[Congressional Record Volume 142, Number 137 (Saturday, September 28, 1996)]
[House]
[Pages H12037-H12047]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CONFERENCE REPORT ON H.R. 3005, NATIONAL SECURITIES MARKETS IMPROVEMENT 
                              ACT OF 1996

  Mr. BLILEY submitted the following conference report and statement on 
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:

                           CONFERENCE REPORT
                           (H. Rept. 104-864)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to 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, having met, after full and free conference, have 
     agreed to recommend and do recommend to their respective 
     Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Severability.

                        TITLE I--CAPITAL MARKETS

Sec. 101. Short title.
Sec. 102. Creation of national securities markets.
Sec. 103. Broker-dealer exemptions from State law.
Sec. 104. Broker-dealer funding.
Sec. 105. Exemptive authority.
Sec. 106. Promotion of efficiency, competition, and capital formation.
Sec. 107. Privatization of EDGAR.
Sec. 108. Improving coordination of supervision.
Sec. 109. Increased access to foreign business information.

              TITLE II--INVESTMENT COMPANY ACT AMENDMENTS

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. Reports to the Commission and shareholders.
Sec. 207. Books, records, and inspections.
Sec. 208. Prohibition on deceptive investment company names.
Sec. 209. Amendments to definitions.
Sec. 210. Performance fees exemptions.

      TITLE III--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

Sec. 301. Short title.
Sec. 302. Funding for enhanced enforcement priority.
Sec. 303. Improved supervision through State and Federal cooperation.
Sec. 304. Interstate cooperation.
Sec. 305. Disqualification of convicted felons.
Sec. 306. Investor access to information.
Sec. 307. Continued State authority.
Sec. 308. Effective date.

       TITLE IV--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION

Sec. 401. Short title.
Sec. 402. Purposes.
Sec. 403. Authorization of appropriations.
Sec. 404. Registration fees.
Sec. 405. Transaction fees.
Sec. 406. Time for payment.
Sec. 407. Sense of the Congress concerning fees.

          TITLE V--REDUCING THE COST OF SAVING AND INVESTMENT

Sec. 501. Exemption for economic, business, and industrial development 
              companies.
Sec. 502. Intrastate closed-end investment company exemption.
Sec. 503. Definition of eligible portfolio company.
Sec. 504. Definition of business development company.
Sec. 505. Acquisition of assets by business development companies.
Sec. 506. Capital structure amendments.
Sec. 507. Filing of written statements.
Sec. 508. Church employee pension plans.
Sec. 509. Promoting global preeminence of American securities markets.
Sec. 510. Studies and reports.

     SEC. 2. DEFINITIONS.

       For purposes of this Act--
       (1) the term ``Commission'' means the Securities and 
     Exchange Commission; and
       (2) the term ``State'' has the same meaning as in section 3 
     of the Securities Exchange Act of 1934.

     SEC. 3. 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--CAPITAL MARKETS

     SEC. 101. SHORT TITLE.

       This title may be cited as the ``Capital Markets Efficiency 
     Act of 1996''.

     SEC. 102. CREATION OF NATIONAL SECURITIES MARKETS.

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

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

       ``(a) Scope of Exemption.--Except as otherwise provided in 
     this section, no law, rule, regulation, or order, or other 
     administrative action of any State or any political 
     subdivision thereof--
       ``(1) requiring, or with respect to, registration or 
     qualification of securities, or registration or qualification 
     of securities transactions, shall directly or indirectly 
     apply to a security that--
       ``(A) is a covered security; or
       ``(B) will be a covered security upon completion of the 
     transaction;
       ``(2) shall directly or indirectly prohibit, limit, or 
     impose any conditions upon the use of--
       ``(A) with respect to a covered security described in 
     subsection (b), any offering document that is prepared by or 
     on behalf of the issuer; or
       ``(B) any proxy statement, report to shareholders, or other 
     disclosure document relating to a covered security or the 
     issuer thereof that is required to be and is filed with the 
     Commission or any national securities organization registered 
     under section 15A of the Securities Exchange Act of 1934, 
     except that this subparagraph does not apply to the laws, 
     rules, regulations, or orders, or other administrative 
     actions of the State of incorporation of the issuer; or
       ``(3) shall directly or indirectly prohibit, limit, or 
     impose conditions, based on the merits of such offering or 
     issuer, upon the offer or sale of any security described in 
     paragraph (1).
       ``(b) Covered Securities.--For purposes of this section, 
     the following are covered securities:

[[Page H12038]]

