[Congressional Record Volume 149, Number 31 (Wednesday, February 26, 2003)]
[House]
[Pages H1341-H1343]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EMERGENCY SECURITIES RESPONSE ACT OF 2003
Mr. GARRETT of New Jersey. Mr. Speaker, I move to suspend the rules
and pass the bill (H.R. 657) to amend the Securities Exchange Act of
1934 to augment the emergency authority of the Securities and Exchange
Commission, as amended.
The Clerk read as follows:
H.R. 657
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Emergency Securities
Response Act of 2003''.
SEC. 2. EXTENSION OF EMERGENCY ORDER AUTHORITY OF THE
SECURITIES EXCHANGE COMMISSION.
(a) Extension of Authority.--Paragraph (2) of section 12(k)
of the Securities Exchange Act of 1934 (15 U.S.C. 78l(k)(2))
is amended to read as follows:
``(2) Emergency orders.--(A) The Commission, in an
emergency, may by order summarily take such action to alter,
supplement, suspend, or impose requirements or restrictions
with respect to any matter or action subject to regulation by
the Commission or a self-regulatory organization under the
securities laws, as the Commission determines is necessary in
the public interest and for the protection of investors--
``(i) to maintain or restore fair and orderly securities
markets (other than markets in exempted securities);
``(ii) to ensure prompt, accurate, and safe clearance and
settlement of transactions in securities (other than exempted
securities); or
``(iii) to reduce, eliminate, or prevent the substantial
disruption by the emergency of (I) securities markets (other
than markets in exempted securities), investment companies,
or any other significant portion or segment of such markets,
or (II) the transmission or processing of securities
transactions (other than transactions in exempted
securities).
``(B) An order of the Commission under this paragraph (2)
shall continue in effect for the period specified by the
Commission, and may be extended. Except as provided in
subparagraph (C), the Commission's action may not continue in
effect for more than 30 business days, including extensions.
``(C) An order of the Commission under this paragraph (2)
may be extended to continue in effect for more than 30
business days if, at the time of the extension, the
Commission finds that the emergency still exists and
determines that the continuation of the order beyond 30
business days is necessary in the public interest and for the
protection of investors to attain an objective described in
clause (i), (ii), or (iii) of subparagraph (A). In no event
shall an order of the Commission under this paragraph (2)
continue in effect for more than 90 calendar days.
``(D) If the actions described in subparagraph (A) involve
a security futures product, the Commission shall consult with
and consider the views of the Commodity Futures Trading
Commission. In exercising its authority under this paragraph,
the Commission shall not be required to comply with the
provisions of section 553 of title 5, United States Code, or
with the provisions of section 19(c) of this title.
``(E) Notwithstanding the exclusion of exempted securities
(and markets therein) from the Commission's authority under
subparagraph (A), the Commission may use such authority to
take action to alter, supplement, suspend, or impose
requirements or restrictions with respect to clearing
agencies for transactions in such exempted securities. In
taking any action under this subparagraph, the Commission
shall consult with and consider the views of the Secretary of
the Treasury.''.
(b) Consultation; Definition of Emergency.--Section 12(k)
of the Securities Exchange Act of 1934 (15 U.S.C. 78l(k)) is
further amended by striking paragraph (6) and inserting the
following:
``(6) Consultation.--Prior to taking any action described
in paragraph (1)(B), the Commission shall consult with and
consider the views of the Secretary of the Treasury, Board of
Governors of the Federal Reserve System, and the Commodity
Futures Trading Commission, unless such consultation is
impracticable in light of the emergency.
``(7) Definitions.--
``(A) Emergency.--For purposes of this subsection, the term
`emergency' means--
``(i) a major market disturbance characterized by or
constituting--
``(I) sudden and excessive fluctuations of securities
prices generally, or a substantial threat thereof, that
threaten fair and orderly markets; or
``(II) a substantial disruption of the safe or efficient
operation of the national system for clearance and settlement
of transactions in securities, or a substantial threat
thereof; or
``(i) a major disturbance that substantially disrupts, or
threatens to substantially disrupt--
``(I) the functioning of securities markets, investment
companies, or any other significant portion or segment of the
securities markets; or
``(II) the transmission or processing of securities
transactions.
