[Congressional Record Volume 142, Number 98 (Friday, June 28, 1996)]
[Senate]
[Pages S7328-S7336]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  SECURITIES INVESTMENT PROMOTIONS ACT

  The text of 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 passed by the 
Senate on June 27, 1996, is as follows:
       Resolved, That the bill from the House of Representatives 
     (H.R. 3005) entitled ``An Act to amend the Federal securities 
     laws in order to promote efficiency and capital formation in 
     the financial markets, and to amend the Investment Company 
     Act of 1940 to promote more efficient management of mutual 
     funds, protect investors, and provide more effective and less 
     burdensome regulation.'', do pass with the following 
     amendment:
Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

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

       TITLE I--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

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

           TITLE II--FACILITATING INVESTMENT IN MUTUAL FUNDS

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

         TITLE III--REDUCING THE COST OF SAVING AND INVESTMENT

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

     SEC. 2. SEVERABILITY.

       If any provision of this Act, an amendment made by this 
     Act, or the application of such provision or amendment to any 
     person or circumstance is held to be unconstitutional, the 
     remainder of this Act, the amendments made by this Act, and 
     the application of the provisions of such to any person or 
     circumstance shall not be affected thereby.
       TITLE I--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

     SEC. 101. SHORT TITLE.

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

     SEC. 102. FUNDING FOR ENHANCED ENFORCEMENT PRIORITY.

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

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

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

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

       ``(a) Advisers Subject to State Authorities.--

[[Page S7329]]

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

     SEC. 104. INTERSTATE COOPERATION.

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

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

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

     SEC. 105. DISQUALIFICATION OF CONVICTED FELONS.

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

     SEC. 106. CONTINUED STATE AUTHORITY.

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

     SEC. 107. EFFECTIVE DATE.

       This title and the amendments made by this title shall take 
     effect 180 days after the date of enactment of this Act.
           TITLE II--FACILITATING INVESTMENT IN MUTUAL FUNDS

     SEC. 201. SHORT TITLE.

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

     SEC. 202. FUNDS OF FUNDS.

       Section 12(d)(1) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-12(d)(1)) is amended--
       (1) in subparagraph (E)(iii)--
       (A) by striking ``in the event such investment company is 
     not a registered investment company,''; and
       (B) by inserting ``in the event that such investment 
     company is not a registered investment company,'' after 
     ``(bb)'';
       (2) by redesignating subparagraphs (G) and (H) as 
     subparagraphs (H) and (I), respectively;
       (3) by striking ``this paragraph (1)'' each place that term 
     appears and inserting ``this paragraph'';
       (4) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) This paragraph does not apply to securities of a 
     registered open-end investment company or a registered unit 
     investment trust (hereafter in this subparagraph referred to 
     as the `acquired company') purchased or otherwise acquired by 
     a registered open-end investment company or a registered unit 
     investment trust (hereafter in this subparagraph referred to 
     as the `acquiring company') if--
       ``(I) the acquired company and the acquiring company are 
     part of the same group of investment companies;
       ``(II) the securities of the acquired company, securities 
     of other registered open-end investment companies and 
     registered unit investment trusts that are part of the same 
     group of investment companies, Government securities, and 
     short-term paper are the only investments held by the 
     acquiring company;
       ``(III)(aa) the acquiring company does not pay and is not 
     assessed any charges or fees for distribution-related 
     activities with respect to securities of the acquired 
     company, unless the acquiring company does not charge a sales 
     load or other fees or charges for distribution-related 
     activities; or
       ``(bb) any sales loads and other distribution-related fees 
     charged with respect to securities of the acquiring company, 
     when aggregated with any sales load and distribution-related 
     fees paid by the acquiring company with respect to securities 
     of the acquired fund, are not excessive under rules adopted 
     pursuant to section 22(b) or section 22(c) by a securities 
     association registered under section 15A of the Securities 
     Exchange Act of 1934 or the Commission;
       ``(IV) the acquired company has a policy that prohibits it 
     from acquiring any securities of registered open-end 
     investment companies or registered unit investment trusts in 
     reliance on this subparagraph or subparagraph (F); and