       ``(1) Exclusive federal registration of nationally traded 
     securities.--A security is a covered security if such 
     security is--
       ``(A) listed, or authorized for listing, on the New York 
     Stock Exchange or the American Stock Exchange, or listed on 
     the National Market System of the Nasdaq Stock Market (or any 
     successor to such entities);
       ``(B) listed, or authorized for listing, on a national 
     securities exchange (or tier or segment thereof) that has 
     listing standards that the Commission determines by rule (on 
     its own initiative or on the basis of a petition) are 
     substantially similar to the listing standards applicable to 
     securities described in subparagraph (A); or
       ``(C) is a security of the same issuer that is equal in 
     seniority or that is a senior security to a security 
     described in subparagraph (A) or (B).
       ``(2) Exclusive federal registration of investment 
     companies.--A security is a covered security if such security 
     is a security issued by an investment company that is 
     registered, or that has filed a registration statement, under 
     the Investment Company Act of 1940.
       ``(3) Sales to qualified purchasers.--A security is a 
     covered security with respect to the offer or sale of the 
     security to qualified purchasers, as defined by the 
     Commission by rule. In prescribing such rule, the Commission 
     may define the term `qualified purchaser' differently with 
     respect to different categories of securities, consistent 
     with the public interest and the protection of investors.
       ``(4) Exemption in connection with certain exempt 
     offerings.--A security is a covered security with respect to 
     a transaction that is exempt from registration under this 
     title pursuant to--
       ``(A) paragraph (1) or (3) of section 4, and the issuer of 
     such security files reports with the Commission pursuant to 
     section 13 or 15(d) of the Securities Exchange Act of 1934;
       ``(B) section 4(4);
       ``(C) section 3(a), other than the offer or sale of a 
     security that is exempt from such registration pursuant to 
     paragraph (4) or (11) of such section, except that a 
     municipal security that is exempt from such registration 
     pursuant to paragraph (2) of such section is not a covered 
     security with respect to the offer or sale of such security 
     in the State in which the issuer of such security is located; 
     or
       ``(D) Commission rules or regulations issued under section 
     4(2), except that this subparagraph does not prohibit a State 
     from imposing notice filing requirements that are 
     substantially similar to those required by rule or regulation 
     under section 4(2) that are in effect on September 1, 1996.
       ``(c) Preservation of Authority.--
       ``(1) Fraud authority.--Consistent with this section, the 
     securities commission (or any agency or office performing 
     like functions) of any State shall retain jurisdiction under 
     the laws of such State to investigate and bring enforcement 
     actions with respect to fraud or deceit, or unlawful conduct 
     by a broker or dealer, in connection with securities or 
     securities transactions.
       ``(2) Preservation of filing requirements.--
       ``(A) Notice filings permitted.--Nothing in this section 
     prohibits the securities commission (or any agency or office 
     performing like functions) of any State from requiring the 
     filing of any document filed with the Commission pursuant to 
     this title, together with annual or periodic reports of the 
     value of securities sold or offered to be sold to persons 
     located in the State (if such sales data is not included in 
     documents filed with the Commission), solely for notice 
     purposes and the assessment of any fee, together with a 
     consent to service of process and any required fee.
       ``(B) Preservation of fees.--
       ``(i) In general.--Until otherwise provided by law, rule, 
     regulation, or order, or other administrative action of any 
     State, or any political subdivision thereof, adopted after 
     the date of enactment of the Capital Markets Efficiency Act 
     of 1996, filing or registration fees with respect to 
     securities or securities transactions shall continue to be 
     collected in amounts determined pursuant to State law as in 
     effect on the day before such date.
       ``(ii) Schedule.--The fees required by this subparagraph 
     shall be paid, and all necessary supporting data on sales or 
     offers for sales required under subparagraph (A), shall be 
     reported on the same schedule as would have been applicable 
     had the issuer not relied on the exemption provided in 
     subsection (a).
       ``(C) Availability of preemption contingent on payment of 
     fees.--
       ``(i) In general.--During the period beginning on the date 
     of enactment of the National Securities Market Improvement 
     Act of 1996 and ending 3 years after that date of enactment, 
     the securities commission (or any agency or office performing 
     like functions) of any State may require the registration of 
     securities issued by any issuer who refuses to pay the fees 
     required by subparagraph (B).
       ``(ii) Delays.--For purposes of this subparagraph, delays 
     in payment of fees or underpayments of fees that are promptly 
     remedied shall not constitute a refusal to pay fees.
       ``(D) Fees not permitted on listed securities.--
     Notwithstanding subparagraphs (A), (B), and (C), no filing or 
     fee may be required with respect to any security that is a 
     covered security pursuant to subsection (b)(1), or will be 
     such a covered security upon completion of the transaction, 
     or is a security of the same issuer that is equal in 
     seniority or that is a senior security to a security that is 
     a covered security pursuant to subsection (b)(1).
       ``(3) Enforcement of requirements.--Nothing in this section 
     shall prohibit the securities commission (or any agency or 
     office performing like functions) of any State from 
     suspending the offer or sale of securities within such State 
     as a result of the failure to submit any filing or fee 
     required under law and permitted under this section.
       ``(d) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Offering document.--The term `offering document'--
       ``(A) has the meaning given the term `prospectus' in 
     section 2(10), but without regard to the provisions of 
     subparagraphs (A) and (B) of that section; and
       ``(B) includes a communication that is not deemed to offer 
     a security pursuant to a rule of the Commission.
       ``(2) Prepared by or on behalf of the issuer.--Not later 
     than 6 months after the date of enactment of the Securities 
     Amendments Act of 1996, the Commission shall, by rule, define 
     the term `prepared by or on behalf of the issuer' for 
     purposes of this section.
       ``(3) State.--The term `State' has the same meaning as in 
     section 3 of the Securities Exchange Act of 1934.
       ``(4) Senior security.--For purposes of this paragraph, the 
     term `senior security' means any bond, debenture, note, or 
     similar obligation or instrument constituting a security and 
     evidencing indebtedness, and any stock of a class having 
     priority over any other class as to distribution of assets or 
     payment of dividends.''.
       (b) Study and Report on Uniformity.--The Commission shall 
     conduct a study, after consultation with States, issuers, 
     brokers, and dealers, on the extent to which uniformity of 
     State regulatory requirements for securities or securities 
     transactions has been achieved for securities that are not 
     covered securities (within the meaning of section 18 of the 
     Securities Act of 1933, as amended by paragraph (1) of this 
     subsection). 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 such study.

     SEC. 103. BROKER-DEALER EXEMPTIONS FROM STATE LAW.

       (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) Limitations on State Law.--
       ``(1) Capital, margin, books and records, bonding, and 
     reports.--No law, rule, regulation, or order, or other 
     administrative action of any State or political subdivision 
     thereof shall establish capital, custody, margin, financial 
     responsibility, making and keeping records, bonding, or 
     financial or operational reporting requirements for brokers, 
     dealers, municipal securities dealers, government securities 
     brokers, or government securities dealers that differ from, 
     or are in addition to, the requirements in those areas 
     established under this title. The Commission shall consult 
     periodically the securities commissions (or any agency or 
     office performing like functions) of the States concerning 
     the adequacy of such requirements as established under this 
     title.
       ``(2) De minimis transactions by associated persons.--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 (3) 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.
       ``(3) 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 1-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) during 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.''.

[[Page H12039]]

       (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. 104. BROKER-DEALER FUNDING.

