counted toward such amount if such issuer is, or but for the 
     exception in paragraph (1) or (7) of section 3(c) would be, 
     an investment company;
       ``(B) any trust 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 subparagraph 
     (A) or (C); or
       ``(C) 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 
     $100,000,000 in securities of issuers that are not affiliated 
     persons (as defined in paragraph (3)(C) of this subsection) 
     of such person, except that securities of such an affiliated 
     person issuer may be counted toward such amount if such 
     issuer is, or but for the exception in paragraph (1) or (7) 
     of section 3(c) would be, an investment company.

     The Commission may adopt such rules and regulations governing 
     the persons and trusts specified in subparagraphs (A), (B), 
     and (C) of this paragraph as it determines are necessary or 
     appropriate in the public interest and for the protection of 
     investors.''.
       (c) Conforming Amendment.--The last sentence of section 
     3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
     3(a)) is amended--
       (1) by inserting ``(i)'' after ``of the owner''; and
       (2) by inserting before the period the following: ``, and 
     (ii) which are not relying on the exception from the 
     definition of investment company in subsection (c)(1) or 
     (c)(7) of this section''.
       (d) Rulemaking Required.--
       (1) Implementation of section 3(c)(1)(b).--Within one 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) Employee exception.--Within one 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 (15 U.S.C. 80a-6) to permit the ownership 
     by knowledgeable employees of an issuer or an affiliated 
     person of the issuer of the securities of that issuer or 
     affiliated person without loss of the issuer's exception 
     under section 3(c)(1) or 3(c)(7) of such Act from treatment 
     as an investment company under such Act.
      TITLE III--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION

     SEC. 301. SHORT TITLE.

       This title may be cited as the ``Securities and Exchange 
     Commission Authorization Act of 1996''.

     SEC. 302. PURPOSES.

       The purposes of this title are--
       (1) to authorize appropriations for the Securities and 
     Exchange Commission for fiscal year 1997; and
       (2) to reduce over time the rates of fees charged under the 
     Federal securities laws.

     SEC. 303. AUTHORIZATION OF APPROPRIATIONS.

       Section 35 of the Securities Exchange Act of 1934 is 
     amended to read as follows:

     ``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

       ``There are authorized to be appropriated to carry out the 
     functions, powers, and duties of the Commission $317,000,000 
     for fiscal year 1997.''.

     SEC. 304. REGISTRATION FEES.

       Section 6(b) of the Securities Act of 1933 (15 U.S.C. 
     77f(b)) is amended to read as follows:
       ``(b) Registration Fee.--
       ``(1) Recovery of cost of services.--The Commission shall, 
     in accordance with this subsection, collect registration fees 
     that are designed to recover the costs to the government of 
     the securities registration process, and costs related to 
     such process, including enforcement activities, policy and 
     rulemaking activities, administration, legal services, and 
     international regulatory activities.
       ``(2) Fee payment required.--At the time of filing a 
     registration statement, the applicant shall pay to the 
     Commission a fee that shall be equal to the sum of the 
     amounts (if any) determined under the rates established by 
     paragraphs (3) and (4). The Commission shall publish in the 
     Federal Register notices of the fee rates applicable under 
     this section for each fiscal year. In no case shall the fee 
     required by this subsection be less than $200, except that 
     during fiscal year 2002 or any succeeding fiscal year such 
     minimum fee shall be $182.
       ``(3) General revenue fees.--The rate determined under this 
     paragraph is a rate equal to $200 for each $1,000,000 of the 
     maximum aggregate price at which such securities are proposed 
     to be offered, except that during fiscal year 2002 and any 
     succeeding fiscal year such rate is equal to $182 for each 
     $1,000,000 of the maximum aggregate price at which such 
     securities are proposed to be offered. Fees collected during 
     any fiscal year pursuant to this paragraph shall be deposited 
     and credited as general revenues of the Treasury.
       ``(4) Offsetting collection fees.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), the rate determined under this paragraph is a rate 
     equal to the following amount for each $1,000,000 of the 
     maximum aggregate price at which such securities are proposed 
     to be offered:
       ``(i) $103 during fiscal year 1997;
       ``(ii) $70 during fiscal year 1998;
       ``(iii) $38 during fiscal year 1999;
       ``(iv) $17 during fiscal year 2000; and
       ``(v) $0 during fiscal year 2001 or any succeeding fiscal 
     year.
       ``(B) Limitation; deposit.--Except as provided in 
     subparagraph (C), no amounts shall be collected pursuant to 
     this paragraph (4) for any fiscal year except to the extent 
     provided in advance in appropriations acts. Fees collected 
     during any fiscal year pursuant to this paragraph shall be 
     deposited and credited as offsetting collections in 
     accordance with appropriations Acts.
       ``(C) Lapse of appropriations.--If on the first day of a 
     fiscal year a regular appropriation to the Commission has not 
     been enacted, the Commission shall continue to collect fees 
     (as offsetting collections) under this paragraph at the rate 
     in effect during the preceding fiscal year, until such a 
     regular appropriation is enacted.''.

     SEC. 305. TRANSACTION FEES.

       (a) Amendment.--Section 31 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78ee) is amended to read as follows:

[[Page H6443]]

     ``SEC. 31. TRANSACTION FEES.

