[House Report 118-312]
[From the U.S. Government Publishing Office]


118th Congress }                                          { REPORT 
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 118-312

======================================================================
 
                 INCREASING INVESTOR OPPORTUNITIES ACT

                                _______
                                

 December 12, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. McHenry, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2627]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2627) to amend the Investment Company Act of 
1940 to prohibit limitations on closed-end companies investing 
in private funds, and for other purposes, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Increasing Investor Opportunities 
Act''.

SEC. 2. CLOSED-END COMPANY AUTHORITY TO INVEST IN PRIVATE FUNDS.

  (a) In General.--Section 5 of the Investment Company Act of 1940 (15 
U.S.C. 80a-5) is amended by adding at the end the following:
  ``(d) Closed-End Company Authority to Invest in Private Funds.--
          ``(1) In general.--Except as otherwise prohibited or 
        restricted by this Act (or any rule issued under this Act), the 
        Commission may not prohibit or otherwise limit a closed-end 
        company from investing any or all of the assets of the closed-
        end company in securities issued by private funds.
          ``(2) Other restrictions on commission authority.--
                  ``(A) In general.--Except as otherwise prohibited or 
                restricted by this Act (or any rule issued under this 
                Act) or to the extent permitted by subparagraph (B), 
                the Commission may not impose any condition on, 
                restrict, or otherwise limit--
                          ``(i) the offer to sell, or the sale of, 
                        securities issued by a closed-end company that 
                        invests, or proposes to invest, in securities 
                        issued by private funds; or
                          ``(ii) the listing of the securities of a 
                        closed-end company described in clause (i) on a 
                        national securities exchange.
                  ``(B) Unrelated restrictions.--The Commission may 
                impose a condition on, restrict, or otherwise limit an 
                activity described in clause (i) or (ii) of 
                subparagraph (A) if that condition, restriction or 
                limitation is unrelated to the underlying 
                characteristics of a private fund or the status of a 
                private fund as a private fund.
          ``(3) Application.--Notwithstanding section 6(f), this 
        subsection shall also apply to a closed-end company that elects 
        to be treated as a business development company pursuant to 
        section 54.''.
  (b) Definition of Private Fund.--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:
          ``(55) The term `private fund' has the meaning given in 
        section 202(a) of the Investment Advisers Act of 1940 (15 
        U.S.C. 80b-2(a)).''.
  (c) Treatment by National Securities Exchanges.--Section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at 
the end the following:
  ``(m)(1) Except as otherwise prohibited or restricted by rules of the 
exchange that are consistent with section 5(d) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-5(d)), an exchange may not prohibit, 
condition, restrict, or impose any other limitation on the listing or 
trading of the securities of a closed-end company when the closed-end 
company invests, or may invest, some or all of the assets of the 
closed-end company in securities issued by private funds.
  ``(2) In this paragraph--
          ``(A) the term `closed-end company'--
                  ``(i) has the meaning given the term in section 5(a) 
                of the Investment Company Act of 1940 (15 U.S.C. 80a-
                5(a)); and
                  ``(ii) includes a closed-end company that elects to 
                be treated as a business development company pursuant 
                to section 54 of the Investment Company Act of 1940 (15 
                U.S.C. 80a-53); and
          ``(B) the term `private fund' has the meaning given the term 
        in section 2(a) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-2(a))).''.
  (d) Investment Limitation.--Section 3(c) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-3(c)) is amended--
          (1) in paragraph (1), in the matter preceding subparagraph 
        (A), in the second sentence, by striking ``subparagraphs (A)(i) 
        and (B)(i)'' and inserting ``subparagraphs (A)(i), (B)(i), and 
        (C)''; and
          (2) in paragraph (7)(D), by striking ``subparagraphs (A)(i) 
        and (B)(i)'' and inserting ``subparagraphs (A)(i), (B)(i), and 
        (C)''.
  (e) Rules of Construction.--
          (1) Nothing in this Act or the amendments made by this Act 
        may be construed to limit or amend any fiduciary duty owed to a 
        closed-end company (as defined in section 5(a)(2) of the 
        Investment Company Act of 1940 (15 U.S.C. 80a-5(a)(2))) or by 
        an investment adviser (as defined under section 2(a) of the 
        Investment Company Act of 1940 (15 U.S.C. 80a-2(a))) to a 
        closed-end company.
          (2) Nothing in this Act or the amendments made by this Act 
        may be construed to limit or amend the valuation, liquidity, or 
        redemption requirements or obligations of a closed-end company 
        (as defined in section 5(a)(2) of the Investment Company Act of 
        1940 (15 U.S.C. 80a-5(a)(2))) as required by the Investment 
        Company Act of 1940.

                          Purpose and Summary

    Introduced on April 13, 2023, by Representative Ann Wagner, 
H.R. 2627, the Increasing Investor Opportunities Act, would 
amend the Investment Company Act of 1940 and remove an SEC 
staff-level position that places an arbitrary limit on the 
amount of assets a closed-end fund may invest in private funds.