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

     except that the Board may impose such rules and regulations, 
     in whole or in part, on any credit otherwise exempted by this 
     paragraph if the Board determines that such action is 
     necessary or appropriate in the public interest or for the 
     protection of investors.''.
       (2) Extensions of credit by other lenders.--Section 7(d) of 
     the Securities Exchange Act of 1934 (78 U.S.C. 78g(d)) is 
     amended to read as follows:
       ``(d) Unlawful Credit Extension in Violation of Rules and 
     Regulations; Exception to Application of Rules, Etc.--
       ``(1) Prohibition.--It shall be unlawful for any person not 
     subject to subsection (c) to extend or maintain credit or to 
     arrange for the extension or maintenance of credit for the 
     purpose of purchasing or carrying any security, in 
     contravention of such rules and regulations as the Board 
     shall prescribe to prevent the excessive use of credit for 
     the purchasing or carrying of or trading in securities in 
     circumvention of the other provisions of this section. Such 
     rules and regulations may impose upon all loans made for the 
     purpose of purchasing or carrying securities limitations 
     similar to those imposed upon members, brokers, or dealers by 
     subsection (c) and the rules and regulations thereunder.
       ``(2) Exceptions.--This subsection and the rules and 
     regulations issued under this subsection shall not apply to 
     any credit extended, maintained, or arranged--
       ``(A) by a person not in the ordinary course of business;
       ``(B) on an exempted security;
       ``(C) to or for a member of a national securities exchange 
     or a registered broker or dealer--
       ``(i) a substantial portion of whose business consists of 
     transactions with persons other than brokers or dealers; or
       ``(ii) to finance its activities as a market maker or an 
     underwriter;
       ``(D) by a bank on a security other than an equity 
     security; or
       ``(E) as the Board shall, by such rules, regulations, or 
     orders as it may deem necessary or appropriate in the public 
     interest or for the protection of investors, exempt, either 
     unconditionally or upon specified terms and conditions or for 
     stated periods, from the operation of this subsection and the 
     rules and regulations thereunder.
       ``(3) Board authority.--The Board may impose such rules and 
     regulations, in whole or in part, on any credit otherwise 
     exempted by subparagraph (C) if it determines that such 
     action is necessary or appropriate in the public interest or 
     for the protection of investors.''.
       (b) Borrowing by Members, Brokers, and Dealers.--Section 8 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78h) is 
     amended--
       (1) by striking subsection (a); and
       (2) by redesignating subsections (b) and (c) as subsections 
     (a) and (b), respectively.

     SEC. 105. EXEMPTIVE AUTHORITY.

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

     ``SEC. 28. GENERAL EXEMPTIVE AUTHORITY.

       ``The Commission, by 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) General Exemptive Authority Under the Securities 
     Exchange Act of 1934.--Title I of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78a et seq.) is amended by adding at the 
     end the following new section:

     ``SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

       ``(a) Authority.--
       ``(1) In general.--Except as provided in subsection (b), 
     but notwithstanding any other provision of this title, the 
     Commission, by rule, regulation, or order, may conditionally 
     or unconditionally exempt any person, security, or 
     transaction, or any class or classes of persons, securities, 
     or transactions, from any provision or provisions of this 
     title or of any rule or regulation thereunder, to the extent 
     that such exemption is necessary or appropriate in the public 
     interest, and is consistent with the protection of investors.
       ``(2) Procedures.--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 any definition in paragraph (42), 
     (43), (44), or (45) of section 3(a).''.

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

       (a) Securities Act of 1933.--Section 2 of the Securities 
     Act of 1933 (15 U.S.C. 77b) is amended--
       (1) by inserting ``(a) Definitions.--'' after ``Sec. 2.''; 
     and
       (2) by adding at the end the following new subsection:
       ``(b) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.
       (b) Securities Exchange Act of 1934.--Section 3 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended by 
     adding at the end the following new subsection:
       ``(f) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking, or in the 
     review of a rule of a self-regulatory organization, and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.
       (c) Investment Company Act of 1940.--Section 2 of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-2) is amended 
     by adding at the end the following new subsection:
       ``(c) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     consistent with the public interest, the Commission shall 
     also consider, in addition to the protection of investors, 
     whether the action will promote efficiency, competition, and 
     capital formation.''.

     SEC. 107. PRIVATIZATION OF EDGAR.

       (a) Examination.--The Commission shall examine proposals 
     for the privatization of the EDGAR system. Such examination 
     shall promote competition in the automation and rapid 
     collection and dissemination of information required to be 
     disclosed. Such examination shall include proposals that 
     maintain free public access to data filings in the EDGAR 
     system.
       (b) Report.--Not later than 180 days after the date of 
     enactment of this Act, the Commission shall submit to the 
     Congress a report on the examination under subsection (a). 
     Such report shall include such recommendations for such 
     legislative action as may be necessary to implement the 
     proposal that the Commission determines most effectively 
     achieves the objectives described in subsection (a).

     SEC. 108. 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) 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.
       ``(2) 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.
       ``(3) Examinations for cause.--At any time, any examining 
     authority may conduct an examination for cause of any broker 
     or dealer subject to its jurisdiction.
       ``(4) Confidentiality.--
       ``(A) In general.--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 ensure

[[Page H12040]]

     that such information is not inappropriately disclosed.
       ``(B) Appropriate disclosure not prohibited.--Nothing in 
     this paragraph authorizes 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.
       ``(5) Definition.--For purposes of this subsection, the 
     term `examining authority' means a self-regulatory 
     organization registered with the Commission under this title 
     (other than a registered clearing agency) with the authority 
     to examine, inspect, and otherwise oversee the activities of 
     a registered broker or dealer.''.

     SEC. 109. INCREASED ACCESS TO FOREIGN BUSINESS INFORMATION.

       Not later than 1 year after the date of enactment of this 
     Act, the Commission shall adopt rules under the Securities 
     Act of 1933 concerning the status under the registration 
     provisions of the Securities Act of 1933 of foreign press 
     conferences and foreign press releases by persons engaged in 
     the offer and sale of securities.
              TITLE II--INVESTMENT COMPANY ACT AMENDMENTS

     SEC. 201. SHORT TITLE.

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

     SEC. 202. FUNDS OF FUNDS.