       ``(a) Recovery of Cost of Services.--The Commission shall, 
     in accordance with this subsection, collect transaction fees 
     that are designed to recover the costs to the Government of 
     the supervision and regulation of securities markets and 
     securities professionals, and costs related to such 
     supervision and regulation, including enforcement activities, 
     policy and rulemaking activities, administration, legal 
     services, and international regulatory activities.
       ``(b) Exchange-Traded Securities.--Every national 
     securities exchange shall pay to the Commission a fee at a 
     rate equal to $33 for each $1,000,000 of the aggregate dollar 
     amount of sales of securities (other than bonds, debentures, 
     and other evidences of indebtedness) transacted on such 
     national securities exchange, except that for fiscal year 
     2002 or any succeeding fiscal year such rate shall be equal 
     to $25 for each $1,000,000 of such aggregate dollar amount of 
     sales. Fees collected pursuant to this subsection shall be 
     deposited and collected as general revenue of the Treasury.
       ``(c) Off-Exchange-Trades of Exchange Registered 
     Securities.--Every national securities association shall pay 
     to the Commission a fee at a rate equal $33 for each 
     $1,000,000 of the aggregate dollar amount of sales transacted 
     by or through any member of such association otherwise than 
     on a national securities exchange of securities registered on 
     such an exchange (other than bonds, debentures, and other 
     evidences of indebtedness), except that for fiscal year 2002 
     or any succeeding fiscal year such rate shall be equal to $25 
     for each $1,000,000 of such aggregate dollar amount of sales. 
     Fees collected pursuant to this subsection shall be deposited 
     and collected as general revenue of the Treasury.
       ``(d) Off-Exchange-Trades of Last-Sale-Reported 
     Securities.--
       ``(1) Covered transactions.--Every national securities 
     association shall pay to the Commission a fee at a rate equal 
     to the dollar amount determined under paragraph (2) for each 
     $1,000,000 of the aggregate dollar amount of sales transacted 
     by or through any member of such association otherwise than 
     on a national securities exchange of securities (other than 
     bonds, debentures, and other evidences of indebtedness) 
     subject to prompt last sale reporting pursuant to the rules 
     of the Commission or a registered national securities 
     association, excluding any sales for which a fee is paid 
     under subsection (c).
       ``(2) Fee rates.--Except as provided in paragraph (4), the 
     dollar amount determined under this paragraph is--
       ``(A) $12 for fiscal year 1997;
       ``(B) $14 for fiscal year 1998;
       ``(C) $17 for fiscal year 1999;
       ``(D) $18 for fiscal year 2000;
       ``(E) $20 for fiscal year 2001; and
       ``(F) $25 for fiscal year 2002 or for any succeeding fiscal 
     year.
       ``(3) Limitation; deposit of fees.--Except as provided in 
     paragraph (4), no amounts shall be collected pursuant to this 
     subsection (d) for any fiscal year beginning before October 
     1, 2001, except to the extent provided in advance in 
     appropriations Acts. Fees collected during any such fiscal 
     year pursuant to this subsection shall be deposited and 
     credited as offsetting collections to the account providing 
     appropriations to the Commission, except that any amounts in 
     excess of the following amounts (and any amount collected for 
     fiscal years beginning on or after October 1, 2001) shall be 
     deposited and credited as general revenues of the Treasury:
       ``(A) $20,000,000 for fiscal year 1997;
       ``(B) $26,000,000 for fiscal year 1998;
       ``(C) $32,000,000 for fiscal year 1999;
       ``(D) $32,000,000 for fiscal year 2000;
       ``(E) $32,000,000 for fiscal year 2001; and
       ``(F) $0 for fiscal year 2002 and any succeeding fiscal 
     year.
       ``(4) Lapse of appropriations.--If on the first day of a 
     fiscal year a regular appropriation to the Commission has not 
     been enacted, the Commission shall continue to collect fees 
     (as offsetting collections) under this subsection at the rate 
     in effect during the preceding fiscal year, until such a 
     regular appropriation is enacted.
       ``(e) Dates for Payment of Fees.--The fees required by 
     subsections (b), (c), and (d) of this section shall be paid--
       ``(1) on or before March 15, with respect to transactions 
     and sales occurring during the period beginning on the 
     preceding September 1 and ending at the close of the 
     preceding December 31; and
       ``(2) on or before September 30, with respect to 
     transactions and sales occurring during the period beginning 
     on the preceding January 1 and ending at the close of the 
     preceding August 31.
       ``(f) Exemptions.--The Commission, by rule, may exempt any 
     sale of securities or any class of sales of securities from 
     any fee imposed by this section, if the Commission finds that 
     such exemption is consistent with the public interest, the 
     equal regulation of markets and brokers and dealers, and the 
     development of a national market system.
       ``(g) Publication.--The Commission shall publish in the 
     Federal Register notices of the fee rates applicable under 
     this section for each fiscal year.''.
       (b) Effective Dates; Transition.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by subsection (a) shall apply with respect to 
     transactions in securities that occur on or after January 1, 
     1997.
       (2) Off-exchange trades of last sale reported 
     transactions.--The amendment made by subsection (a) shall 
     apply with respect to transactions described in section 
     31(d)(1) of the Securities Exchange Act of 1934 (as amended 
     by subsection (a) of this section) that occur on or after 
     September 1, 1996.
       (3) Rule of construction.--Nothing in this subsection shall 
     be construed to affect the obligation of national securities 
     exchanges and registered brokers and dealers under section 31 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) as in 
     effect prior to the amendment made by subsection (a) to make 
     the payments required by such section on March 15, 1997.

     SEC. 306. TIME FOR PAYMENT.

       Section 4(e) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78d(e)) is amended by inserting before the period at 
     the end thereof the following: ``and the Commission may also 
     specify the time that such fee shall be determined and paid 
     relative to the filing of any statement or document with the 
     Commission''.

     SEC. 307. SENSE OF THE CONGRESS CONCERNING FEES.

       It is the sense of the Congress that--
       (1) the fees authorized by the amendments made by this Act 
     are in lieu of, and not in addition to, any fees that the 
     Securities and Exchange Commission is authorized to impose or 
     collect pursuant to section 9701 of title 31, United States 
     Code; and
       (2) in order to maintain the competitiveness of United 
     States securities markets relative to foreign markets, no fee 
     should be assessed on transactions involving portfolios of 
     equity securities taking place at times of day characterized 
     by low volume and during non-traditional trading hours.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia [Mr. Bliley] and the gentleman from Massachusetts [Mr. Markey] 
each will control 20 minutes.
  The Chair recognizes the gentleman from Virginia [Mr. Bliley].
  Mr. BLILEY. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. BLILEY asked and was given permission to revise and extend his 
remarks.)
  Mr. BLILEY. Mr. Speaker, today, the House will consider H.R. 3005, 
the securities amendments of 1996. This is good bipartisan legislation. 
It is designed to help small business find the money it needs to create 
new jobs, and increase the returns to pension funds, mutual funds and 
other savings vehicles in which our citizens are saving for their 
retirement and for the education of their children. I am pleased that 
this bill has bipartisan support, and has been endorsed by SEC Chairman 
Arthur Levitt. The bill being considered is an amended version of that 
which was reported from the Commerce Committee. I will insert an 
explanation of these changes which I have prepared in the Record 
immediately following my statement.
  This bill accomplishes significant changes in the securities laws. 
Chief among these is the elimination of State regulation of large 
securities offerings and of mutual funds that we have found duplicates 
the extensive system of SEC regulation. It is high time that we move to 
facilitate national capital markets by having a unitary Federal system 
of regulation of offerings. We believe that this system will reduce 
regulatory burdens on companies seeking to raise capital, and will not 
imperil the fine record of investor protection built up by the SEC
  The bill codifies the existing exemption from State regulation for 
companies that are listed on a national securities exchange. Both the 
debt and equity offerings of these companies will be exempt from State 
regulation. The legislation provides that other regional exchanges that 
develop listing standards comparable to those of the national exchanges 
can also be certified by the SEC and gain the advantages of this 
exemption.
  The legislation provides that offers and sales of securities to 
qualified purchasers will be exempt from State regulation. We believe 
that institutional investors are capable of assessing offerings without 
the need of a second layer of regulation. This will help to increase 
the rate of return to these institutional investors who are the savings 
vehicles for people's retirement and for their children's education.
  The legislation provides relief from a second tier of regulation to 
the brokerage industry in a number of areas. The bill preempts State 
authority over capital, margin, books and records of brokerage firms. 
The bill also provides a uniform exception from State registration for 
brokers whose customers go on vacation or are temporarily out of State.