``(B) Securities laws.--Notwithstanding section 3(a)(47),
for purposes of this subsection, the term `securities laws'
does not include the Public Utility Holding Company Act of
1935 (15 U.S.C. 79a et seq.).''.
SEC. 3. PARALLEL AUTHORITY OF THE SECRETARY OF THE TREASURY
WITH RESPECT TO GOVERNMENT SECURITIES.
Section 15C of the Securities Exchange Act of 1934 (15
U.S.C. 78o-5) is amended by adding at the end the following
new subsection:
``(h) Emergency Authority.--The Secretary may by order take
any action with respect to a matter or action subject to
regulation by the Secretary under this section, or the rules
of the Secretary thereunder, involving a government security
or a market therein (or significant portion or segment of
that market), that the Commission may take under section
12(k)(2) of this title with respect to transactions in
securities (other than exempted securities) or a market
therein (or significant portion or segment of that
market).''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
Jersey (Mr. Garrett) and the gentleman from Pennsylvania (Mr.
Kanjorski) each will control 20 minutes.
The Chair recognizes the gentleman from New Jersey (Mr. Garrett).
General Leave
Mr. GARRETT of New Jersey. Mr. Speaker, I ask unanimous consent that
all Members may have 5 legislative days within which to revise and
extend their remarks on H.R. 657.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New Jersey?
There was no objection.
Mr. GARRETT of New Jersey. Mr. Speaker, I yield myself such time as I
may consume.
[[Page H1342]]
Mr. Speaker, I rise now in support of adoption of H.R. 657. This is a
bill that would amend the Securities and Exchange Act of 1934, and it
will augment the emergency authority of the Securities and Exchange
Commission.
The SEC played a crucial role in the recovery of our financial
markets from the devastating effects of the terrorist attacks back on
September 11. This legislation now extends that emergency authority and
also the flexibility of the SEC from 10 business days to 30 business
days, with the possibility of an additional 90 days thereafter, to
respond to emergency situations such as 9-11. By extending this
emergency authority, this bill will ensure that the SEC has the ability
to immediately provide stability and liquidity to our markets following
such an emergency as that.
After the damage to Lower Manhattan on September 11, which, as we
know, Mr. Speaker, is the home of the world's stock market, the New
York Stock Exchange, they suspended the operations of the U.S. equities
market for the longest time since World War I.
To facilitate the planned reopening of our markets, the SEC used for
the first time ever its emergency powers to temporarily ease regulatory
restrictions. All of the security markets were open, amazingly, for
trading by September 17, 2001. The actions of the SEC ensured an
orderly reopening of the markets, something that was in the interests
of everyone, the economy and investors alike.
H.R. 657, what it does further is to eliminate any question that
anyone may have of the SEC's abilities to increase liquidity and extend
the duration of the relief to our marketplace. Should, unfortunately,
another financial crisis occur, I am confident that by us giving them
this emergency authority, they will be able to restore fair and orderly
markets and prevent substantial disruption to our marketplace.
Mr. Speaker, I would also point out that the manager's amendment that
we have that I am offering today amends this legislation to clarify a
couple of points; first of all, the exclusion for exempted securities
from the new emergency authority that the bill grants to the SEC. What
this does is it preserves the regulation of government securities as it
stands under the current law with respect to the Secretary of the
Treasury.
It also extends the SEC's emergency authority to clearing
organizations for exempted securities, so the commission will be able
to take actions regarding clearing of the government securities. In
addition to this, the Commission is required now under these amendments
to consult with the Treasury prior to using their authority.
{time} 1330
It requires a commission to consult with the Secretary of the
Treasury, the Board of Governors of the Federal Reserve System, and the
Commodity Futures Trading Commission to, of course, the extent
practical under the circumstances prior to its using its national
emergency authority to suspend trading in our national marketplace.
When you think about it, this is really simply good government. The
commission did consult with its fellow financial regulators during the
aftermath of September 11 in order to determine what steps were
necessary at that time. And so what we are doing with this legislation
now is it will ensure that this commonsense practice that they did in
the past, that they will do in the future as well.
Finally, this amendment grants to the Secretary of the Treasury new
emergency authority similar to what the bill granted to the Commission.