       Section 12(d)(1) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-12(d)(1)) is amended--
       (1) in subparagraph (E)(iii)--
       (A) by striking ``in the event such investment company is 
     not a registered investment company,''; and
       (B) by inserting ``in the event 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) with respect to--
       ``(aa) securities of the acquired company, the acquiring 
     company does not pay and is not assessed any charges or fees 
     for distribution-related activities, unless the acquiring 
     company does not charge a sales load or other fees or charges 
     for distribution-related activities; or
       ``(bb) securities of the acquiring company, any sales loads 
     and other distribution-related fees charged, when aggregated 
     with any sales load and distribution-related fees paid by the 
     acquiring company with respect to securities of the acquired 
     fund, are not excessive under rules adopted pursuant to 
     section 22(b) or section 22(c) by a securities association 
     registered under section 15A of the Securities Exchange Act 
     of 1934, or the Commission;
       ``(IV) the acquired company has a policy that prohibits it 
     from acquiring any securities of registered open-end 
     investment companies or registered unit investment trusts in 
     reliance on this subparagraph or subparagraph (F); and
       ``(V) such acquisition is not in contravention of such 
     rules and regulations as the Commission may from time to time 
     prescribe with respect to acquisitions in accordance with 
     this subparagraph, as necessary and appropriate for the 
     protection of investors.
       ``(ii) For purposes of this subparagraph, the term `group 
     of investment companies' means any 2 or more registered 
     investment companies that hold themselves out to investors as 
     related companies for purposes of investment and investor 
     services.''; and
       (5) by adding at the end the following new subparagraph:
       ``(J) The Commission, by rule or regulation, 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 a company or trust 
     referred to in paragraph (1), the company or trust, as 
     applicable, 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 company or trust, reduced 
     by--
       ``(A) the aggregate redemption or repurchase price of the 
     securities of the company or trust during that year; and
       ``(B) the aggregate redemption or repurchase price of the 
     securities of the company or trust during any prior fiscal 
     year ending not more than 1 year before the date of enactment 
     of the Investment Company Act Amendments of 1996, that were 
     not used previously by the company or trust to reduce fees 
     payable under this section.
       ``(3) Interest due on late payment.--A company or trust 
     paying the fee required by this subsection or any portion 
     thereof more than 90 days after the end of the fiscal year of 
     the company or trust shall pay to the Commission interest on 
     unpaid amounts, at the average investment rate for Treasury 
     tax and loan accounts published by the Secretary of the 
     Treasury pursuant to section 3717(a) 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 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--
       ``(A) unless 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, beginning on 
     the earlier of August 1, 1997, or the earliest effective date 
     of any registration statement or amendment thereto for such 
     contract following the date of enactment of this subsection, 
     the insurance company so represents in the registration 
     statement for the contract; and
       ``(B) unless 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 which is the domiciliary State 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.
       ``(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

[[Page H12041]]

     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. REPORTS TO THE COMMISSION AND SHAREHOLDERS.

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

     SEC. 207. BOOKS, RECORDS, AND INSPECTIONS.

       Section 31 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-30) is amended--
       (1) by striking subsections (a) and (b) and inserting the 
     following:
       ``(a) Maintenance of Records.--
       ``(1) In general.--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) Minimizing compliance burden.--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) Examinations of Records.--
       ``(1) In general.--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.
       ``(2) Availability.--For purposes of examinations referred 
     to in paragraph (1), 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.
       ``(3) Commission action.--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;
       (3) by inserting after subsection (b) the following new 
     subsections:
       ``(c) Limitations on Disclosure by Commission.--
     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) Definitions.--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.'';
       (4) in subsection (e), as redesignated, by inserting 
     ``Regulatory Authority.--'' before ``The Commission''; and
       (5) in subsection (f), as redesignated, by inserting 
     ``Exemption Authority.--'' before ``The Commission''.

     SEC. 208. 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) Deceptive or Misleading Names.--It shall be unlawful 
     for any registered investment company to adopt as a part of 
     the name or title of such company, or of any securities of 
     which it is the issuer, any word or words that the Commission 
     finds are materially deceptive or misleading. The Commission 
     is authorized, by rule, regulation, or order, to define such 
     names or titles as are materially deceptive or misleading.''.

     SEC. 209. AMENDMENTS TO DEFINITIONS.

       (a) Excepted Investment Companies.--Section 3(c) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) is 
     amended--
       (1) in paragraph (1), by inserting after the first sentence 
     the following: ``Such issuer shall be deemed to be an 
     investment company for purposes of the limitations set forth 
     in subparagraphs (A)(i) and (B)(i) of section 12(d)(1) 
     governing the purchase or other acquisition by such issuer of 
     any security issued by any registered investment company and 
     the sale of any security issued by any registered open-end 
     investment company to any such issuer.'';
       (2) in subparagraph (A) of paragraph (1)--
       (A) by inserting after ``issuer,'' the first place that 
     term appears, the following: ``and is or, but for the 
     exception provided for in this paragraph or paragraph (7), 
     would be an investment company,''; and
       (B) by striking ``unless, as of'' and all that follows 
     through the end of the subparagraph and inserting a period;
       (3) in paragraph (2)--
       (A) by striking ``and acting as broker,'' and inserting 
     ``acting as broker, and acting as market intermediary,'';
       (B) by inserting ``(A)'' after ``(2)''; and
       (C) by adding at the end the following new subparagraph:
       ``(B) For purposes of this paragraph--
       ``(i) the term `market intermediary' means any person that 
     regularly holds itself out as being willing contemporaneously 
     to engage in, and that is regularly engaged in, the business 
     of entering into transactions on both sides of the market for 
     a financial contract or one or more such financial contracts; 
     and
       ``(ii) the term `financial contract' means any arrangement 
     that--
       ``(I) takes the form of an individually negotiated 
     contract, agreement, or option to buy, sell, lend, swap, or 
     repurchase, or other similar individually negotiated 
     transaction commonly entered into by participants in the 
     financial markets;
       ``(II) is in respect of securities, commodities, 
     currencies, interest or other rates, other measures of value, 
     or any other financial or economic interest similar in 
     purpose or function to any of the foregoing; and
       ``(III) is entered into in response to a request from a 
     counter party for a quotation, or is otherwise entered into 
     and structured to accommodate the objectives of the counter 
     party to such arrangement.''; and
       (4) by striking paragraph (7) and inserting the following:
       ``(7)(A) Any issuer, the outstanding securities of which 
     are owned exclusively by persons who, at the time of 
     acquisition of such securities, are qualified purchasers, and 
     which is not making and does not at that time propose to make 
     a public offering of such securities. Securities that are 
     owned by persons who received the securities from a qualified 
     purchaser as a gift or bequest, or in a case in which the 
     transfer was