[[Page H6444]]

  The legislation also ends anticompetitive barriers on broker dealer 
borrowing. The Government has given a legal monopoly to commercial 
banks to lend money to brokers. That legal monopoly harms competition 
and raises costs to our country's brokers. Eliminating this barrier 
will, in the words of Federal Reserve Chairman Alan Greenspan, increase 
the safety and soundness of the financial system. In April, the Board 
of Governors of the Federal Reserve adopted changes to regulation T, 
eliminating a substantial number of the rules regulating broker dealer 
lending, including elimination of margin requirements on high quality 
debt securities and arranged transactions. We applaud the action of 
Chairman Greenspan and the board which will have the effect of making 
our brokerage firms more competitive without sacrificing safety and 
soundness.
  This legislation requires that the SEC, when making a public interest 
determination in a rulemaking consider efficiency, competition, and 
capital formation. This will require the SEC to consider the costs of 
its rules, which we think is very important in light of the enhanced 
congressional role mandated for SEC rules and for rules of self 
regulatory organizations under the Small Business Regulatory 
Enforcement Act of 1996. The legislative history of the Small Business 
Act makes clear that SRO rules are considered major rules for purposes 
of the act. I endorse that interpretation, and expect to work 
cooperatively with the SEC when it is considering SRO rules.
  I would like to commend Chairman Fields for his work in crafting the 
beginnings of a bipartisan agreement on securities reform in the 
Subcommittee on Telecommunications and Finance. I would like to thank 
the ranking member of the subcommittee, Ed Markey, for his fine 
contributions to the bill. I would like to thank especially the ranking 
member of the committee, my friend, John Dingell, for his cooperation 
and assistance in crafting further changes to the bill.
  I urge members to join with us in supporting this legislation.

                              {time}  1445

  Mr. Speaker, I reserve the balance of my time.
  Mr. MARKEY. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. MARKEY asked and was given permission to revise and extend his 
remarks and to include extraneous material.)
  Mr. MARKEY. Mr. Speaker, I am pleased to rise and speak in support of 
H.R. 3005, The Securities Amendments of 1996. Let me begin by 
congratulating the distinguished gentleman from Virginia [Mr. Bliley], 
the chairman of the Committee on Commerce, and his counterpart, the 
distinguished gentleman from Michigan [Mr. Dingell], the senior Member 
of the House and the ranking Democrat on the committee. Both directed 
that we put partisanship aside so that we could work on the three 
critically important public policy issues that underlie the 
legislation: the promotion of capital formation, the advancement of 
efficient markets, and the maintenance of the highest possible 
standards of investor protection.
  Their guidance helped us overcome numerous obstacles, any one of 
which could easily have upset the delicate compromises that brought us 
to the House floor today. Even though virtually everyone agrees that 
the policy objectives of titles I and II of The Securities Amendments 
of 1996 are extraordinarily important, until March of this year few 
thought it possible that we could overcome the deep differences as to 
how we could in fact achieve them. But because of the truly remarkable 
leadership of the distinguished gentleman from the State of Texas, 
Chairman Jack Fields, my good friend and colleague of the subcommittee, 
we were able to develop a consensus approach to these issues that 
ultimately allowed us to bring this bill to the floor.
  Indeed, Chairman Fields has been the singular driving force in the 
U.S. Congress behind the idea of comprehensively modernizing our system 
of securities regulation. His desire to promote capital formation and 
efficient securities markets is unsurpassed, but it should also be 
evident that he is committed to making sure that Federal and State 
securities laws continue to protect American investors from fraud and 
abuse. Indeed, he recognizes that the unparalleled success of our 
markets is grounded in the fact that the United States maintains the 
strongest and most profound commitment to investor protection of any 
country on Earth. Chairman Fields' thoroughgoing commitment to 
achieving this careful balanced played a crucial role in helping us to 
develop the historic package of reforms that we will be voting on 
today. His 2 years as chairman of the subcommittee passing historic 
telecommunications and now securities legislation will have him being 
looked back at as the one Republican who understood how to work in a 
bipartisan fashion during this 2-year period, this brief 2-year period 
that the Republicans controlled the House of Representatives.
  So I want to congratulate the gentleman so much for the incredible 
job which he has done during his tenure as the chairman of this 
subcommittee. It is indeed remarkable and historic in fact, which is 
not an overstatement. Comprehensive financial modernization, as some of 
our colleagues are painfully aware, can be tauntingly elusive as a 
goal. Yet in the last 3 months, Chairman Fields has given us all a case 
study about how to get there.
  When we step back from the details and examine the Bliley amendment 
from the broad perspective, two historic qualities stand out. The first 
is how far we have come in a relatively short time. Six months ago we 
were on the eve of a huge ideological battle confronted with proposals 
that in our judgment would have caused considerable damage to markets, 
to companies, and to investors. Included among them were proposals to 
preempt virtually every aspect of independent State securities 
regulation, to repeal suitability requirements that protect 
institutional investors and deter deceitful conduct, to repeal 
the Williams Act, which could have encouraged a whole new round of 
hostile takeovers, to eliminate virtually all margin requirements, 
which could have fueled all sorts of undesirable speculation in the 
stock markets at the worst possible time when the markets were already 
at record highs.

  There were several other issues as well. In every one of these areas, 
we have worked diligently to make extraordinary improvements to the 
original proposals. The results are contained in title I. Collectively 
they represent a balance and a sensible, rather than a rigid and 
ideological approach to modernization. More important, title I is 
historic because it includes a truly unprecedented legislative effort 
to modernize and to carefully reallocate important aspects of Federal 
and State securities laws.
  Without in any way compromising our longstanding commitment to 
maintaining the highest possible standard of investor protection, as 
anyone involved in its drafting knows, modernizing State securities 
laws is an extraordinarily sensitive and complex subject. An editorial 
in this morning's Boston Globe, a copy of which is attached to the 
statement I will submit for the Record, captured this delicacy. While 
it acknowledges that, quote,

       There is a broad agreement among the industry and 
     regulators that some loosening is in order, but Congress must 
     take care as it balances the sometimes conflicting interests 
     of free markets and the reality of those who would exploit 
     them.

  I have always agreed with that view personally and as a result have 
given a tremendous amount of thought to this particular section of the 
legislation, especially careful consideration of this section was 
necessary in part because the States have historically filled such a 
profound and irreplaceable role in protecting small investors from 
fraud and abuse. Two years ago, I was deeply honored to receive an 
investor protection award from the Association of State Securities 
Administrators, the first non-NASAA North American Securities 
Administrator member to ever receive the award.
  I said at that time the States are the ones who work the front lines 
and serve as the Nation's early warning system for financial fraud. You 
are the ones who witness most closely the terrible consequences of 
these frauds, not just the frustration and the anger of having been 
robbed, but the heartache and the tragedy of dreams that have been 
stolen, dreams about sending a

[[Page H6445]]

child to college or about planning for retirement years. Over the 
years, your extraordinary and unwavering commitment to promoting the 
interests of small investors has made NASA a powerful and respected and 
necessary presence on Capitol Hill.
  The Bliley amendment and the committee report that accompanies 
explicitly provide that the States continue to have available to them 
the full arsenal of powers needed to investigate and to enforce laws 
against fraud and to continue their ability to protect the small 
investor of this country. Similarly, the committee report also makes 
clear that nothing in this legislation alters or affects in any way any 
State statutory or common laws against fraud or deceit, including 
private actions brought pursuant to such laws.
  Such a provision was essential to prevent this legislation from 
getting caught up in the disputes that surround that issue. In several 
other ways, title I to the Bliley amendment largely strikes the proper 
balance between promoting efficiency and growth while ensuring 
integrity and fairness.
  The second historic quality about the Bliley amendment is that it 
includes the first significant proposal to affect the regulation of the 
mutual fund industry in more than a generation. I am proud to have 
joined with Chairman Fields and Chairman Bliley, Mr. Dingell, and 
others as an original cosponsor of these proposals, and I am delighted 
that Members of the Senate Committee on Banking, Housing, and Urban 
Affairs have also taken a very strong interest in them. Most important, 
this part of the legislation recognizes the fundamentally national 
character of the fund industry by assigning exclusive responsibility 
for the routine review of mutual fund offering documents and related 
sales material to the SEC and the NASD.