                  Background and Need for Legislation

    Approximately three million retail investors rely on 
closed-end funds (CEFs) as an important source of retirement 
savings and investment opportunities. These funds are strictly 
regulated and professionally managed investment vehicles that 
are treated as sophisticated investors and can invest freely in 
privately offered investments that retail investors typically 
cannot access. These funds regularly invest in privately 
offered assets that may be illiquid, such as repurchase 
agreements, derivatives, certain municipal securities, and 
institutional debt. The funds can also invest in private funds. 
However, the SEC staff limits those investments to 15 percent 
of the fund's net assets, unless the fund only offers its 
shares to accredited investors with minimum initial purchases 
of at least $25,000. To increase retail investor exposure to 
private markets while maintaining investor protections, H.R. 
2627 would amend the Investment Company Act of 1940 and remove 
the SEC staff-level position that places an arbitrary limit on 
the amount of assets a CEF may invest in private funds.

                                Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 2627: The Subcommittee on 
Capital Markets of the Committee on Financial Services held a 
hearing on February 8, 2023, titled ``Sophistication or 
Discrimination? How the Accredited Investor Definition Unfairly 
Limits Investment Access for the Non-wealthy and the Need for 
Reform.''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
May 24, 2023, and ordered H.R. 2627 to be reported favorably to 
the House as amended by a recorded vote of 37 ayes to 11 nays 
(Record vote no. FC-68), a quorum being present. Before the 
question was called to order the bill favorably reported, the 
Committee adopted an amendment in the nature of a substitute 
offered by Ms. Wagner by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the order to report legislation and amendments thereto. H.R. 
2627 was ordered reported favorably to the House as amended by 
a recorded vote of 37 ayes to 11 nays (Record vote no. FC-68), 
a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause (c)(4) of rule XIII of the Rules of the 
House of Representatives, the goal of H.R. 2627 is to amend the 
Investment Company Act of 1940 and remove an SEC staff-level 
position that places an arbitrary limit on the amount of assets 
a CEF may invest in private funds.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:



   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee adopts as its own the 
estimate of new budget authority, entitlement authority, or tax 
expenditures or revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1973.

                       Federal Mandates Statement

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee adopts as its own the estimate of the 
Federal mandates prepared by the Director of the Congressional 
Budget Office.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, the Committee has carefully reviewed the 
provisions of the bill and states that the provisions of the 
bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 2627 as the ``Increasing Investor 
Opportunities Act''.

Section 2. Closed-end company authority to invest in private funds

    This section amends the Investment Company Act of 1940 to 
give a closed-end company authority to invest in private funds 
without limitation. Specifically, this section states that the 
SEC may not limit a closed-end company from investing any or 
all of the company's assets in private funds solely or 
primarily because of the private funds' status as a private 
fund. This section also applies to a closed-end company that 
elects to be treated as a business development company. This 
section also clarifies that the rules of a national securities 
exchange do not prohibit the listing or trading of securities 
of a closed-end company solely or primarily because of the 
amount of the company's investment in private funds.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                     INVESTMENT COMPANY ACT OF 1940

TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *


                          general definitions

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) ``Advisory board'' means a board, whether elected 
        or appointed, which is distinct from the board of 
        directors or board of trustees, of an investment 
        company, and which is composed solely of persons who do 
        not serve such company in any other capacity, whether 
        or not the functions of such board are such as to 
        render its members ``directors'' within the definition 
        of that term, which board has advisory functions as to 
        investments but has no power to determine that any 
        security or other investment shall be purchased or sold 
        by such company.
          (2) ``Affiliated company'' means a company which is 
        an affiliated person.
          (3) ``Affiliated person'' of another person means (A) 
        any person directly or indirectly owning, controlling, 
        or holding with power to vote, 5 per centum or more of 
        the outstanding voting securities of such other person; 
        (B) any person 5 per centum or more of whose 
        outstanding voting securities are directly or 
        indirectly owned, controlled, or held with power to 
        vote, by such other person; (C) any person directly or 
        indirectly controlling, controlled by, or under common 
        control with, such other person; (D) any officer, 
        director, partner, copartner, or employee of such other 
        person; (E) if such other person is an investment 
        company, any investment adviser thereof or any member 
        of an advisory board thereof; and (F) if such other 
        person is an unincorporated investment company not 
        having a board of directors, the depositor thereof.
          (4) ``Assignment'' includes any direct or indirect 
        transfer or hypothecation of a contract or chose in 
        action by the assignor, or of a controlling block of 
        the assignor's outstanding voting securities by a 
        security holder of the assignor; but does not include 
        an assignment of partnership interests incidental to 
        the death or withdrawal of a minority of the members of 
        the partnership having only a minority interest in the 
        partnership business or to the admission to the 
        partnership of one or more members who, after such 
        admission, shall be only a minority of the members and 
        shall have only a minority interest in the business.
          (5) ``Bank'' means (A) a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance 
        Act) or a branch or agency of a foreign bank (as such 
        terms are defined in section 1(b) of the International 
        Banking Act of 1978), (B) a member bank of the Federal 
        Reserve System, (C) any other banking institution or 
        trust company, whether incorporated or not, doing 
        business under the laws of any State or of the United 
        States, a substantial portion of the business of which 
        consists of receiving deposits or exercising fiduciary 
        powers similar to those permitted to national banks 
        under the authority of the Comptroller of the Currency, 
        and which is supervised and examined by State or 
        Federal authority having supervision over banks, and 
        which is not operated for the purpose of evading the 
        provisions of this title, and (D) a receiver, 
        conservator, or other liquidating agent of any 
        institution or firm included in clause (A), (B), or (C) 
        of this paragraph.
          (6) The term ``broker'' has the same meaning as given 
        in section 3 of the Securities Exchange Act of 1934, 
        except that such term does not include any person 
        solely by reason of the fact that such person is an 
        underwriter for one or more investment companies.
          (7) ``Commission'' means the Securities and Exchange 
        Commission.
          (8) ``Company'' means a corporation, a partnership, 
        an association, a joint-stock company, a trust, a fund, 
        or any organized group of persons whether incorporated 
        or not; or any receiver, trustee in a case under title 
        11 of the United States Code or similar official or any 
        liquidating agent for any of the foregoing, in his 
        capacity as such.
          (9) ``Control'' means the power to exercise a 
        controlling influence over the management or policies 
        of a company, unless such power is solely the result of 
        an official position with such company.
          Any person who owns beneficially, either directly or 
        through one or more controlled companies, more than 25 
        per centum of the voting securities of a company shall 
        be presumed to control such company. Any person who 
        does not so own more than 25 per centum of the voting 
        securities of any company shall be presumed not to 
        control such company. A natural person shall be 
        presumed not to be a controlled person within the 
        meaning of this title. Any such presumption may be 
        rebutted by evidence, but except as hereinafter 
        provided, shall continue until a determination to the 
        contrary made by the Commission by order either on its 
        own motion or on application by an interested person. 
        If an application filed hereunder is not granted or 
        denied by the Commission within sixty days after filing 
        thereof, the determination sought by the application 
        shall be deemed to have been temporarily granted 
        pending final determination of the Commission thereon. 
        The Commission, upon its own motion or upon 
        application, may by order revoke or modify any order 
        issued under this paragraph whenever it shall find that 
        the determination embraced in such original order is no 
        longer consistent with the facts.
          (10) ``Convicted'' includes a verdict, judgment, or 
        plea of guilty, or a finding of guilt on a plea of nolo 
        contendere, if such verdict, judgment, plea, or finding 
        has not been reversed, set aside, or withdrawn, whether 
        or not sentence has been imposed.
          (11) The term ``dealer'' has the same meaning as 
        given in the Securities Exchange Act of 1934, but does 
        not include an insurance company or investment company.
          (12) ``Director'' means any director of a corporation 
        or any person performing similar functions with respect 
        to any organization, whether incorporated or 
        unincorporated, including any natural person who is a 
        member of a board of trustees of a management company 
        created as a common-law trust.
          (13) ``Employees' securities company'' means any 
        investment company or similar issuer all of the 
        outstanding securities of which (other than short-term 
        paper) are beneficially owned (A) by the employees or 
        persons on retainer of a single employer or of two or 
        more employers each of which is an affiliated company 
        of the other, (B) by former employees of such employer 
