[Congressional Record Volume 142, Number 96 (Wednesday, June 26, 1996)]
[Extensions of Remarks]
[Pages E1185-E1186]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   THE SECURITIES AMENDMENTS OF 1996

                                 ______
                                 

                       HON. THOMAS J. BLILEY, JR.

                              of virginia

                    in the house of representatives

                        Wednesday, June 26, 1996

  Mr. BLILEY. Mr. Speaker, today I offer an amendment to H.R. 3005, the 
Securities Amendments of 1996, that makes five important changes to 
this legislation.
  This amendment ensures that the benefits of exemption from multiple 
layers of State regulation that this legislation provides to issuers of 
national securities offerings are available to large, established 
partnerships and limited liability companies. As passed by the Commerce 
Committee, the legislation included a limitation that prevented 
partnerships and limited liability companies from qualifying for the 
exemption from State regulation that the legislation provides to 
national securities issuers. This limitation was included--and remains 
in the legislation--to address concerns raised by some that these 
vehicles might be more prone to abuse. These concerns do not, however, 
extend to large, established companies that may be organized as 
partnerships or limited liability companies.
  Therefore, the amendment I offer today eliminates State regulation 
over securities issued by a partnership or limited liability company 
that is either a registered dealer or an affiliate of such a dealer and 
has capital or equity of not less than $75 million. In addition, to 
qualify for the exemption State authority that this legislation 
provides, if the issuer is not a registered dealer, the issuer must not 
use the proceeds of the offering to fund its nonfinancial business. I 
intend that dealer affiliates, however, be able to rely upon the 
exemption to finance the full range of their activities, whether or not 
involving transactions in securities. Dealers and their affiliates 
today are legitimately engaged in a broad range of investment-related 
activities. Accordingly, I intend the financial business for purposes 
of section 18(c)(4)(A)(3), to include any business or activity 
pertaining to securities, commodities, banking, trust services, or 
insurance as well as the financing of any related capital or operating 
expense.
  I also recognize that issuers commonly add the proceeds of securities 
offerings to their

[[Page E1186]]

general funds and that, in consequence, the offering proceeds become 
fungible with the issuer's other moneys. In this regard, section 
18(c)(4)(A)(3), added by this amendment, is not intended to require 
issuers to trace offering proceeds to specific end uses. A dealer 
affiliate that funds both financial and nonfinancial businesses at, or 
subsequent to, the completion of a securities offering should remain 
eligible to claim the exemption unless it specifically directs all or 
most of the offering proceeds to the nonfinancial business.
  This amendment narrows the provision in the legislation that makes it 
easier for brokers to service their customers who are out of town, to 
help ensure investor protection. We live in a very mobile society, 
where it is commonplace for people to conduct their personal business 
outside the State where they live. Laws that do not recognize this fact 
of modern life are a trap for the unwary. This legislation eliminates 
this trap by providing a very narrow exception that permits brokers to 
provide service to their customers who are temporarily out of State or 
who have moved out of State, without having to register in that State 
in advance of the transaction. The amendment I offer today further 
narrows this provision to add a condition that applies in all cases 
where a broker seeks to use this exemption. It provides that a broker 
may only use the provisions of the exemption to service a preexisting 
customer of the broker-dealer that employs that broker. This will help 
to ensure that the exemption is used to help brokers and their clients 
transact business in today's mobile society, not to promote cold-
calling and boiler-room operations.

  In addition, the amendment provides that up to four associated 
persons may be deemed to be assigned to a client for purposes of new 
paragraph (3)(A)(ii) that the legislation adds to new section 15(h) of 
the Exchange Act.
  This amendment changes the provision of the legislation that grants 
the Securities and Exchange Commission exemptive authority to prevent 
the Commission from usurping the authority of the Department of the 
Treasury with respect to certain aspects of the regulation of 
Government securities brokers. The amendment provides an express 
limitation on the Commission's exemptive authority to provide that this 
authority does not extend to the provisions of section 15C under the 
Exchange Act, pursuant to which the Department of the Treasury 
regulates Government securities dealers.
  This amendment requires that the Securities and Exchange Commission 
find that a mutual fund name is materially misleading in order to use 
the rulemaking authority the legislation grants the Commission to stop 
the use of such a name.
  Finally, the amendment adds a new title III to the legislation, 
authorizing the Securities and Exchange Commission. This amendment is 
designed to put money back in the pockets of American investors. Today, 
the Securities and Exchange Commission takes in over $600 million in 
fees annually--which is double the amount it costs to run the place. 
This surplus in fee revenue over the cost of running the agency amounts 
to a tax on capital paid by all investors, including individual 
investors relying on mutual funds or pension plans to secure their 
retirement, their children's education, and their future financial 
security.
  Title III was crafted with the cooperation of Chairman Rogers and 
Chairman Archer to reauthorize the Securities and Exchange Commission 
and provide a stable long-term mechanism for funding the agency. At the 
same time, this funding mechanism reduces surplus fees--this tax--paid 
by investors.
  I introduced the legislation that I offer today as title III together 
with my friends John Dingell, ranking member of the Commerce Committee, 
Telecommunications and Finance Subcommittee chairman, Jack Fields, and 
the ranking member of the Subcommittee, Ed Markey. In addition, this 
funding legislation is endorsed by Securities and Exchange Commission 
chairman, Arthur Levitt.
  Working together, we developed legislation that reduces SEC fees by 
$751 million between fiscal years 1997 and 2002, and then reduces SEC 
fees by at least $256 million per year than they would be under current 
law. In fact, this legislation is likely to be the first bipartisan tax 
cut to pass through the House this year.
  Equally importantly, Chairman Rogers has agreed to work with us to 
provide a more stable funding mechanism for the SEC, so that the 
Commission can focus on its substantive work rather than annual or 
biannual funding emergencies.
  This legislation is vitally important. It is the first significant, 
sweeping reform to the regulation of the American securities markets in 
decades. It will help free up the capital that fledgling and growing 
businesses need to hire employees, build equipment, create new 
products. It will create jobs. And it represents another example of how 
productive and positive this Congress can be working together with our 
friends on both sides of the aisle. The amendment I offer today, I 
believe, makes this excellent piece of legislation even stronger, and I 
urge my colleagues to support it.

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