  Title II of the Bliley amendment also encourages further innovation 
in this industry by allowing for the first time documents known as 
advertising prospectuses, and for modestly liberalizing the rules for 
fund of funds. At the same time, however, the Bliley amendment also 
recognizes the extraordinary and rapidly growing importance of mutual 
fund investments to the financial health of average Americans by 
continuing to permit States to investigate sales practice abuses and 
other types of fraudulent or deceitful activity.
  In addition, the bill recognizes the critical challenge facing the 
Securities and Exchange Commission, which must maintain its successful 
record of overseeing the fund industry at a time when mutual funds are 
growing exponentially and the industry is becoming more diverse and 
complex. Thus, the Bliley amendment gives the Securities and Exchange 
Commission the authority to obtain information it must have if it is to 
determine accurately whether funds are in compliance with the investor 
protection provisions of the Federal law. This provision has been 
carefully negotiated with the Securities and Exchange Commission and 
the fund industry, and it is an essential part of the balance of the 
bill which we have put together today which ensures that the 
information is there which guarantees investor protection.
  Mr. Speaker, I cannot again praise the gentleman from Virginia [Mr. 
Bliley] and the gentleman from Michigan [Mr. Dingell] enough for their 
leadership and to single out the gentleman from Texas [Mr. Fields] here 
near the end of his final year in Congress for his special work in 
putting together this legislation today.
  Mr. Speaker, I would like to close by thanking those who worked 
tirelessly to bridge the gap that divided Democrats and Republicans on 
these important issues.
  Before concluding, I also believe a brief comment is due about the 
fact that title III has been included as part of the Bliley amendment. 
I understand that this legislation has already passed the House, and is 
being included with this bill today in order to facilitate a conference 
on the subject. and I am well aware of the unnecessary funding fights 
that have hampered and demoralized the SEC in recent years. But I 
believe the administration has raised important concerns about the 
implications of the authorization bill that we need to explore, I am 
committed to working with the administration to see if we can somehow 
reconcile the important competing policy considerations that relate to 
this issue.

  As a practical matter, this bill could not have reached the floor 
today without the tremendous commitment of time and energy on the part 
of our staff: Linda Dallas Rich and David Cavicke, for the Republicans; 
Consuela Washington, Jeff Duncan, and Timothy Forde, for the Democrats; 
and Steve Cope, our exceptionally talented and exceedingly patient 
legislative counsel. Senior staff of the SEC, under the direction and 
with the encouragement of Chairman Arthur Levitt, also provided us with 
critically important assistance at key times over the last few months. 
All are to be commended for an extraordinary job.
  Finally, I doubt that we would have reached this consensus without 
the good faith participation of the States. As proposals and ideas have 
been floated back and forth about how to change State laws and 
regulations, the States have always responded stoically--with good 
humor as well as with good faith. Neil Sullivan and Dee Harris have 
provided remarkable leadership throughout this difficult process. I 
have never been as proud of this group as I am today.
  While there are not many legislative days left in this session of 
Congress, I still think that we have a good chance of seeing much of 
what we vote on here today enacted into law within a few months. That 
remarkable prospect would not have been possible without the leadership 
of Chairman Bliley, Chairman Fields, Ranking Democrat Dingell, and the 
steadfast support of our colleagues on both sides of the aisle. I look 
forward to working with them to secure the bill's passage through the 
Senate and its signature by the President.
  Mr. Speaker, include for the Record the following article.

                 [From the Boston Globe, June 18, 1996]

                         Insecurity Regulation

       The Massachusetts congressional delegation will do well to 
     listen to the concerns of Secretary of State William Galvin 
     as it contemplates legislation loosening regulation of 
     securities dealers.
       Although there is broad agreement among the industry and 
     regulators that some loosening is in order--the National 
     American Securities Administrators Association (NASAA) hopes 
     that a suitable bill can be drafted during the current 
     session of Congress--Galvin wants a more thorough review that 
     would likely push action into the next session.
       Among the issues Galvin and his NASAA colleagues agree are 
     troubling would be relaxing rules for unlicensed broker 
     employees or sales agents who may use high-powered selling 
     tactics to entice the unwary into unwise investments. Many 
     such sales practices are engaged in by smaller brokerage 
     firms, involving small corporations with fewer shares, which 
     create markets that can be volatile and even treacherous. 
     These companies do not attract the institutional interest 
     that is important with larger stocks in establishing more 
     financially credible pricing.
       The US Securities and Exchange Commission has historically 
     relied on states to supplement its enforcement activities 
     against shady sales practices by concentrating on these 
     smaller brokerages. The states' task is complicated enough 
     already by the tendency of victims to be embarrassed at 
     having been taken in. Galvin is worried that Congress will 
     prevent states from taking up even those cases where victims 
     do protest.
       Those worries deserve the attention of the industry, whose 
     preponderantly ethical members are injured by the misdeeds of 
     a few slick dealers. Congress must take care as it balances 
     the sometimes conflicting interests of free markets and the 
     reality of those who would exploit them.

  Mr. Speaker, I reserve the balance of my time.
  Mr. Bliley. Mr. Speaker, I yield as much time as he may consume to 
the gentleman from Texas [Mr. Fields], the chairman of the subcommittee 
who put so much work into this bill.
  (Mr. FIELDS of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. FIELDS of Texas. Mr. Speaker, first of all, I would be remiss if 
I did not point out that the gentleman from Virginia [Mr. Bliley] is 
once again bringing a very complex piece of legislation to the floor 
that is meaningful in reform and it is bipartisan in nature.
  For me personally, this is an exciting day, exciting because we have 
been able to negotiate in a very complex issue area with bipartisan 
cooperation, and we dramatically reform and modernize the regulation of 
this country's capital markets. I would be less than candid if I did 
not say that part of my excitement is in the fact that we were able to 
forge and pass this legislation when everyone said that it could not be 
done, and we were told earlier that our telecommunications reform 
legislation was too complex and too contentious to pass.
  With each of these difficult subject matter areas, the gentleman from 
Massachusetts [Mr. Markey], my good friend and ranking minority member 
of our subcommittee, and I were able to find commonality rather than 
partisanship, were able to exercise our personal friendship in 
representing our Members and our constituencies rather than looking for 
political points to score.