        or employers, (C) by members of the immediate family of 
        such employees, persons on retainer, or former 
        employees, (D) by any two or more of the foregoing 
        classes of persons, or (E) by such employer or 
        employers together with any one or more of the 
        foregoing classes of persons.
          (14) ``Exchange'' means any organization, 
        association, or group of persons, whether incorporated 
        or unincorporated, which constitutes, maintains, or 
        provides a market place or facilities for bringing 
        together purchasers and sellers of securities or for 
        otherwise performing with respect to securities the 
        functions commonly performed by a stock exchange as 
        that term is generally understood, and includes the 
        market place and the market facilities maintained by 
        such exchange.
          (15) ``Face-amount certificate'' means any 
        certificate, investment contract, or other security 
        which represents an obligation on the part of its 
        issuer to pay a stated or determinable sum or sums at a 
        fixed or determinable date or dates more than twenty-
        four months after the date of issuance, in 
        consideration of the payment of periodic installments 
        of a stated or determinable amount (which security 
        shall be known as a face-amount certificate of the 
        ``installment type''); or any security which represents 
        a similar obligation on the part of a face-amount 
        certificate company, the consideration for which is the 
        payment of a single lump sum (which security shall be 
        known as a ``fully paid'' face-amount certificate).
          (16) ``Government security'' means any security 
        issued or guaranteed as to principal or interest by the 
        United States, or by a person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing.
          (17) ``Insurance company'' means a company which is 
        organized as an insurance company, whose primary and 
        predominant business activity is the writing of 
        insurance or the reinsuring of risks underwritten by 
        insurance companies, and which is subject to 
        supervision by the insurance commissioner or a similar 
        official or agency of a State; or any receiver or 
        similar official or any liquidating agent for such a 
        company, in his capacity as such.
          (18) ``Interstate commerce'' means trade, commerce, 
        transportation, or communication among the several 
        States, or between any foreign country and any State, 
        or between any State and any place or ship outside 
        thereof.
          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) any affiliated person of such 
                        company,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such company,
                          (iii) any interested person of any 
                        investment adviser of or principal 
                        underwriter for such company,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company 
                        has acted as legal counsel for such 
                        company,
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account over which 
                                the investment company's 
                                investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account for which 
                                the investment company's 
                                investment adviser has 
                                borrowing authority, and
                          (vii) any natural person whom the 
                        Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had, at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company, 
                        a material business or professional 
                        relationship with such company or with 
                        the principal executive officer of such 
                        company or with any other investment 
                        company having the same investment 
                        adviser or principal underwriter or 
                        with the principal executive officer of 
                        such other investment company:
                 Provided, That no person shall be deemed to be 
                an interested person of an investment company 
                solely by reason of (aa) his being a member of 
                its board of directors or advisory board or an 
                owner of its securities, or (bb) his membership 
                in the immediate family of any person specified 
                in clause (aa) of this proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) any affiliated person of such 
                        investment adviser or principal 
                        underwriter,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such investment 
                        advisor or principal underwiter,
                          (iii) any person who knowingly has 
                        any direct or indirect beneficial 
                        interest in, or who is designated as 
                        trustee, executor, or guardian of any 
                        legal interest in, any security issued 
                        either by such investment adviser or 
                        principal underwriter or by a 
                        controlling person of such investment 
                        adviser or principal underwriter,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company has acted as legal 
                        counsel for such investment adviser or 
                        principal underwriter,
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account over which 
                                the investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account for which 
                                the investment adviser has 
                                borrowing authority, and
                          (vii) any natural person whom the 
                        Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.
                For the purposes of this paragraph (19), 
                ``member of the immediate family'' means any 
                parent, spouse of a parent, child, spouse of a 
                child, spouse, brother, or sister, and includes 
                step and adoptive relationships. The Commission 
                may modify or revoke any order issued under 
                clause (vii) of subparagaph (A) or (B) of this 
                paragraph whenever it finds that such order is 
                no longer consistent with the facts. No order 
                issued pursuant to clause (vii) of subparagraph 
                (A) or (B) of this paragraph shall become 
                effective until at least sixty days after the 
                entry thereof, and no such order shall affect 
                the status of any person for the purposes of 
                this title or for any other purpose for any 
                period prior to the effective date of such 
                order.
          (20) ``Investment adviser'' of an investment company 