This new authority will enable the Treasurer to take action by order as
opposed to rulemaking. Now this new authority, it should be clearly
pointed out here, is specifically limited to apply only to matters
under the Treasurer's existing regulatory position that affects
government securities. So it does not, for example, grant the Treasurer
the authority to close down the government securities market.
I would also like to point out, Mr. Speaker, that this amendment does
not specifically require the commission to consult with its sister
regulators prior to using the emergency authority that this bill sets
out under 12(k)(2), the section that does not address trading
suspension. And there is a reason for this. This is because there are
instances in which the commission would be using its emergency
authority to address issues that do not have to have an impact on areas
within other financial regulatory authority. For example, lifting the
requirement that mutual fund directors meet in person, in the event
travel is rendered difficult or impossible because of such an emergency
as that.
However, it is my expectation that the commission will consult with
the Secretary of the Treasury and the other regulators at the time, as
I mentioned previously, prior to using their new authority, where such
use would have a broad financial market impact and would affect areas
within those entities, their particular entities' jurisdiction. And
this is exactly what the commission did back on 9/11 when the emergency
occurred.
I would also expect the commission to apply this cooperative and, as
I said earlier, commonsense approach to this new emergency authority by
ensuring that all affected regulators are consulted whenever necessary.
When we think back now, back to September 11, 2001 and the terrorist
attacks and how much they inflicted great human and physical loss in
New Jersey and upon the constituents in New Jersey's Fifth
Congressional District, my district, in the event of another large-
scale disaster, the Emergency Response Security Act here before us
gives the SEC the additional emergency authority to protect the
operational resilience of our financial markets. This legislation
ensures the health and future of America's economy which relies heavily
upon the future of America's economy and upon the access to our
markets.
This is an impact that we saw after
9/11 that impacted the constituents, as I indicated previously, the
constituents in the Fifth Congressional District. As the Speaker is
aware my district is made up of four counties: Sussex, Warren, Passaic,
and Bergen Counties. Many of the people are involved with the
securities markets just over the Hudson River in New York City where
the New York Stock Exchange is located. Not only did these individuals
have relatives and loved ones who were lost in the terrorist attack on
9/11, but many of them were directly impacted by the financial
consequences that followed thereafter. The SEC was able to, due to the
emergency authority that they had at that time, had within their
purview the powers to address the situation and get the marketplace up
and running within a week's period of time.
The bill that we have before us now allows us to ensure that that
will occur in the future.
Mr. Speaker, I would like to thank the gentleman from Ohio (Mr.
Oxley) and the gentleman from Louisiana (Mr. Baker) for their support
and swift action on this legislation. I thank the gentleman from
Illinois (Mr. Emanuel) for his support across the aisle.
Mr. Speaker, I strongly urge my colleagues to support this
legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Speaker, I yield myself such time as I may consume
rise.
Mr. Speaker, I rise in support of the adoption of H.R. 657, a bill to
provide the Securities and Exchange Commission with additional
emergency powers.
As my colleagues know, the SEC played a crucial role in the recovery
of our financial markets from the devastating effects of September 11,
2001 terrorist attacks. In addition to the important role the
commission played in coordinating market participants throughout the
crisis, the emergency orders issued by the SEC helped to provide needed
liquidity and stability to the stock markets. The actions of the SEC
also helped to ensure an orderly reopening of our capital markets,
something that was in the interest of our economy and all investors.
Under our current law the SEC has the authority to issue emergency
orders up to 10 business days in order to preserve orderly securities
trading, clearance, and settlement. Following the terrorist attacks,
the SEC used this authority for the first time to ease a variety of
securities regulations including broker-dealer capital rules related to
uncleared trades and restrictions on public companies' repurchase of
their own securities. The SEC later used its general exemptive
authority to
[[Page H1343]]
extend some of the emergency provisions beyond the initial 10 business
days in order to address continued lags in clearance and other areas,
as well as to temporarily suspend certain investment company
requirements.
While the SEC very effectively used its existing emergency powers
after the 2001 terrorist strikes, I believe this authority could be
further strengthened. At congressional hearings shortly after the
attacks, the SEC expressed similar views about the adequacy of its
emergency power. The formal legislative request later submitted by the
SEC asked that we provide the agency with additional emergency
authority to respond to any further crises both by extending the
potential length of the emergency orders and by extending the authority
to clearly cover all of the Federal securities laws.