[[Page S7330]]

       ``(V) such acquisition is not in contravention of such 
     rules and regulations as the Commission may from time to time 
     prescribe with respect to acquisitions in accordance with 
     this subparagraph, as necessary and appropriate for the 
     protection of investors.
       ``(ii) For purposes of this subparagraph, the term `group 
     of investment companies' means any 2 or more registered 
     investment companies that hold themselves out to investors as 
     related companies for purposes of investment and investor 
     services.''; and
       (5) by adding at the end the following new subparagraph:
       ``(J) The Commission, by rules and regulations, upon its 
     own motion, or by order upon application, may conditionally 
     or unconditionally exempt any person, security, or 
     transaction, or any class or classes of persons, securities, 
     or transactions from any provision of this subsection, if and 
     to the extent that such exemption is consistent with the 
     public interest and the protection of investors.''.

     SEC. 203. FLEXIBLE REGISTRATION OF SECURITIES.

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

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

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

     SEC. 205. VARIABLE INSURANCE CONTRACTS.

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

     SEC. 206. PROHIBITION ON DECEPTIVE INVESTMENT COMPANY NAMES.

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

     SEC. 207. EXCEPTED INVESTMENT COMPANIES.

       (a) Amendments.--Section 3(c) of the Investment Company Act 
     of 1940 (15 U.S.C. 80a-3(c)) is amended--
       (1) in paragraph (1), by inserting after the first sentence 
     the following: ``Such issuer shall be deemed to be an 
     investment company for purposes of the limitations set forth 
     in subparagraphs (A)(i) and (B)(i) of section 12(d)(1) 
     governing the purchase or other acquisition by such issuer of 
     any security issued by any registered investment company and 
     the sale of any security issued by any registered open-end 
     investment company to any such issuer.'';
       (2) in subparagraph (A) of paragraph (1)--
       (A) by inserting after ``issuer,'' the first place that 
     term appears, the following: ``and is or, but for the 
     exception provided for in this paragraph or paragraph (7), 
     would be an investment company,''; and
       (B) by striking ``unless, as of'' and all that follows 
     through the end of the subparagraph and inserting a period;
       (3) in paragraph (2)--
       (A) by striking ``and acting as broker,'' and inserting 
     ``acting as broker, and acting as market intermediary,'';
       (B) by inserting ``(A)'' after ``(2)''; and
       (C) by adding at the end the following new subparagraph:
       ``(B) For purposes of this paragraph--
       ``(i) the term `market intermediary' means any person that 
     regularly holds itself out as being willing contemporaneously 
     to engage in, and that is regularly engaged in, the business 
     of entering into transactions on both sides of the market for 
     a financial contract or one or more such financial contracts; 
     and
       ``(ii) the term `financial contract' means any arrangement 
     that--
       ``(I) takes the form of an individually negotiated 
     contract, agreement, or option to buy, sell, lend, swap, or 
     repurchase, or other similar individually negotiated 
     transaction commonly entered into by participants in the 
     financial markets;
       ``(II) is in respect of securities, commodities, 
     currencies, interest or other rates, other measures of value, 
     or any other financial or economic interest similar in 
     purpose or function to any of the foregoing; and
       ``(III) is entered into in response to a request from a 
     counter party for a quotation, or is otherwise entered into 
     and structured to accommodate the objectives of the counter 
     party to such arrangement.''; and
       (4) by striking paragraph (7) and inserting the following:
       ``(7)(A) Any issuer, the outstanding securities of which 
     are owned exclusively by persons who, at the time of 
     acquisition of such securities, are

[[Page S7331]]

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

     SEC. 208. PERFORMANCE FEES EXEMPTIONS.

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

     SEC. 209. REPORTS TO THE COMMISSION AND SHAREHOLDERS.