        means (A) any person (other than a bona fide officer, 
        director, trustee, member of an advisory board, or 
        employee of such company, as such) who pursuant to 
        contract with such company regularly furnishes advice 
        to such company with respect to the desirability of 
        investing in, purchasing or selling securities or other 
        property, or is empowered to determine what securities 
        or other property shall be purchased or sold by such 
        company, and (B) any other person who pursuant to 
        contract with a person described in clause (A) 
        regularly performs substantially all of the duties 
        undertaken by such person described in clause (A); but 
        does not include (i) a person whose advice is furnished 
        solely through uniform publications distributed to 
        subscribers thereto, (ii) a person who furnishes only 
        statistical and other factual information, advice 
        regarding economic factors and trends, or advice as to 
        occasional transactions in specific securities, but 
        without generally furnishing advice or making 
        recommendations regarding the purchase or sale of 
        securities, (iii) a company furnishing such services at 
        cost to one or more investment companies, insurance 
        companies, or other financial institutions, (iv) any 
        person the character and amount of whose compensation 
        for such services must be approved by a court, or (v) 
        such other persons as the Commission may by rules and 
        regulations or order determine not to be within the 
        intent of this definition.
          (21) ``Investment banker'' means any person engaged 
        in the business of underwriting securities issued by 
        other persons, but does not include an investment 
        company, any person who acts as an underwriter in 
        isolated transactions but not as a part of a regular 
        business, or any person solely by reason of the fact 
        that such person is an underwriter for one or more 
        investment companies.
          (22) ``Issuer'' means every person who issues or 
        proposes to issue any security, or has outstanding any 
        security which it has issued.
          (23) ``Lend'' includes a purchase coupled with an 
        agreement by the vendor to repurchase; ``borrow'' 
        includes a sale coupled with a similar agreement.
          (24) ``Majority-owned subsidiary'' of a person means 
        a company 50 per centum or more of the outstanding 
        voting securities of which are owned by such person, or 
        by a company which, within the meaning of this 
        paragraph, is a majority-owned subsidiary of such 
        person.
          (25) ``Means or instrumentality of interstate 
        commerce'' includes any facility of a national 
        securities exchange.
          (26) ``National securities exchange'' means an 
        exchange registered under section 6 of the Securities 
        Exchange Act of 1934.
          (27) ``Periodic payment plan certificate'' means (A) 
        any certificate, investment contract, or other security 
        providing for a series of periodic payments by the 
        holder, and representing an undivided interest in 
        certain specified securities or in a unit or fund of 
        securities purchased wholly or partly with the proceeds 
        of such payments, and (B) any security the issuer of 
        which is also issuing securities of the character 
        described in clause (A) and the holder of which has 
        substantially the same rights and privileges as those 
        which holders of securities of the character described 
        in clause (A) have upon completing the periodic 
        payments for which such securities provide.
          (28) ``Person'' means a natural person or a company.
          (29) ``Principal underwriter'' of or for any 
        investment company other than a closed-end company, or 
        of any security issued by such a company, means any 
        underwriter who as principal purchases from such 
        company, or pursuant to contract has the right (whether 
        absolute or conditional) from time to time to purchase 
        from such company, any such security for distribution, 
        or who as agent for such company sells or has the right 
        to sell any such security to a dealer or to the public 
        or both, but does not include a dealer who purchases 
        from such company through a principal underwriter 
        acting as agent for such company. ``Principal 
        underwriter'' of or for a closed-end company or any 
        issuer which is not an investment company, or of any 
        security issued by such a company or issuer, means any 
        underwriter who, in connection with a primary 
        distribution of securities, (A) is in privity of 
        contract with the issuer or an affiliated person of the 
        issuer; (B) acting alone or in concert with one or more 
        other persons, initiates or directs the formation of an 
        underwriting syndicate; or (C) is allowed a rate of 
        gross commission, spread, or other profit greater than 
        the rate allowed another underwriter participating in 
        the distribution.
          (30) ``Promoter'' of a company or a proposed company 
        means a person who, acting alone or in concert with 
        other persons, is initiating or directing, or has 
        within one year initiated or directed, the organization 
        of such company.
          (31) ``Prospectus'', as used in section 22, means a 
        written prospectus intended to meet the requirements of 
        section 10(a) of the Securities Act of 1933 and 
        currently in use. As used elsewhere, ``prospectus'' 
        means a prospectus as defined in the Securities Act of 
        1933.
          (32) ``Redeemable security'' means any security, 
        other than short-term paper, under the terms of which 
        the holder, upon its presentation to the issuer or to a 
        person designated by the issuer, is entitled (whether 
        absolutely or only out of surplus) to receive 
        approximately his proportionate share of the issuer's 
        current net assets, or the cash equivalent thereof.
          (33) ``Reorganization'' means (A) a reorganization 
        under the supervision of a court of competent 
        jurisdiction; (B) a merger or consolidation; (C) a sale 
        of 75 per centum or more in value of the assets of a 
        company; (D) a restatement of the capital of a company, 
        or an exchange of securities issued by a company for 
        any of its own outstanding securities; (E) a voluntary 
        dissolution or liquidation of a company; (F) a 
        recapitalization or other procedure or transaction 
        which has for its purpose the alteration, modification, 
        or elimination of any of the rights, preferences, or 
        privileges of any class of securities issued by a 
        company, as provided in its charter or other instrument 
        creating or defining such rights, preferences, and 
        privileges; (G) an exchange of securities issued by a 
        company for outstanding securities issued by another 