In 2001 the Committee on Financial Services worked with the
commission and other interested parties to craft an appropriate
framework for any future emergency actions that the SEC may need to
take. The Emergency Securities Response Act subsequently passed the
House by a voice vote but it did not become law during the 107th
Congress. As a result, we must consider this matter anew in the 108th
Congress.
The bill before us today makes a number of improvements to current
law. For example, it expands the SEC's emergency authority to cover all
of the Federal securities laws. The bill further permits the SEC to
issue emergency orders for 30 business days, which I believe will give
the SEC the flexibility needed to ensure they can respond in a timely
and effective manner to any future emergency. The legislation also
provides the commission with the authority in limited circumstances to
extend emergency orders for an additional 90 days upon the finding that
the emergency continues to exist and that an extension of the orders
continues to be necessary and in the public interest.
As it became clear after the 2001 terrorist attacks, serious
disruptions in communications, computer systems, transportation, and
many other systems, as well as the physical damage to facilities, can
have profound effects on the securities markets and market
participants. This bill will give the SEC an expanded set of tools to
address such emergencies throughout the securities markets, no matter
what the underlying cause of the emergency may be.
Mr. Speaker, this bill also is a tribute to the leadership of Harvey
Pitt when he was chairman of the SEC Commission. And although Mr. Pitt
has now left the commission and probably has been criticized for many
people for many things, I think the record should reflect that in
regard to handling the crises during 2001 and working with the Congress
thereafter to provide for orderly markets, no other chairman of the SEC
expressed greater powers and controls with greater responsibility than
Harvey Pitt.
Mr. Speaker, I urge the adoption of H.R. 657, the Emergency
Securities Response Act.
Mr. Speaker, I reserve the balance of my time.
Mr. GARRETT. Mr. Speaker, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Speaker, I yield such time as she may consume to
the gentlewoman from New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Speaker, I thank the gentleman from Pennsylvania
(Mr. Kanjorski) for his leadership on this important legislation and I
thank him for yielding me time.
Mr. Speaker, I rise in strong support of the Emergency Securities
Response Act, legislation intended to assist the recovery of the
securities markets in the event of another major terrorist attack or
emergency.
The terrorist attacks of September 11, 2001 wreaked a tremendous toll
on my city of New York, the center of the world financial markets. As
we all know, the loss of life, buildings, property, and communications
equipment prevented the reopening of the financial markets until
September 17. While the stock market went down the day it opened, the
most important thing was that it was opened and functioning. This was a
major boost in confidence for the economy, for New York City, and for
the entire Nation.
For their roles in reopening the markets, the SEC and the other
regulators deserve much credit. Without their work, the economic
fallout of the attack would have been even more serious and harmed more
people. The legislation we are voting on today is intended to give the
SEC additional flexibility to deal with just such a situation should we
face another terrorist attack, disaster or emergency.
The Emergency Securities Response Act extends the commission's
emergency authority from 10 to 30 days and up to 90 days in certain
circumstances. This legislation is necessary because we know that our
Nation's financial infrastructure is a frontline target in the war
against terrorism. The World Trade Center was a symbol of the United
States' economy.
I truly want to compliment the leaders of other such symbols of our
economy in New York. The New York Stock Exchange and the New York
Mercantile Exchange have done an extremely good job not only during
that emergency, but since, in their efforts to upgrade security to
almost fortress-like levels. I would like to thank the gentleman from
Ohio (Mr. Oxley), the gentleman from Massachusetts (Mr. Frank), the
ranking member, the gentleman from Pennsylvania (Mr. Kanjorski) and the
gentleman from New Jersey (Mr. Garrett) for their work on this issue.
And I truly hope we never have to use the powers this legislation
grants the SEC. I truly hope we will never have such an emergency
again. But I strongly support this legislation.
Mr. KANJORSKI. Mr. Speaker, I have no further requests for time, and
I yield back the balance of my time.
Mr. GARRETT of New Jersey. Mr. Speaker, I have no further requests
for time, and I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Terry). The question is on the motion
offered by the gentleman from New Jersey (Mr. Garrett) that the House
suspend the rules and pass the bill, H.R. 657, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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