[[Page H6446]]

  Mr. Speaker, I appreciate all the nice things that the gentleman said 
about me just a moment ago, but I want to say ``ditto'' so that the 
gentleman does not get one up in terms of being overly nice with his 
compliments. I also want to say that we shared the beliefs of investor 
protection. We believed that there should be a reliable, secure, and 
transparent market.

                              {time}  1500

  We differed on a few points, and agreed to disagree and consider 
these points of difference at some other time. If we had wanted to find 
the differences and tear this legislation apart, we could have done so.
  It has been surprising to me that many in our capital markets have 
yet to appreciate or understand what this legislation actually 
accomplishes. I think this stems from the fact that the markets are not 
accustomed to Congress being proactive instead of just reacting to a 
market crisis or scandal. To many, it has not sunk in yet that this 
legislation dramatically reforms the 1933, 1934, and 1940 laws relative 
to the securities and mutual fund industries.
  So just as we reformed the 1934 Communications Act and brought the 
communications industry into the 21st century, so too are we reforming 
the securities and mutual fund industries into the 21st century in an 
era of modern regulation without compromising one aspect of investor 
protection.
  When I introduced the capital markets bill back in July of last year, 
I said you have to begin the dialog someplace. I said that that initial 
bill was a work in progress. And to the credit of my subcommittee 
members who originally cosponsored the legislation last July, who, 
along with me, endured some criticism, they never wavered in their 
belief that our capital markets needed to be reformed and modernized, 
and we never lost our resolve to come to this day, and we were 
encouraged to see some of the things that happened once the debate was 
begun just with the introduction of the bill.
  Chairman Levitt gave a speech in Vancouver which I think will go down 
as one of the most significant events in the modernization of our 
capital markets regulatory regime, when he suggested that there were 
problems in duplicative regulation at the State and Federal level. Then 
the SEC began to recommend eliminating unnecessary and redundant 
regulations. Margin reform was acted upon by the Federal Reserve. A 
memorandum of understanding was entered into by the SEC, the exchanges, 
and the National Association of Securities Dealers to streamline the 
examination of broker dealers. Many say that these reforms would not 
have happened or would have come about much slower if the dialog had 
not been initiated.
  So today we bring to the House a very complex piece of dramatic 
reform legislation, in a complex subject matter area, but, again, with 
broad bipartisan support and effort.

  In the most simplistic of terms, this legislation does the following: 
Investment company securities sold in the secondary market and many 
securities exempt from Federal registration will be subject to a single 
national regulatory system. In addition, securities sold by the cream 
of the small cap companies, companies with assets of at least $10 
million and 2 years of operations, will be subject only to Federal 
regulation.
  This bill recognizes that we have entered the information age and 
requires the SEC to report to Congress on the steps taken to facilitate 
the electronic delivery of prospectuses.
  We give a general grant of exemptive authority to the SEC under both 
the 1933 and 1934 acts to eliminate rules and regulations that no 
longer serve a legitimate purpose.
  We require the SEC when promulgating a rule or granting an exemption 
to consider efficiency, promotion of capital formation, and competition 
as criteria in addition to investor protection. We require the SEC to 
examine proposals for the privatization of EDGAR.
  I want to stop just a moment and give special credit to the gentleman 
from New York, Dan Frisa, who not only worked tirelessly on this 
provision, but authored the definitive document on EDGAR and the SEC's 
information management system.
  In title II we permit all mutual fund companies to create a fund of 
funds. We permit mutual funds to advertise more information than is 
permitted under current law. We also preempt the State from duplicative 
State regulations, recognizing that this is a national marketplace and 
our companies are competing in a global way.
  Mr. Speaker, this brief and cursory explanation does not do justice 
to the historic reform that this legislation represents. This House 
should be proud of what we are accomplishing today. The House should be 
proud of the gentleman from Virginia, Chairman Bliley, for moving this 
bill forward in the way that he did. It should be proud of the ranking 
minority member from Michigan [Mr. Dingell] who has always been willing 
to work in a positive and bipartisan manner with all of the Members of 
our committee.
  But, again, Mr. Speaker, I would be remiss if I did not give special 
credit and focus on my good friend, the gentleman from Massachusetts, 
Ed Markey, who came to my office 2 nights before we were to mark up the 
capital markets bill in the subcommittee, and we sat together for 2 
hours as we negotiated the bill. It was in those 2 hours as we 
negotiated the bill. It was in those 2 hours, without staff, that 
through our friendship, we found commonality, to serve the interests of 
our constituents and the people who will be affected by this reform, 
the investors of this country, and the capital markets community.

  I would be further remiss if I did not acknowledge the hard work and 
personal engagement of Chairman Arthur Levitt. Without his personal 
efforts we would not be poised to pass this historic legislation. I 
believe Chairman Levitt will go down as one of the greatest, if not the 
greatest, SEC chairman that has ever served our country in that 
capacity.
  Finally, I must give credit to a staff who took what Mr. Markey and I 
initially agreed upon, put it in legislative language for the 
subcommittee, further refined it at the full committee, and then 
brought us to this point today. Special thanks to David Cavicke, Linda 
Rich, Brian McCullough, and on the minority staff Jeff Duncan, Tim 
Ford, and Consuela Washington. And, of course, a special thanks to 
Christy Strawman on my personal staff, and a special thanks to the 
greatest draftsman in the House, Steve Cope.
  Mr. MARKEY. Mr. Speaker, I yield 5 minutes to the gentleman from 
Michigan [Mr. Dingell], the ranking Democrat on the Committee on 
Commerce.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, I rise in support of the legislation and 
urge its passage by the House.
  The bill has come a long way since title I was originally proposed 
last July as H.R. 2131. It was controversial legislation then which 
would have, amongst other things, repealed the Trust Indenture Act and 
key protections under the Williams Act and Federal margin provisions, 
negated anti-fraud protections and suitability obligations on broker 
dealers to institutional investors, and decimated securities regulation 
and enforcement at the State level. That bill, thank heaven, is not 
this bill.
  With that, I wish to commend my good friend, the gentleman from Texas 
[Mr. Fields], the chairman of the subcommittee, and the gentleman from 
Massachusetts [Mr. Markey], for their outstanding efforts in reforming 
that legislation into something we could rejoice in and pass today. I 
want to again commend Mr. Fields, the chairman of the subcommittee, and 
the gentleman from Virginia, Mr. Bliley, the chairman of the Committee 
on Commerce, for working with Members on this side of the aisle, the 
Securities and Exchange Commission, State securities regulators, and 
the securities industry to write the balanced legislation that we 
consider today.
  I will express my personal thanks to the gentleman from Massachusetts 
[Mr. Markey] for his important leadership on and contributions to this 
bill.
  Others will be describing the floor amendment in great detail. There 
are a few points I would like to make. In his November 30, 1995, 
testimony before our committee, a great and decent man and an 
outstanding regulator, Chairman Levitt, stated that: ``State securities 
regulators play an essential role in the regulation of the U.S. 
securities industry. State regulators are often the