        company or companies, preliminary to and for the 
        purpose of effecting or consummating any of the 
        foregoing; or (H) any exchange of securities by a 
        company which is not an investment company for 
        securities issued by a registered investment company.
          (34) ``Sale'', ``sell'', ``offer to sell'', or 
        ``offer for sale'' includes every contract of sale or 
        disposition of, attempt or offer to dispose of, or 
        solicitation of an offer to buy, a security or interest 
        in a security, for value. Any security given or 
        delivered with, or as a bonus on account of, any 
        purchase of securities or any other thing, shall be 
        conclusively presumed to constitute a part of the 
        subject of such purchase and to have been sold for 
        value.
          (35) ``Sales load'' means the difference between the 
        price of a security to the public and that portion of 
        the proceeds from its sale which is received and 
        invested or held for investment by the issuer (or in 
        the case of a unit investment trust, by the depositor 
        or trustee), less any portion of such difference 
        deducted for trustee's or custodian's fee, insurance 
        premiums, issue taxes, or administrative expenses or 
        fees which are not properly chargeable to sales or 
        promotional activities. In the case of a periodic 
        payment plan certificate, ``sales load'' includes the 
        sales load on any investment company securities in 
        which the payments made on such certificate are 
        invested, as well as the sales load on the certificate 
        itself.
          (36) ``Security'' means any note, stock, treasury 
        stock, security future, bond, debenture, evidence of 
        indebtedness, certificate of interest or participation 
        in any profit-sharing agreement, collateral-trust 
        certificate, preorganization certificate or 
        subsciption, transferable share, investment contract, 
        voting-trust certificate, certificate of deposit for a 
        security, fractional undivided interest in oil, gas, or 
        other mineral rights, any put, call, straddle, option, 
        or privilege on any security (including a certificate 
        of deposit) or on any group or index of securities 
        (including any interest therein or based on the value 
        thereof), or any put, call, straddle, option, or 
        privilege entered into on a national securities 
        exchange relating to foreign currency, or, in general, 
        any interest or instrument commonly known as a 
        ``security'', or any certificate of interest or 
        participation in, temporary or interim certificate for, 
        receipt for, guarantee of, or warrant or right to 
        subscribe to or purchase, any of the foregoing.
          (37) ``Separate account'' means an account 
        established and maintained by an insurance company 
        pursuant to the laws of any State or territory of the 
        United States, or of Canada or any province thereof, 
        under which income, gains and losses, whether or not 
        realized, from assets allocated to such account, are, 
        in accordance with the applicable contract, credited to 
        or charged against such account without regard to other 
        income, gains, or losses of the insurance company.
          (38) ``Short-term paper'' means any note, draft, bill 
        of exchange, or banker's acceptance payable on demand 
        or having a maturity at the time of issuance of not 
        exceeding nine months, exclusive of days of grace, or 
        any renewal thereof payable on demand or having a 
        maturity likewise limited; and such other classes of 
        securities, of a commercial rather than an investment 
        character, as the Commission may designate by rules and 
        regulations.
          (39) ``State'' means any State of the United States, 
        the District of Columbia, Puerto Rico, the Virgin 
        Islands, or any other possession of the United States.
          (40) ``Underwriter'' means any person who has 
        purchased from an issuer with a view to, or sells for 
        an issuer in connection with, the distribution of any 
        security, or participates or has a direct or indirect 
        participation in any such undertaking, or participates 
        or has a participation in the direct or indirect 
        underwriting of any such undertaking; but such term 
        shall not include a person whose interest is limited to 
        a commission from an underwriter or dealer not in 
        excess of the usual and customary distributor's or 
        seller's commission. As used in this paragraph the term 
        ``issuer'' shall include, in addition to an issuer, any 
        person directly or indirectly controlling or controlled 
        by the issuer, or any person under direct or indirect 
        common control with the issuer. When the distribution 
        of the securities in respect of which any person is an 
        underwriter is completed such person shall cease to be 
        an underwriter in respect of such securities or the 
        issuer thereof.
          (41) ``Value'', with respect to assets of registered 
        investment companies, except as provided in subsection 
        (b) of section 28 of this title, means--
                  (A) as used in sections 3, 5, and 12 of this 
                title, (i) with respect to securities owned at 
                the end of the last preceding fiscal quarter 
                for which market quotations are readily 
                available, the market value at the end of such 
                quarter; (ii) with respect to other securities 
                and assets owned at the end of the last 
                preceding fiscal quarter, fair value at the end 
                of such quarter, as determined in good faith by 
                the board of directors; and (iii) with respect 
                to securities and other assets acquired after 
                the end of the last preceding fiscal quarter, 
                the cost thereof; and
                  (B) as used elsewhere in this title, (i) with 
                respect to securities for which market 
                quotations are readily available, the market 
                value of such securities; and (ii) with respect 
                to other securities and assets, fair value as 
                determined in good faith by the board of 
                directors;
        in each case as of such time or times as determined 
        pursuant to this title, and the rules and regulations 
        issued by the Commission hereunder. Notwithstanding the 
        fact that market quotations for securities issued by 
        controlled companies are available, the board of 
        directors may in good faith determine the value of such 
        securities: Provided, That the value so determined is 
        not in excess of the higher of market value or asset 
        value of such securities in the case of majority-owned 
        subsidiaries, and is not in excess of market value in 
        the case of other controlled companies.
                  