       Section 30 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-29) is amended--
       (1) in subsection (b), by striking paragraph (1) and 
     inserting the following:
       ``(1) such information, documents, and reports (other than 
     financial statements), as the Commission may require to keep 
     reasonably current the information and documents contained in 
     the registration statement of such company filed under this 
     title;'';
       (2) by redesignating subsections (c), (d), (e), and (f) as 
     subsections (d), (e), (g), and (h), respectively;
       (3) by inserting after subsection (b) the following new 
     subsection:
       ``(c)(1) The Commission shall take such action as it deems 
     necessary or appropriate, consistent with the public interest 
     and the protection of investors, to avoid unnecessary 
     reporting by, and minimize the compliance burdens on, 
     registered investment companies and their affiliated persons 
     in exercising its authority--
       ``(A) under subsection (f); and

[[Page S7332]]

       ``(B) under subsection (b)(1), if the Commission requires 
     the filing of information, documents, and reports under that 
     subsection on a basis more frequently than semiannually.
       ``(2) Action taken by the Commission under paragraph (1) 
     shall include considering, and requesting public comment on--
       ``(A) feasible alternatives that minimize the reporting 
     burdens on registered investment companies; and
       ``(B) the utility of such information, documents, and 
     reports to the Commission in relation to the costs to 
     registered investment companies and their affiliated persons 
     of providing such information, documents, and reports.'';
       (4) by inserting after subsection (e) (as redesignated by 
     paragraph (2) of this section), the following new subsection:
       ``(f) The Commission may, by rule, require that semi-annual 
     reports containing the information set forth in subsection 
     (e) include such other information as the Commission deems 
     necessary or appropriate in the public interest or for the 
     protection of investors.''; and
       (5) in subsection (g) (as redesignated by paragraph (2) of 
     this section), by striking ``subsections (a) and (d)'' and 
     inserting ``subsections (a) and (e)''.

     SEC. 210. BOOKS, RECORDS, AND INSPECTIONS.

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

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

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

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

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

     SEC. 303. DEFINITION OF ELIGIBLE PORTFOLIO COMPANY.

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

     SEC. 304. DEFINITION OF BUSINESS DEVELOPMENT COMPANY.

         Section 2(a)(48)(B) of the Investment Company Act of 1940 
     (15 U.S.C. 80a-2(a)(48)(B)) is amended by adding at the end 
     the following: ``provided further that a business development 
     company need not make available significant managerial 
     assistance with respect to any company described in paragraph 
     (46)(C)(iii), or with respect to any

[[Page S7333]]

     other company that meets such criteria as the Commission may 
     by rule, regulation, or order permit, as consistent with the 
     public interest, the protection of investors, and the 
     purposes of this title; and''.

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

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

     SEC. 306. CAPITAL STRUCTURE AMENDMENTS.

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

     SEC. 307. FILING OF WRITTEN STATEMENTS.

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

     SEC. 308. FACILITATING NATIONAL SECURITIES MARKETS.

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

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

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

     SEC. 309. REGULATORY FLEXIBILITY.

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

     ``SEC. 28. GENERAL EXEMPTIVE AUTHORITY.

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

     ``SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

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

     SEC. 310. ANALYSIS OF ECONOMIC EFFECTS OF REGULATION.

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

     SEC. 311. PRIVATIZATION OF EDGAR.

         Not later than 180 days after the date of enactment of 
     this Act, the Commission shall submit to the Congress a 
     report on the Electronic Data Gathering Analysis and 
     Retrieval System consisting of the Commission's plan for 
     promoting competition and

[[Page S7334]]

     innovation of the system through privatization of all or any 
     part of the system. Such plan shall include such 
     recommendations for action as may be necessary to implement 
     the plan.

     SEC. 312. IMPROVING COORDINATION OF SUPERVISION.

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

     SEC. 313. INCREASED ACCESS TO FOREIGN BUSINESS INFORMATION.

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

     SEC. 314. SHORT-FORM REGISTRATION.

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

     SEC. 315. CHURCH EMPLOYEE PENSION PLANS.