[[Page H12042]]

     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 any portion of the securities 
     of such issuer on or before September 1, 1996; and
       ``(II) at the time at which such persons initially acquired 
     the securities of such issuer, 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, 
     as determined under paragraph (1), 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, as determined 
     under paragraph (1), 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) 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 clause (ii) 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); or
       ``(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.
       ``(B) The Commission may adopt such rules and regulations 
     applicable to the persons and trusts specified in clauses (i) 
     through (iv) 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)), as amended by this section.
       (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.
       (4) Beneficial ownership.--Not later than 180 days after 
     the date of enactment of this Act, the Commission shall 
     prescribe rules defining the term ``beneficial owner'' for 
     purposes of section 3(c)(7)(B) of the Investment Company Act 
     of 1940, as amended by this 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. 210. 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.''.
      TITLE III--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT

     SEC. 301. SHORT TITLE.

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

     SEC. 302. FUNDING FOR ENHANCED ENFORCEMENT PRIORITY.

       There are authorized to be appropriated to the Commission, 
     for the enforcement of the Investment Advisers Act of 1940, 
     not more than $20,000,000 in each of fiscal years 1997 and 
     1998, in addition to any funds authorized to be appropriated 
     to the Commission for this or other purposes.

     SEC. 303. IMPROVED SUPERVISION THROUGH STATE AND FEDERAL 
                   COOPERATION.

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

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

       ``(a) Advisers Subject to State Authorities.--
       ``(1) In general.--No investment adviser that is regulated 
     or required to be regulated as an investment adviser in the 
     State in which it maintains its principal office and place of 
     business shall register under section 203, unless the 
     investment adviser--
       ``(A) has assets under management of not less than 
     $25,000,000, or such higher amount as the Commission may, by 
     rule, deem appropriate in accordance with the purposes of 
     this title; or

[[Page H12043]]

       ``(B) is an adviser to an investment company registered 
     under 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 person, 
     except that a State may license, register, or otherwise 
     qualify any investment adviser representative who has a place 
     of business located within that State; 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 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. 304. 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.
       ``(d) National De Minimis Standard.--No law of any State or 
     political subdivision thereof requiring the registration, 
     licensing, or qualification as an investment adviser shall 
     require an investment adviser to register with the securities 
     commissioner of the State (or any agency or officer 
     performing like functions) or to comply with such law (other 
     than any provision thereof prohibiting fraudulent conduct) if 
     the investment adviser--
       ``(1) does not have a place of business located within the 
     State; and
       ``(2) during the preceding 12-month period, has had fewer 
     than 6 clients who are residents of that State.''.

     SEC. 305. 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. 306. INVESTOR ACCESS TO INFORMATION.

       The Commission shall--
       (1) provide for the establishment and maintenance of a 
     readily accessible telephonic or other electronic process to 
     receive inquiries regarding disciplinary actions and 
     proceedings involving investment advisers and persons 
     associated with investment advisers; and
       (2) provide for prompt response to any inquiry described in 
     paragraph (1).

     SEC. 307. CONTINUED STATE AUTHORITY.

       (a) Preservation of Filing Requirements.--Nothing in this 
     title or any amendment made by this title prohibits the 
     securities commission (or any agency or office performing 
     like functions) of any State from requiring the filing of any 
     documents filed with the Commission pursuant to the 
     securities laws solely for notice purposes, together with a 
     consent to service of process and any required fee.
       (b) Preservation of Fees.--Until otherwise provided by law, 
     rule, regulation, or order, or other administrative action of 
     any State, or any political subdivision thereof, adopted 
     after the date of enactment of this Act, filing, 
     registration, or licensing fees shall, notwithstanding the 
     amendments made by this title, continue to be paid in amounts 
     determined pursuant to the law, rule, regulation, or order, 
     or other administrative action as in effect on the day before 
     such date of enactment.
       (c) Availability of Preemption Contingent on Payment of 
     Fees.--
       (1) In general.--During the period beginning on the date of 
     enactment of this Act and ending 3 years after that date of 
     enactment, the securities commission (or any agency or office 
     performing like functions) of any State may require 
     registration of any investment adviser that fails or refuses 
     to pay the fees required by subsection (b) in or to such 
     State, notwithstanding the limitations on the laws, rules, 
     regulations, or orders, or other administrative actions of 
     any State, or any political subdivision thereof, contained in 
     subsection (a), if the laws of such State require 
     registration of investment advisers.
       (2) Delays.--For purposes of this subsection, delays in 
     payment of fees or underpayments of fees that are promptly 
     remedied in accordance with the applicable laws, rules, 
     regulations, or orders, or other administrative actions of 
     the relevant State shall not constitute a failure or refusal 
     to pay fees.

     SEC. 308. EFFECTIVE DATE.

       (a) In General.--This title and the amendments made by this 
     title shall take effect 180 days after the date of enactment 
     of this Act.
       (b) Conforming Amendment.--
       (1) In general.--Section 3(38)(B) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(38)(B)) is amended by inserting ``or under the laws of 
     any State'' after ``1940''.
       (2) Sunset.--The amendment made by paragraph (1) shall 
     cease to be effective 2 years after the date of enactment of 
     this Act.
       TITLE IV--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION

     SEC. 401. SHORT TITLE.

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

     SEC. 402. PURPOSES.

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

     SEC. 403. AUTHORIZATION OF APPROPRIATIONS.