  For purposes of the valuation of those assets of a registered 
diversified company which are not subject to the limitations 
provided for in section 5(b)(1), the Commission may, by rules 
and regulations or orders, permit any security to be carried at 
cost, if it shall determine that such procedure is consistent 
with the general intent and purposes of this title. For 
purposes of sections 5 and 12, in lieu of values determined as 
provided in clause (A) above, the Commission shall by rules and 
regulations permit valuation of securities at cost or other 
basis in cases where it may be more convenient for such company 
to make its computations on such basis by reason of the 
necessity or desirability of complying with the provisions of 
any United States revenue laws or rules and regulations issued 
thereunder, or the laws or the rules and regulations issued 
thereunder of any State in which the securities of such company 
may be qualified for sale.
  The foregoing definition shall not derogate from the 
authority of the Commission with respect to the reports, 
information, and documents to be filed with the Commission by 
any registered company, or with respect to the accounting 
policies and principles to be following by any such company, as 
provided in sections 8, 30, and 31.
          (42) ``Voting security'' means any security presently 
        entitling the owner or holder thereof to vote for the 
        election of directors of a company. A specified 
        percentage of the outstanding voting securities of a 
        company means such amount of its outstanding voting 
        securities as entitles the holder or holders thereof to 
        cast said specified percentage of the aggregate votes 
        which the holders of all the outstanding voting 
        securities of such company are entitled to cast. The 
        vote of a majority of the outstanding voting securities 
        of a company means the vote, at the annual or a special 
        meeting of the security holders of such company duly 
        called, (A) of 67 per centum or more of the voting 
        securities present at such meeting, if the holders of 
        more than 50 per centum of the outstanding voting 
        securities of such company are present or represented 
        by proxy; or (B) of more than 50 per centum of the 
        outstanding voting securities of such company, 
        whichever is the less.
          (43) ``Wholly-owned subsidiary'' of a person means a 
        company 95 per centum or more of the outstanding voting 
        securities of which are owned by such person, or by a 
        company which, within the meaning of this paragraph, is 
        a wholly-owned subsidiary of such person.
          (44) ``Securities Act of 1933'', ``Securities 
        Exchange Act of 1934'', and ``Trust Indenture Act of 
        1939'' means those Acts, respectively, as heretofore or 
        hereafter amended.
          (45) ``Savings and loan association'' means a savings 
        and loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, which is supervised and examined by State 
        or Federal authority having supervision over any such 
        institution, and a receiver, conservator, or other 
        liquidating agent of any such institution.
          (46) ``Eligible portfolio company'' means any issuer 
        which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is neither an investment company as 
                defined in section 3 (other than a small 
                business investment company which is licensed 
                by the Small Business Administration to operate 
                under the Small Business Investment Act of 1958 
                and which is a wholly-owned subsidiary of the 
                business development company) nor a company 
                which would be an investment company except for 
                the exclusion from the definition of investment 
                company in section 3(c); and
                  (C) satisfies one of the following:
                          (i) it does not have any class of 
                        securities with respect to which a 
                        member of a national securities 
                        exchange, broker, or dealer may extend 
                        or maintain credit to or for a customer 
                        pursuant to rules or regulations 
                        adopted by the Board of Governors of 
                        the Federal Reserve System under 
                        section 7 of the Securities Exchange 
                        Act of 1934;
                          (ii) it is controlled by a business 
                        development company, either alone or as 
                        part of a group acting together, and 
                        such business development company in 
                        fact exercises a controlling influence 
                        over the management or policies of such 
                        eligible portfolio company and, as a 
                        result of such control, has an 
                        affiliated person who is a director of 
                        such eligible portfolio company;
                          (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
                          (iv) it meets such other criteria as 
                        the Commission may, by rule, establish 
                        as consistent with the public interest, 
                        the protection of investors, and the 
                        purposes fairly intended by the policy 
                        and provisions of this title.
          (47) ``Making available significant managerial 
        assistance'' by a business development company means--
                  (A) any arrangement whereby a business 
                development company, through its directors, 
                officers, employees, or general partners, 
                offers to provide, and, if accepted, does so 
                provide, significant guidance and counsel 
                concerning the management, operations, or 
                business objectives and policies of a portfolio 
                company;
                  (B) the exercise by a business development 
                company of a controlling influence over the 
                management or policies of a portfolio company 
                by the business development company acting 
                individually or as part of a group acting 
                together which controls such portfolio company; 
                or
                  (C) with respect to a small business 
                investment company licensed by the Small 
                Business Administration to operate under the 
                Small Business Investment Act of 1958, the 
                making of loans to a portfolio company.
        For purposes of subparagraph (A), the requirement that 
        a business development company make available 
        significant managerial assistance shall be deemed to be 
        satisfied with respect to any particular portfolio 
        company where the business development company 
        purchases securities of such portfolio company in 
        conjunction with one or more other persons acting 
        together, and at least one of the persons in the group 
        makes available significant managerial assistance to 
        such portfolio company, except that such requirement 
        will not be deemed to be satisfied if the business 
        development company, in all cases, makes available 
        significant managerial assistance solely in the manner 
        described in this sentence.
          (48) ``Business development company'' means any 
        closed-end company which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is operated for the purpose of making 
                investments in securities described in 
                paragraphs (1) through (3) of section 55(a), 
                and makes available significant managerial 
                assistance with respect to the issuers of such 
                securities, provided that a business 
                development company must make available 
                significant managerial assistance only with 
                respect to the companies which are treated by 
                such business development company as satisfying 
                the 70 per centum of the value of its total 
                assets condition of section 55; and 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
                  (C) has elected pursuant to section 54(a) to 
                be subject to the provisions of sections 55 
                through 65.
          (49) ``Foreign securities authority'' means any 
        foreign government or any governmental body or 
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws as they 
        relate to securities matters.
          (50) ``Foreign financial regulatory authority'' means 
        any (A) foreign securities authority, (B) other 
        governmental body or foreign equivalent of a self-
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws relating 
        to the regulation of fiduciaries, trusts, commercial 
        lending, insurance, trading in contracts of sale of a 
        commodity for future delivery, or other instruments 
        traded on or subject to the rules of a contract market, 
        board of trade or foreign equivalent, or other 
        financial activities, or (C) membership organization a 
        function of which is to regulate the participation of 
        its members in activities listed above.
          (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.
          (52) The terms ``security future'' and ``narrow-based 
        security index'' have the same meanings as provided in 
        section 3(a)(55) of the Securities Exchange Act of 
        1934.
          (53) The term ``credit rating agency'' has the same 
        meaning as in section 3 of the Securities Exchange Act 
        of 1934.
          (54) The terms ``commodity pool'', ``commodity pool 
        operator'', ``commodity trading advisor'', ``major swap 
        participant'', ``swap'', ``swap dealer'', and ``swap 
        execution facility'' have the same meanings as in 
        section 1a of the Commodity Exchange Act (7 U.S.C. 
        1a).''.
          (55) The term ``private fund'' has the meaning given 
        in section 202(a) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-2(a)).
  (b) No provision in this title shall apply to, or be deemed 
to include, the United States, a State, or any political 
subdivision of a State, or any agency, authority, or 
instrumentality of any one or more of the foregoing, or any 
corporation which is wholly owned directly or indirectly by any 
one or more of the foregoing, or any officer, agent, or 
employee of any of the foregoing acting as such in the course 
of his official duty, unless such provision makes specific 
reference thereto.
  (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.

