[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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