[House Report 104-864]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-864
_______________________________________________________________________


 
          NATIONAL SECURITIES MARKETS IMPROVEMENT ACT OF 1996

                                _______
                                

               September 28, 1996.--Ordered to be printed

_______________________________________________________________________


 Mr. Bliley, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 3005]

    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:
            ``(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.''.
    (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 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 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 
        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
                    ``(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:

``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).
            ``(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 
        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.

                                   Alfonse 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 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.