         (a) Amendment to the Investment Company Act of 1940.--
     Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 
     80a-3(c)) is amended by adding at the end the following new 
     paragraph:
         ``(14) Any church plan described in section 414(e) of the 
     Internal Revenue Code of 1986, if, under any such plan, no 
     part of the assets may be used for, or diverted to, purposes 
     other than the exclusive benefit of plan participants or 
     beneficiaries, or any company or account that is--
         ``(A) established by a person that is eligible to 
     establish and maintain such a plan under section 414(e) of 
     the Internal Revenue Code of 1986; and
         ``(B) substantially all of the activities of which 
     consist of--
         ``(i) managing or holding assets contributed to such 
     church plans or other assets which are permitted to be 
     commingled with the assets of church plans under the Internal 
     Revenue Code of 1986; or
         ``(ii) administering or providing benefits pursuant to 
     church plans.''.
         (b) Amendment to the Securities Act of 1933.--Section 
     3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a)) is 
     amended by adding at the end the following new paragraph:
         ``(13) Any security issued by or any interest or 
     participation in any church plan, company or account that is 
     excluded from the definition of an investment company under 
     section 3(c)(14) of the Investment Company Act of 1940.''.
         (c) Amendments to the Securities Exchange Act of 1934.--
         (1) Exempted securities.--Section 3(a)(12)(A) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)) is 
     amended--
         (A) in clause (v), by striking ``and'' at the end;
         (B) by redesignating clause (vi) as clause (vii); and
         (C) by inserting after clause (v) the following new 
     clause:
         ``(vi) solely for purposes of sections 12, 13, 14, and 16 
     of this title, any security issued by or any interest or 
     participation in any church plan, company, or account that is 
     excluded from the definition of an investment company under 
     section 3(c)(14) of the Investment Company Act of 1940; 
     and''.
         (2) Exemption from broker-dealer provisions.--Section 3 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is 
     amended by adding at the end the following new subsection:
         ``(f) Church Plans.--No church plan described in section 
     414(e) of the Internal Revenue Code of 1986, no person or 
     entity eligible to establish and maintain such a plan under 
     the Internal Revenue Code of 1986, no company or account that 
     is excluded from the definition of an investment company 
     under section 3(c)(14) of the Investment Company Act of 1940, 
     and no trustee, director, officer or employee of or volunteer 
     for such plan, company, account person, or entity, acting 
     within the scope of that person's employment or activities 
     with respect to such plan, shall be deemed to be a `broker', 
     `dealer', `municipal securities broker', `municipal 
     securities dealer', `government securities broker', 
     `government securities dealer', `clearing agency', or 
     `transfer agent' for purposes of this title--
         ``(1) solely because such plan, company, person, or 
     entity buys, holds, sells, trades in, or transfers securities 
     or acts as an intermediary in making payments in connection 
     with transactions in securities for its own account in its 
     capacity as trustee or administrator of, or otherwise on 
     behalf of, or for the account of, any church plan, company, 
     or account that is excluded from the definition of an 
     investment company under section 3(c)(14) of the Investment 
     Company Act of 1940; and
         ``(2) if no such person or entity receives a commission 
     or other transaction-related sales compensation in connection 
     with any activities conducted in reliance on the exemption 
     provided by this subsection.''.
         (d) Amendment to the Investment Advisers Act of 1940.--
     Section 203(b) of the Investment Advisers Act of 1940 (15 
     U.S.C. 80b-3(b)) is amended--
         (1) in paragraph (3), by striking ``or'' at the end;
         (2) in paragraph (4), by striking the period at the end 
     and inserting ``; or''; and
         (3) by adding at the end the following new paragraph:
         ``(5) any plan described in section 414(e) of the 
     Internal Revenue Code of 1986, any person or entity eligible 
     to establish and maintain such a plan under the Internal 
     Revenue Code of 1986, or any trustee, director, officer, or 
     employee of or volunteer for any such plan or person, if such 
     person or entity provides investment advice exclusively to 
     any plan, person, or entity or any company,