[[Page H6447]]

first line of defense against developing problems. They are the `local 
cops' on the beat who can quickly detect and respond to violations of 
law.''
  I strongly agree with those sentiments. Nothing that we do in this 
legislation should undercut the authority and ability of States to 
detect and take action against securities fraud and sales practice 
abuses. I will continue to work on this issue in conference with the 
Senate.
  While I support the bill's grant of exemptive authority to the SEC 
under the Securities Act of 1933 and the Securities Exchange Act of 
1934, I want it clearly understood that this bill does not grant the 
SEC the authority to grant exemptions from the antifraud provisions of 
either act. In determining the public interest, Congress has expressed 
the public interest through the express provisions of law that it has 
enacted. The SEC may not administratively repeal these provisions by 
use of the new exemptive authority.
  I support responsible efforts to reform and modernize the securities 
laws consistent with the maintenance of investor protections and the 
transparency, integrity, and fairness of the U.S. securities markets. 
Our capital markets run on investor confidence, and that confidence 
will disappear, and the liquidity and efficiency of our markets will be 
seriously impaired, if investors believe that we are turning the hen-
house sentry posts over to the foxes or abolishing half the sentry 
posts at a time of increases poaching. For example, yesterday's Wall 
Street Journal [Investigators Tie Brokers To Bribes, Monday, June 17, 
1996, at C1] reported that dozens of stockbrokers around the country 
are suspected of taking hidden payments from promoters to sell stocks 
to their customers. The March 1996 report of the SEC-SRO-State Joint 
Regulatory Sales Practice Sweep found that: one-fifth of the 
examinations resulted in enforcement referrals and an additional one-
fourth of the examinations resulted in the issuance of letters of 
caution of deficiency letters; almost one-half of the branches that 
engage in some type of cold calling evidence cold-calling violations or 
deficiencies; supervisors in many of the branches examined conduct 
inadequate or no routine review of registered representatives' customer 
service transactions to detect sales practice abuses; and many of the 
branches examined utilized only minimum hiring procedures and some of 
these are willing to employ registered reps with a history of 
disciplinary actions or customer complaints.
  SEC resources are also an important part of this enforcement 
equation. Title III of the floor amendment includes the text of the SEC 
reauthorization bill that passed the House unanimously in march of this 
year. As I understand it, the inclusion of this title is intended to 
facilitate good faith negotiations between the House, Senate, and OMB 
to resolve longstanding questions about SEC fees. Although the 
administration supports other provisions of H.R. 3005, it has expressed 
serious concerns with reauthorization provisions that would reduce or 
eliminate the use of increased securities registration and transaction 
fees for general-fund purposes. I intend to continue to work with the 
administration to address their concerns with this provision, and hope 
my colleagues on the Majority side will join in the effort to get a 
cooperative resolution of this issue.
  Also I wanted to just observe that this House is going to seriously 
miss my friend from Texas, Mr. Fields, when he goes. He has been a 
distinguished Member of this body, a fine chairman of this 
subcommittee, a valuable friend of mine, a responsible and decent 
Member of this body, and I am pleased that he is not yet leaving us. I 
do want the Record to show the high regard in which I hold the fine 
gentleman from Texas.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Ohio [Mr. Oxley], the vice chairman of the subcommittee.
  Mr. OXLEY. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, never in our wildest dreams could we imagine we would be 
on the floor today on a suspension calendar to pass H.R. 3005, the 
securities amendments of 1996. I want to pay tribute to the gentleman 
from Texas, Chairman Fields, for his great leadership, as well as the 
chairman of the full committee, the gentleman from Virginia, Mr. 
Bliley, along with our good friend, the gentleman from Massachusetts, 
Ed Markey, the ranking member of the subcommittee, and the ranking 
member, the gentleman from Michigan, Mr. Dingell, for their hard work, 
and also to Chairman Levitt for providing the kind of leadership at the 
SEC that we have come to expect from that fine gentleman. This bill is 
a product of the work that all of the aforementioned gentlemen put in 
on this very important bill.
  Times are changing and the way Americans invest are changing. The 
laws regarding securities and mutual fund policies must change as well. 
According to the Fed, in 1980 the average American household had one-
third of its liquid assets in securities. By 1995 it had two-thirds of 
its liquid assets in securities.
  For once, Congress is taking positive action in the area of 
securities law and not reacting to a crisis or to a scandal. The bill 
is designated to promote capital formation, efficiency and competition, 
without compromising the integrity of our confidence in the financial 
marketplace. The bill repeals or amends sections of the Securities Act 
of 1933, the SEC Act of 1934, and the Investment Company Act of 1940. 
The bill creates a national system of securities regulation, 
eliminating duplication in State and Federal regulation for exchange 
listed securities, securities offerings to qualified investors, and 
mutual funds. This will lower the administrative and regulatory costs 
to investors across the country and increase returns to mutual funds 
and other savings vehicles.
  On the issue of institutional suitability, let me say during our 
hearings we heard from three former SEC commissioners, the Public 
Securities Administration, the PSA, and others in the private sector on 
the need for reform. We plan to pursue that issue in the next Congress.

                              {time}  1515

  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Washington, Mr. Rick White, a valued member of the committee.
  Mr. WHITE. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, 2 years ago, I was a business lawyer, now I am a humble 
freshman Member of Congress. I would have to say that it has been a 
great privilege to serve on this subcommittee and this committee, where 
we have actually gotten some important things done during this 
Congress.
  It has been my privilege to serve with the gentleman from Virginia, 
Chairman Bliley, the gentleman from Texas, Jack Fields, the 
subcommittee chairman, and with the ranking members, the gentleman from 
Michigan, John Dingell, and the gentleman from Massachusetts, Edward 
Markey, especially on this bill, where we were able to work together 
and do something that really needed to be done.
  Mr. Speaker, the fact is, as we heard so many times during the 
hearings on this bill, the United States right now has the best capital 
markets in the world. But I remember my days when I was a lawyer, it 
was only 2 years ago, and I dabbled in securities law at that time. And 
in my office, right down the hall were the real securities lawyers in 
my firm, and I well remember the days when those securities lawyers and 
the people working for them would be tearing out their hair and rending 
their garments because of all the regulations and hoops they had to 
jump through in order to get a securities offering done.
  The fact is, Mr. Speaker, the price of liberty is eternal vigilance, 
and that maxim applies in the securities market just like in every 
place else. The great thing about this bill is that it modernizes our 
securities laws and puts them in line for what we are going to need in 
the 21st century.
  One of the main problems we have had, and one of the things that I 
notices when I was a lawyer, is that when we want to issue a big 
securities offering, not only do we have to get approval from 
Washington, DC, we have to get approval from 52 States and other 
offices in order to get that securities offering approved. That was one 
of the reasons that the lawyers down the hall from me would tear out 
their hair whenever they had to go through this process.