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

[[Page H12044]]

     ``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

       ``There are authorized to be appropriated to carry out the 
     functions, powers, and duties of the Commission $300,000,000 
     for fiscal year 1997, in addition to any other funds 
     authorized to be appropriated to the Commission.''.

     SEC. 404. REGISTRATION FEES.

       Section 6(b) of the Securities Act of 1933 (15 U.S.C. 
     77f(b)) is amended to read as follows:
       ``(b) Registration Fee.--
       ``(1) Recovery of cost of services.--The Commission shall, 
     in accordance with this subsection, collect registration fees 
     that are designed to recover the costs to the government of 
     the securities registration process, and costs related to 
     such process, including enforcement activities, policy and 
     rulemaking activities, administration, legal services, and 
     international regulatory activities.
       ``(2) Fee payment required.--At the time of filing a 
     registration statement, the applicant shall pay to the 
     Commission a fee that shall be equal to the sum of the 
     amounts (if any) determined under the rates established by 
     paragraphs (3) and (4). The Commission shall publish in the 
     Federal Register notices of the fee rates applicable under 
     this section for each fiscal year.
       ``(3) General revenue fees.--The rate determined under this 
     paragraph is a rate equal to $200 per $1,000,000 of the 
     maximum aggregate price at which such securities are proposed 
     to be offered, except that during fiscal year 2007 and any 
     succeeding fiscal year such rate is equal to $67 per 
     $1,000,000 of the maximum aggregate price at which such 
     securities are proposed to be offered. Fees collected during 
     any fiscal year pursuant to this paragraph shall be deposited 
     and credited as general revenues of the Treasury.
       ``(4) Offsetting collection fees.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), the rate determined under this paragraph is a rate 
     equal to the following amount per $1,000,000 of the maximum 
     aggregate price at which such securities are proposed to be 
     offered:
       ``(i) $95 during fiscal year 1998;
       ``(ii) $78 during fiscal year 1999;
       ``(iii) $64 during fiscal year 2000;
       ``(iv) $50 during fiscal year 2001;
       ``(v) $39 during fiscal year 2002;
       ``(vi) $28 during fiscal year 2003;
       ``(vii) $9 during fiscal year 2004;
       ``(viii) $5 during fiscal year 2005; and
       ``(ix) $0 during fiscal year 2006 or any succeeding fiscal 
     year.
       ``(B) Limitation; deposit.--Except as provided in 
     subparagraph (C), no amounts shall be collected pursuant to 
     this paragraph (4) for any fiscal year except to the extent 
     provided in advance in appropriations acts. Fees collected 
     during any fiscal year pursuant to this paragraph shall be 
     deposited and credited as offsetting collections in 
     accordance with appropriations Acts.
       ``(C) Lapse of appropriations.--If on the first day of a 
     fiscal year a regular appropriation to the Commission has not 
     been enacted, the Commission shall continue to collect fees 
     (as offsetting collections) under this paragraph at the rate 
     in effect during the preceding fiscal year, until such a 
     regular appropriation is enacted.
       ``(5) Pro rata application of rates.--The rates required by 
     this subsection shall be applied pro rata to amounts and 
     balances equal to less than $1,000,000.''.

     SEC. 405. TRANSACTION FEES.

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

     ``SEC. 31. TRANSACTION FEES.

       ``(a) Recovery of Cost of Services.--The Commission shall, 
     in accordance with this subsection, collect transaction fees 
     that are designed to recover the costs to the Government of 
     the supervision and regulation of securities markets and 
     securities professionals, and costs related to such 
     supervision and regulation, including enforcement activities, 
     policy and rulemaking activities, administration, legal 
     services, and international regulatory activities.
       ``(b) Exchange-Traded Securities.--Every national 
     securities exchange shall pay to the Commission a fee at a 
     rate equal to \1/300\ of one percent of the aggregate dollar 
     amount of sales of securities (other than bonds, debentures, 
     and other evidences of indebtedness) transacted on such 
     national securities exchange, except that for fiscal year 
     2007 or any succeeding fiscal year such rate shall be equal 
     to \1/800\ of one percent of such aggregate dollar amount of 
     sales. Fees collected pursuant to this subsection shall be 
     deposited and collected as general revenue of the Treasury.
       ``(c) Off-Exchange Trades of Exchange Registered 
     Securities.--Each national securities association shall pay 
     to the Commission a fee at a rate equal to \1/300\ of one 
     percent of the aggregate dollar amount of sales transacted by 
     or through any member of such association otherwise than on a 
     national securities exchange of securities registered on such 
     an exchange (other than bonds, debentures, and other 
     evidences of indebtedness), except that for fiscal year 2007 
     or any succeeding fiscal year such rate shall be equal to \1/
     800\ of one percent of such aggregate dollar amount of sales. 
     Fees collected pursuant to this subsection shall be deposited 
     and collected as general revenue of the Treasury.
       ``(d) Off-Exchange-Trades of Last-Sale-Reported 
     Securities.--
       ``(1) Covered transactions.--Each national securities 
     association shall pay to the Commission a fee at a rate equal 
     to \1/300\ of one percent of the aggregate dollar amount of 
     sales transacted by or through any member of such association 
     otherwise than on a national securities exchange of 
     securities (other than bonds, debentures, and other evidences 
     of indebtedness) subject to prompt last sale reporting 
     pursuant to the rules of the Commission or a registered 
     national securities association, excluding any sales for 
     which a fee is paid under subsection (c), except that for 
     fiscal year 2007, or any succeeding fiscal year, such rate 
     shall be equal to \1/800\ of one percent of such aggregate 
     dollar amount of sale.
       ``(2) Limitation; deposit of fees.--Except as provided in 
     paragraph (3), no amounts shall be collected pursuant to 
     subsection (d) for any fiscal year, except to the extent 
     provided in advance in appropriations Acts. Fees collected 
     during any such fiscal year pursuant to this subsection shall 
     be deposited and credited as offsetting collections to the 
     account providing appropriations to the Commission.
       ``(3) Lapse of appropriations.--If on the first day of a 
     fiscal year a regular appropriation to the Commission has not 
     been enacted, the Commission shall continue to collect fees 
     (as offsetting collections) under this subsection at the rate 
     in effect during the preceding fiscal year, until such a 
     regular appropriation is enacted.
       ``(e) Dates for Payment of Fees.--The fees required by 
     subsections (b), (c), and (d) of this section shall be paid--
       ``(1) on or before March 15, with respect to transactions 
     and sales occurring during the period beginning on the 
     preceding September 1 and ending at the close of the 
     preceding December 31; and
       ``(2) on or before September 30, with respect to 
     transactions and sales occurring during the period beginning 
     on the preceding January 1 and ending at the close of the 
     preceding August 31.
       ``(f) Exemptions.--The Commission, by rule, may exempt any 
     sale of securities or any class of sales of securities from 
     any fee imposed by this section, if the Commission finds that 
     such exemption is consistent with the public interest, the 
     equal regulation of markets and brokers and dealers, and the 
     development of a national market system.
       ``(g) Publication.--The Commission shall publish in the 
     Federal Register notices of the fee rates applicable under 
     this section for each fiscal year.''.
       (b) Effective Dates; Transition.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by subsection (a) shall apply with respect to 
     transactions in securities that occur on or after October 1, 
     1997.
       (2) Off-exchange trades of last sale reported 
     transactions.--The amendment made by subsection (a) shall 
     apply with respect to transactions described in section 
     31(d)(1) of the Securities Exchange Act of 1934 (as amended 
     by subsection (a) of this section) that occur on or after 
     September 1, 1997.