[[Page S7335]]

     account, or fund that is excluded from the definition of an 
     investment company under section 3(c)(14) of the Investment 
     Company Act of 1940.''.
         (e) Amendment to the Trust Indenture Act of 1939.--
     Section 304(a)(4)(A) of the Trust Indenture Act of 1939 (15 
     U.S.C. 77ddd(4)(A)) is amended by striking ``or (11)'' and 
     inserting ``(11), or (14)''.
         (f) Protection of Church Employee Benefit Plans Under 
     State Law.--
         (1) Registration requirements.--Any security issued by or 
     any interest or participation in any church plan, company, or 
     account that is excluded from the definition of an investment 
     company under section 3(c)(14) of the Investment Company Act 
     of 1940, as added by subsection (a) of this section, and any 
     offer, sale, or purchase thereof, shall be exempt from any 
     law of a State that requires registration or qualification of 
     securities.
         (2) Treatment of church plans.--No church plan described 
     in section 414(e) of the Internal Revenue Code of 1986, no 
     person or entity eligible to establish and maintain such a 
     plan under the Internal Revenue Code of 1986, no company or 
     account that is excluded from the definition of an investment 
     company under section 3(c)(14) of the Investment Company Act 
     of 1940, as added by subsection (a) of this section, and no 
     trustee, director, officer, or employee of or volunteer for 
     any such plan, person, entity, company, or account shall be 
     required to qualify, register, or be subject to regulation as 
     an investment company or as a broker, dealer, investment 
     adviser, or agent under the laws of any State solely because 
     such plan, person, entity, company, or account buys, holds, 
     sells, or trades in securities for its own account or in its 
     capacity as a trustee or administrator of or otherwise on 
     behalf of, or for the account of, or provides investment 
     advice to, for, or on behalf of, any such plan, person, or 
     entity or any company or account that is excluded from the 
     definition of an investment company under section 3(c)(14) of 
     the Investment Company Act of 1940, as added by subsection 
     (a) of this section.
         (g) Amendment to the Investment Company Act of 1940.--
     Section 30 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-29) is amended by adding at the end the following new 
     subsections:
         ``(g) Disclosure to Church Plan Participants.--A person 
     that maintains a church plan that is excluded from the 
     definition of an investment company solely by reason of 
     section 3(c)(14) shall provide disclosure to plan 
     participants, in writing, and not less frequently than 
     annually, and for new participants joining such a plan after 
     May 31, 1996, prior to joining such plan, that--
         ``(1) the plan, or any company or account maintained to 
     manage or hold plan assets and interests in such plan, 
     company, or account, are not subject to registration, 
     regulation, or reporting under this title, the Securities Act 
     of 1933, the Securities Exchange Act of 1934, or State 
     securities laws; and
         ``(2) plan participants and beneficiaries therefore will 
     not be afforded the protections of those provisions.
         ``(h) Notice to Commission.--The Commission may issue 
     rules and regulations to require any person that maintains a 
     church plan that is excluded from the definition of an 
     investment company solely by reason of section 3(c)(14) to 
     file a notice with the Commission containing such information 
     and in such form as the Commission may prescribe as necessary 
     or appropriate in the public interest or consistent with the 
     protection of investors.''.

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

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

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

         (a) In General.--Section 15 of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78o) is amended by adding at the end 
     the following new subsection:
         ``(h) Exemption From State Law for Certain de Minimis 
     Transactions.--
         ``(1) In general.--No law, rule, regulation, or order, or 
     other administrative action of any State or political 
     subdivision thereof may prohibit an associated person of a 
     broker or dealer from affecting a transaction described in 
     paragraph (2) for a customer in such State if--
         ``(A) such associated person is not ineligible to 
     register with such State for any reason other than such a 
     transaction;
         ``(B) such associated person is registered with a 
     registered securities association and at least one State; and
         ``(C) the broker or dealer with which such person is 
     associated is registered with such State.
         ``(2) Described transactions.--
         ``(A) In general.--A transaction is described in this 
     paragraph if--
         ``(i) such transaction is effected--

         ``(I) on behalf of a customer that, for 30 days prior to 
     the day of the transaction, maintained an account with the 
     broker or dealer; and
         ``(II) by an associated person of the broker or dealer--

         ``(aa) to which the customer was assigned for 14 days 
     prior to the day of the transaction; and
         ``(bb) who is registered with a State in which the 
     customer was a resident or was present for at least 30 
     consecutive days during the one-year period prior to the day 
     of the transaction;
         ``(ii) the transaction is effected--