[[Page H6448]]

  Our bill fixes that. For large offerings, there is one market from 
now on. It streamlines it, makes it make a lot more sense. Our bill 
also tries to bring us into the 21st century is providing information 
to investors. Right now, the law says we have to provide investors with 
a big thick book every time we are to issue a securities offering. But 
in the future, if the SEC allows us to do that, we will be able to do 
it by the Internet or fax or some other electronic means. That is 
getting us ready for the 21st century.
  The fact is, Mr. Speaker, our job is not over. We have some more work 
we need to be beyond this bill to bring our securities in line with the 
21st century, but it is a good step in the right direction, I am proud 
to be a part of it, and I urge all my colleagues to vote for this bill.
  Mr. MARKEY. Mr. Speaker, I yield myself the balance of my time in 
which to close the debate.
  Mr. Speaker, what I would like to do is thank those who helped to 
bridge the gaps between the Democrats and Republicans in making this 
legislation possible; because, as a practical matter, this bill could 
not have become law, reached the floor today, without a tremendous 
amount of dedication and hard work on the part of many people. But a 
small number deserve to be especially singled out, and I begin with 
Linda Dallas Rich and David Cavicke and Kristy Strahman, who served the 
majority extremely well over this past year and a half in bringing this 
bill to this place.
  On the Democratic side, without the historic work of Consulea 
Washington and Jeff Duncan and Tim Forde, who dedicated personally this 
last year and a half to this particular piece of legislation, we could 
not have been here.
  And to Steve Cope, our exceptionally talented and exceedingly patient 
legislative counsel, the senior staff of the Securities and Exchange 
Commission, under the direction of our very distinguished chairman, 
Arthur Levitt, who provided us with critically important assistance at 
key times over the last few months, all are to be commended for an 
extraordinary job.
  Finally, I doubt we would have reached the consensus without the good 
faith participation of the States. As proposals and ideas have been 
floated back and forth about how to change State laws and regulations, 
the States have always responded stoically, with good humor as well as 
with good faith. Neil Sullivan and Dee Harris have provided remarkable 
leadership throughout this difficult process. I have never been as 
proud of that group as I am here today.
  While there are not many legislative days left in this session of 
Congress, I still think that we have a good chance of seeing much of 
what we vote on there today enacted into law within the next couple of 
months. That remarkable prospect would not have been possible without 
the leadership of the gentleman from Virginia, Chairman Bliley, and of 
the ranking minority leader, the gentleman from Michigan, John Dingell, 
of the Committee on Commerce. Their historic roles in securities 
legislation in very well known and appreciated.
  And especially, as has been noted several times before, to my good 
friend, the gentleman from Texas, Jack Fields, of this subcommittee, 
who has worked long and hard to bring this historic piece of 
legislation here to the floor.
  Mr. FIELDS of Texas. Mr. Speaker, will the gentleman yield?
  Mr. MARKEY. I yield to the gentleman from Texas.
  Mr. FIELDS of Texas. Mr. Speaker, I appreciate all of the gentleman's 
kind remarks. I think it is refreshing for the public and the country 
at large to see both sides of the aisle working in an extremely complex 
issue area, working together and finding commonality.
  Mr. Speaker, I want to say on behalf of the gentleman that he made 
this process a dialog, creating that opportunity for us to discuss and 
find where we could agree, and helped bring us to this important day 
today. Certainly I think it is historic, and I just want to compliment 
the gentleman.
  Mr. MARKEY. Mr. Speaker, reclaiming my time, I thank the gentleman, 
and I look forward to its passage in the Senate and to the President's 
signature on this bill as well, which is the only appropriate ending to 
this.
  Mr. BLILEY. Mr. Speaker, how much time do I have remaining?
  The SPEAKER pro tempore (Mr. Weller). The gentleman from Virginia 
[Mr. Bliley] has 3 minutes remaining.
  Mr. BLILEY. Mr. Speaker, I yield myself 30 seconds.
  Mr. MORAN. Mr. Speaker, will the gentleman yield?
  Mr. BLILEY. I yield to the gentleman from Virginia.
  Mr. MORAN. Mr. Speaker, I hate to get in the middle of this exchange 
of roses, but our State Corporation Commission in Virginia, that I am 
sure the chairman is very much aware of, has some concerns in that we 
essentially wipe out of a lot of the State laws. I can understand why 
we do, but they are very much afraid that they will not have the time 
to go through their legislative and rulemaking process because they now 
require regulation fees and the filing of notice of mutual fund shares. 
And they are afraid as well that without doing so, they will not have 
sufficient enforcement authority under their current State law. Can the 
chairman assure us that it will be worked out?
  Mr. BLILEY. Mr. Speaker, reclaiming my time, they have all of that 
enforcement authority and they retain their fees.
  Mr. MORAN. They retain their fees and enforcement authority.
  Mr. BLILEY. That is correct.
  Mr. MORAN. Mr. Speaker, I thank the gentleman for putting that on the 
record.
  Mr. BLILEY. Mr. Speaker, I yield 30 seconds to the gentleman from New 
York [Mr. Lazio] for the purpose of a colloquy.
  Mr. LAZIO of New York. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  As the chairman knows, there are about 20 Members of Congress, 
including the gentleman from New York, Congressman Dan Frisa, who have 
expressed deep concerns about preferencing on securities exchanges. 
Preferencing enables broker-dealers to take the other side of their own 
customer orders, to the exclusion of competing market interest. It is a 
de facto form of collusion. Perferencing was not permitted on 
securities exchanges until 1991, when the Cincinnati Stock Exchange 
began a preferencing pilot program.
  I want to address this to the gentleman from Texas, if I can, and ask 
him if in the course of deliberation, as the bill moves forward in the 
conference process, if he would work with me and the others who are 
interested in this subject to ensure that this issue is addressed?
  Mr. BLILEY. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Texas [Mr. Fields] for a brief comment.
  Mr. FIELDS of Texas. Mr. Speaker, I want to respond to the gentleman 
that it is my intent to work with all Members of the House and develop 
the best possible piece of legislation that can be developed.
  Mr. BLILEY. Mr. Speaker, how much time remains?
  The SPEAKER pro tempore. The gentleman from Virginia [Mr. Bliley] has 
2 minutes remaining.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from 
Wisconsin, Mr. Toby Roth, a member of the Committee on Banking and 
Financial Services.
  Mr. ROTH. Mr. Speaker, I thank my friend, the chairman, for yielding 
me this time and I congratulate him and the other members of this 
committee who have done such a fine job on this bill.
  I have listened attentively to the debate here this afternoon. This 
is a good bill and I hope everyone votes for it. I did have a question 
about the States and how they will be impacted and we heard that in the 
debate here before. This bill will eliminate any duplications between 
State and Federal regulations governing mutual funds and other security 
activities.
  Mr. Speaker, serving on the Committee on Banking and Financial 
Services, I have had a great deal of interest in legislation like this. 
The measure before us is not perfect, but it is going because it has 
been scaled down a long way from the controversial changes that it 
first had, but this is a good piece of legislation.
  Even though this legislation preempts some State powers over 
securities, the bill would preserve a significant role for the State 
regulators. For