     SEC. 406. TIME FOR PAYMENT.

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

     SEC. 407. SENSE OF THE CONGRESS CONCERNING FEES.

       It is the sense of the Congress that, in order to maintain 
     the competitiveness of United States securities markets 
     relative to foreign markets, no fee should be assessed on 
     transactions involving portfolios of equity securities taking 
     place at times of day characterized by low volume and during 
     nontraditional trading hours.
          TITLE V--REDUCING THE COST OF SAVING AND INVESTMENT

     SEC. 501. 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(a)(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).

[[Page H12045]]

       ``(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. 502. 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. 503. 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. 504. DEFINITION OF BUSINESS DEVELOPMENT COMPANY.

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

     SEC. 505. 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. 506. 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. 507. 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. 508. 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:
       ``(g) 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, acting in such capacity, provides investment 
     advice exclusively to, or with respect to, any plan, person, 
     or entity or any company, account, or fund that is excluded 
     from the definition of an investment company under section 
     3(c)(14) of the Investment Company Act of 1940.''.
       (e) Amendment to the Trust Indenture Act of 1939.--Section 
     304(a)(4)(A) of the Trust Indenture Act of 1939 (15 U.S.C. 
     77ddd(4)(A)) is amended by striking ``or (11)'' and inserting 
     ``(11), or (14)''.
       (f) Protection of Church Employee Benefit Plans Under State 
     Law.--
       (1) Registration requirements.--Any security issued by or 
     any interest or participation in any church plan, company, or 
     account that is excluded from the definition of an investment 
     company under section 3(c)(14) of the Investment Company Act 
     of 1940, as added by subsection (a) of this section, and any 
     offer, sale, or purchase thereof, shall be exempt from any 
     law of a State that requires registration or qualification of 
     securities.
       (2) Treatment of church plans.--No church plan described in 
     section 414(e) of the Internal Revenue Code of 1986, no 
     person or entity eligible to establish and maintain such a 
     plan under the Internal Revenue Code of 1986, no company or 
     account that is excluded from the definition of an investment 
     company under section 3(c)(14) of the Investment Company Act 
     of 1940, as added by subsection (a) of this section, and no 
     trustee, director, officer, or employee of or volunteer for 
     any such plan, person, entity, company, or account shall be 
     required to qualify, register, or be subject to regulation as 
     an investment company or as a broker, dealer, investment 
     adviser, or agent under the laws of

[[Page H12046]]

     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, as soon as is practicable after 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. 509. 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. 510. 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, including 
     steps that the Commission has taken to facilitate the 
     electronic delivery of prospectuses to institutional and 
     other investors;
       (ii) how such technologies have changed the way in which 
     the securities markets operate; and
       (iii) any steps taken by the Commission to address such 
     changes.
       (B) Considerations.--In conducting the study under 
     subparagraph (A), the Commission shall consider how the 
     Commission has adapted its enforcement policies and practices 
     in response to technological developments with regard to--
       (i) disclosure, prospectus delivery, and other customer 
     protection regulations;
       (ii) intermediaries and exchanges in the domestic and 
     international financial services industry;
       (iii) reporting by issuers, including communications with 
     holders of securities;
       (iv) the relationship of the Commission with other national 
     regulatory authorities and organizations to improve 
     coordination and cooperation; and
       (v) the relationship of the Commission with State 
     regulatory authorities and organizations to improve 
     coordination and cooperation.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1).
       (b) Shareholder Proposals.--
       (1) Study.--The Commission shall conduct a study of--
       (A) whether shareholder access to proxy statements pursuant 
     to section 14 of the Securities Exchange Act of 1934 has been 
     impaired by recent statutory, judicial, or regulatory 
     changes; and
       (B) the ability of shareholders to have proposals relating 
     to corporate practices and social issues included as part of 
     proxy statements.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1), together with any recommendations for 
     regulatory or legislative changes that it considers necessary 
     to improve shareholder access to proxy statements.
       (c) Preferencing.--
       (1) Study.--The Commission shall conduct a study of the 
     impact on investors and the national market system of the 
     practice known as ``preferencing'' on one or more registered 
     securities exchanges, including consideration of--
       (A) how preferencing impacts--
       (i) the execution prices received by retail securities 
     customers whose orders are preferenced; and
       (ii) the ability of retail securities customers in all 
     markets to obtain executions of their limit orders in 
     preferenced securities; and
       (B) the costs of preferencing to such customers.
       (2) Report.--Not later than 6 months after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     paragraph (1).
       (3) Definition.--For purposes of this subsection, the term 
     ``preferencing'' refers to the practice of a broker acting as 
     a dealer on a national securities exchange, directing the 
     orders of customers to buy or sell securities to itself for 
     execution under rules that permit the broker to take priority 
     in execution over same-priced orders or quotations entered 
     prior in time.
       (d) Broker-Dealer Uniformity.--
       (1) Study.--The Commission, after consultation with 
     registered securities associations, national securities 
     exchanges, and States, shall conduct a study of the impact of 
     disparate State licensing requirements on associated persons 
     of registered brokers or dealers and methods for States to 
     attain uniform licensing requirements for such persons.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit to the 
     Congress a report on the study conducted under paragraph (1). 
     Such report shall include recommendations concerning 
     appropriate methods described in paragraph (1)(B), including 
     any necessary legislative changes to implement such 
     recommendations.
       And the Senate agree to the same.