         ``(I) on behalf of a customer that, for 30 days prior to 
     the day of the transaction, maintains an account with the 
     broker or dealer; and
         ``(II) within the period beginning on the date on which 
     such associated person files an application for registration 
     with the State in which the transaction is effected and 
     ending on the earlier of--

         ``(aa) 60 days after the date on which the application is 
     filed; or
         ``(bb) the date on which such State notifies the 
     associated person that it has denied the application for 
     registration or has stayed the pendency of the application 
     for cause.
         ``(B) Rules of construction.--For purposes of 
     subparagraph (A)(i)(II)--
         ``(i) each of up to 3 associated persons of a broker or 
     dealer who are designated to effect transactions during the 
     absence or unavailability of the principal associated person 
     for a customer may be treated as an associated person to 
     which such customer is assigned; and
         ``(ii) if the customer is present in another State for 30 
     or more consecutive days or has permanently changed his or 
     her residence to another State, a transaction is not 
     described in this paragraph, unless the association person of 
     the broker or dealer files an application for registration 
     with such State not later than 10 business days after the 
     later of the date of the transaction, or the date of the 
     discovery of the presence of the customer in the other State 
     for 30 or more consecutive days or the change in the 
     customer's residence.''.
         (b) Technical Amendment.--Section 28(a) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78bb(a)) is amended by 
     striking ``Nothing'' and inserting ``Except as otherwise 
     specifically provided in this title, nothing''.

     SEC. 318. STUDIES AND REPORTS.

         (a) Impact of Technological Advances.--
         (1) Study.--
         (A) In general.--The Commission shall conduct a study 
     of--
         (i) the impact of technological advances and the use of 
     on-line information systems on the securities markets;
         (ii) how such technologies have changed the way in which 
     the securities markets operate; and
         (iii) any steps taken by the Commission to address such 
     changes.
         (B) Considerations.--In conducting the study under 
     subparagraph (A), the Commission shall consider how the 
     Commission has adapted its enforcement policies and practices 
     in response to technological developments with regard to--
         (i) disclosure, prospectus delivery, and other customer 
     protection regulations;
         (ii) intermediaries and exchanges in the domestic and 
     international financial services industry;
         (iii) reporting by issuers, including communications with 
     holders of securities;
         (iv) the relationship of the Commission with other 
     national regulatory authorities and organizations to improve 
     coordination and cooperation; and
         (v) the relationship of the Commission with State 
     regulatory authorities and organizations to improve 
     coordination and cooperation.
         (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1).
         (b) Shareholder Proposals.--
         (1) Study.--The Commission shall conduct a study of--
         (A) whether shareholder access to proxy statements 
     pursuant to section 14 of the Securities Exchange Act of 1934 
     has been impaired by recent statutory, judicial, or 
     regulatory changes; and

[[Page S7336]]

         (B) the ability of shareholders to have proposals 
     relating to corporate practices and social issues included as 
     part of proxy statements.
         (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1), together with any recommendations for 
     regulatory or legislative changes that it considers necessary 
     to improve shareholder access to proxy statements.
         (c) Preferencing.--
         (1) Study.--The Commission shall conduct a study of the 
     impact on investors and the national market system of the 
     practice known as ``preferencing'' on one or more registered 
     securities exchanges, including consideration of--
         (A) how preferencing impacts--
         (i) the execution prices received by retail securities 
     customers whose orders are preferenced; and
         (ii) the ability of retail securities customers in all 
     markets to obtain executions of their limit orders in 
     preferenced securities; and
         (B) the costs of preferencing to such customers.
         (2) Report.--Not later than 6 months after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1).
         (3) Definition.--For purposes of this subsection, the 
     term ``preferencing'' refers to the practice of a broker 
     acting as a dealer on a national securities exchange, 
     directing the orders of customers to buy or sell securities 
     to itself for execution under rules that permit the broker to 
     take priority in execution over same-priced orders or 
     quotations entered prior in time.

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