[[Page H6449]]

example, the State would no longer have jurisdiction over mutual funds, 
and the bill would scale back State regulation securities offerings, 
substituting Securities and Exchange Commission for a dual State-
Federal system in place. But, on the other hand, this is a good bill, 
it is a well balanced bill, and I hope we all vote for it.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute, the balance of my time, to 
the gentleman from New York [Mr. Frisa], a member of the committee.
  Mr. FRISA. Mr. Speaker, I thank the chairman for yielding me this 
time, and I would like to take this opportunity in joining with my 
colleagues from both sides of the aisle in acknowledging the tremendous 
leadership that the gentleman from Virginia, Chairman Bliley, of the 
Committee on Commerce, has exhibited in this case to bring both sides 
together in a very complex issue, which, most importantly, will benefit 
the investors, all of them, the individual families who invest as well 
as the large pools of money that invest; because, really, Mr. Speaker, 
those investors are the few that drive the engine of the American 
economy by investing in the stock market their hard-earned money so 
that corporations will have the funds to invest in capital and in jobs. 
I think it represents yet another victory for the people and for the 
Committee on Commerce in crafting this bipartisan legislation.
  I think it is also important, Mr. Speaker, to acknowledge that the 
chairman of the Securities and Exchange Commission, Arthur Levitt, has 
worked with us as well in order to craft this agreement. And I think, 
finally, the gentleman from Texas [Mr. Fields], the chairman of the 
subcommittee, who I have been pleased to work with, and the gentleman 
from Massachusetts [Mr. Markey], the ranking member of the 
subcommittee, have provided leadership as well.
  Mr. Speaker, I say to the gentleman from Virginia [Mr. Bliley] and to 
all the others, this entire House can be proud of this legislation. I 
urge its adoption.
  Mr. HASTERT. Mr. Speaker, I am glad to see consensus has been reached 
to move ahead with bipartisan legislation that will equip America's 
capital markets to compete in the global marketplace. The changes in 
this bill will ultimately make it easier for business people and 
investors all over this Nation to reach the American Dream.
  We all know that communications technologies have made the world a 
smaller place. People and businesses looking for capital, or those 
looking to invest, are now able to shop around the world. They look for 
those markets that provide the highest degree of integrity, 
transparency, and liquidity, but do not require unnecessary or 
burdensome red tape.
  H.R. 3005 makes commonsense changes to a system that today, makes the 
cost of capital generation unnecessarily high and overburdens the 
Securities and Exchange Commission. The most fundamental change 
provides efficiency by dividing financial instruments into those that 
are national in scope and those that are not. This allows the SEC to 
focus its resources as the sole regulator of larger, national 
offerings, while the States will carry out the crucial role of 
regulating smaller offerings. This change enables regulators to 
concentrate on those instruments they are best suited to oversee. At 
the same time, eliminating duplicative registration requirements will 
reduce the cost of raising capital. Thus, more companies will be able 
to create jobs, pay out higher dividends, and further expand their 
business.
  These are the tangible effects of the bill we are addressing today. 
Thus, this bill moves entrepreneurs and investors one step closer to 
fulfilling the American Dream. Congress can and should continue to 
enact legislation that provides hope to the citizens of this Nation.
  Mrs. COLLINS of Illinois. Mr. Speaker, during three hearings held on 
securities amendments, the Commerce Committee heard support for 
sensible, targeted efforts to reform Federal securities laws to promote 
greater efficiency and capital formation in U.S. financial markets. We 
also heard from a number of witnesses, including Securities and 
Exchange Commission Chairman Arthur Levitt, who urged us to proceed 
carefully and cautiously, keeping in mind the fact that investor 
confidence and consumer protection must not in any way be compromised 
in this undertaking. I agree fully. I was extremely pleased that a 
bipartisan agreement was reached that heeded Chairman Levitt's sage 
device.
  As we all know, U.S. capital markets are the strongest financial 
markets in the world. Today, nearly one-third of all families in the 
Nation have a portion of their savings invested in stocks, bonds, and 
mutual funds in order to ensure a better future for themselves and 
their loved ones. These investors have trust in their investments 
because our regulatory system has proven beneficial in protecting 
individuals from fraud and abuse perpetuated by unscrupulous brokers 
and dealers. We will be preserving and strengthening this trust with 
the legislation we consider before us today.
  This legislation will maintain the authority of State securities 
regulators to police wrongdoing. In addition, the legislation in its 
current form ensures that the SEC mandate to protect American investors 
and the public interest as well as the long-term stability of our major 
markets remains intact. This is a most important point. While there is 
room to fine tune the regulatory functions of the SEC, reforms must 
never be structured in such a way that they undermine consumer 
confidence.
  This bill, H.R. 2005, does not seek to greatly limit inspections of 
brokerage firms who have violated SEC rules or relieve firms of 
liability for recommending unsuitably risky investments to 
institutional clients. The bill also modifies previous language that 
would have eliminated the requirement in current law that investors be 
sent a prospectus and informed of the risks they face before they buy 
newly offered securities by requiring the SEC to move forward with its 
study of this issue.
  Mr. Speaker, there is undoubtedly a need to monitor mutual fund 
regulation to fully account for the constantly evolving size, 
complexity, and investment opportunities of our Nation's financial 
markets. While mutual funds have grown by more than 20 percent annually 
throughout the 1980's and into the 1990's, Congress has not addressed 
the issue of fund regulation since 1970. This bill updates our 
securities laws.
  I urge my colleagues to support H.R. 3005.
  Mr. ACKERMAN. Mr. Speaker, on May 9, 1996, 18 of my colleagues and I 
wrote to the SEC to express our strong concern about the SEC's order 
giving permanent approval to a preferencing program on the Cincinnati 
Stock Exchange, the CSE. Among the important issues raised in the 
letter was the adequacy of the CSE's surveillance system.
  Preferencing enables a broker-dealer to take the other side of its 
own customer order, to the exclusion of the other competing market 
interest. Because preferencing presents a broker-dealer with a conflict 
between its duty to its customer as a broker and its financial self-
interest as a dealer, an effective surveillance system is especially 
important. Among the unanswered questions about the CSE preferencing 
program is whether the CSE's surveillance system can ensure that 
dealers taking the other side of their customers' orders fulfill their 
fiduciary obligations to achieve the best price for their customers. 
Given the SEC's traditional emphasis on investor protection, it is 
surprising that the order approving the CSE preferencing program does 
not address this issue.
  Mr. Speaker, today we take up H.R. 3005, the securities amendments of 
1996. This legislation does not address the issue of preferencing but I 
understand that similar legislation in the other body may contain a 
provision directing the SEC to undertake detailed study of preferencing 
on exchange markets. Such a study would likely provide answers to some 
of the unanswered questions about preferencing on the CSE, such as the 
adequacy of the CSE's surveillance system. Unless such a study 
concludes that there are tangible benefits to investors and to the 
capital formation process from this questionable practice, I would 
support efforts to move swiftly to ban preferencing on exchanges.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Virginia [Mr. Bliley] that the House suspend the rules 
and pass the bill, H.R. 3005, as amended.
  The question was taken.
  Mr. BLILEY. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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