     Tom Bliley,
     Jack Fields,
     Michael G. Oxley,
     Billy Tauzin,
     Dan Schaefer,
     Nathan Deal,
     Dan Frisa,
     Rick White,
     John D. Dingell,
     Edward J. Markey,
     Bart Gordon,
     Elizabeth Furse,
     Ron Klink,
                                Managers on the Part of the House.

     Alponse D'Amato,
     Phil Gramm,
     Robert F. Bennett,
     Paul S. Sarbanes,
      Chris Dodd,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to 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, submit the 
     following joint statement to the House and the Senate in 
     explanation of the effect of the action agreed upon by the 
     managers and recommended in the accompanying conference 
     report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.
       The Managers agreed to the following resolution of issues 
     between the House and Senate bills.
       The development and growth of the nation's capital markets 
     has prompted the

[[Page H12047]]

     Congress to examine the need for legislation modernizing and 
     rationalizing our scheme of securities regulation to promote 
     investment, decrease the cost of capital, and encourage 
     competition. The Managers have sought to achieve these goals 
     while also advancing the historic commitment of the 
     securities laws to promoting the protection of investors. In 
     particular, the system of dual Federal and state securities 
     regulation has resulted in a degree of duplicative and 
     unnecessary regulation. Securities offerings and the brokers 
     and dealers engaged in securities transactions are all 
     currently subject to a dual system of regulation that, in 
     many instances, is redundant, costly, and ineffective.
       During the course of consideration of this legislation, the 
     Congress received testimony indicating that this duplicative 
     regulation tends to raise the cost of capital to American 
     issuers of securities without providing commensurate 
     protection to investors or to our markets. Testimony also 
     indicated that technological change has transformed the 
     capital raising process, necessitating changes in the 
     regulatory scheme to facilitate the flow of information to 
     potential investors and reduce the marginal cost of capital 
     to firms. The Managers have sought to eliminate duplicative 
     and unnecessary regulatory burdens while preserving important 
     investor protections by reallocating responsibility over the 
     regulation of the nation's securities markets in a more 
     logical fashion between the Federal government and the 
     states.
       With respect to securities offerings, the Managers have 
     allocated regulatory responsibility between the Federal and 
     state governments based on the nature of the securities 
     offering. Some securities offerings, such as those made by 
     investment companies, and certain private placements are 
     inherently national in nature, and are therefore subject to 
     only Federal regulation. Smaller, regional, and intrastate 
     securities offerings remain subject to state regulation. The 
     Managers have preserved the authority of the states to 
     protect investors through application of state antifraud 
     laws. This preservation of authority is intended to permit 
     state securities regulators to continue to exercise their 
     police power to prevent fraud and broker-dealer sales 
     practice abuses, such as churning accounts or misleading 
     customers. It does not preserve the authority of state 
     securities regulators to regulate the securities registration 
     and offering process through commenting on and/or imposing 
     requirements on the contents of prospectuses or other 
     offering documents, whether prior to their use in a state or 
     after such use. The Conference Report requires the SEC to 
     conduct a study on the lack of uniformity in state regulation 
     of non-covered securities. Such study shall focus on the 
     effect of such uniformity or lack thereof on the cost of 
     capital, innovation and technological development in 
     securities markets, and duplicative regulation with respect 
     to securities issuers, including small business.
       The National Securities Markets Improvement Act of 1996 
     eliminates burdens and enhances innovation and efficiency for 
     investment companies. Among these changes are provisions to 
     facilitate the creation of funds, including funds of funds 
     comprising unit investment trusts, to facilitate and 
     streamline the registration process for investment companies, 
     and improve the efficiency and usefulness of investment 
     company advertising. In addition, the legislation grants the 
     Securities and Exchange Commission additional authority 
     regarding investment company books and records, and the 
     preparation of shareholder reports. This authority is 
     limited, however, and permits the Commission only to examine 
     records that the Commission requires investment companies to 
     maintain for inspection. The legislation does not grant the 
     Commission authority to inspect any other documents that an 
     investment company may maintain.
       The Managers agreed to include amendments to the Securities 
     Act of 1933, and the Securities and Exchange Act of 1934 to 
     eliminate duplication, promote efficiency and protect 
     investors.
       The Managers agreed to include amendments to the Investment 
     Company Act of 1940 to eliminate duplication, promote 
     efficiency and protect investors.
       The Managers agreed to include reauthorization of the SEC 
     to reauthorize the Commission, and to reduce over time the 
     fees collected by the agency. It is the intent of the 
     Managers that at the end of the applicable ten year period, 
     the SEC collect in fees a sum approximately equal to the cost 
     of running the agency.
       The Managers agreed to include certain amendments to the 
     Investment Advisers Act of 1940 to eliminate duplication, 
     promote efficiency, and protect investors.

     Tom Bliley,
     Jack Fields,
     Michael G. Oxley,
     Billy Tauzin,
     Dan Schaefer,
     Nathan Deal,
     Dan Frisa,
     Rick White,
     John D. Dingell,
     Edward J. Markey,
     Bart Gordon,
     Elizabeth Furse,
     Ron Klink,
                                Managers on the Part of the House.

     Alfonse D'Amato,
     Phil Gramm,
     Robert F. Bennett,
     Paul S. Sarbanes,
     Chris Dodd,
     Managers on the Part of the Senate.

                          ____________________