                    definition of investment company

  Sec. 3. (a)(1) When used in this title, ``investment 
company'' means any issuer which--
          (A) is or holds itself out as being engaged 
        primarily, or proposes to engage primarily, in the 
        business of investing, reinvesting, or trading in 
        securities;
          (B) is engaged or proposes to engage in the business 
        of issuing face-amount certificates of the installment 
        type, or has been engaged in such business and has any 
        such certificate outstanding; or
          (C) is engaged or proposes to engage in the business 
        of investing, reinvesting, owning, holding, or trading 
        in securities, and owns or proposes to acquire 
        investment securities having a value exceeding 40 per 
        centum of the value of such issuer's total assets 
        (exclusive of Government securities and cash items) on 
        an unconsolidated basis.
  (2) As used in this section, ``investment securities'' 
includes all securities except (A) Government securities, (B) 
securities issued by employees' securities companies, and (C) 
securities issued by majority-owned subsidiaries of the owner 
which (i) are not investment companies, and (ii) are not 
relying on the exception from the definition of investment 
company in paragraph (1) or (7) of subsection (c).
  (b) Notwithstanding paragraph (1)(C) of subsection (a), none 
of the following persons is an investment company within the 
meaning of this title:
          (1) Any issuer primarily engaged, directly or through 
        a wholly-owned subsidiary or subsidiaries, in a 
        business or businesses other than that of investing, 
        reinvesting, owning, holding, or trading in securities.
          (2) Any issuer which the Commission, upon application 
        by such issuer, finds and by order declares to be 
        primarily engaged in a business or businesses other 
        than that of investing, reinvesting, owning, holding, 
        or trading in securities either directly or (A) through 
        majority-owned subsidiaries or (B) through controlled 
        companies conducting similar types of businesses. The 
        filing of an application under this paragraph in good 
        faith by an issuer other than a registered investment 
        company shall exempt the applicant for a period of 
        sixty days from all provisions of this title applicable 
        to investment companies as such. For cause shown, the 
        Commission by order may extend such period of exemption 
        for an additional period or periods. Whenever the 
        Commission, upon its own motion or upon application, 
        finds that the circumstances which gave rise to the 
        issuance of an order granting an application under this 
        paragraph no longer exist, the Commission shall by 
        order revoke such order.
          (3) Any issuer all the outstanding securities of 
        which (other than short-term paper and directors' 
        qualifying shares) are directly or indirectly owned by 
        a company excepted from the definition of investment 
        company by paragraph (1) or (2) of this subsection.
  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) Any issuer whose outstanding securities (other 
        than short-term paper) are beneficially owned by not 
        more than one hundred persons (or, in the case of a 
        qualifying venture capital fund, 250 persons) and which 
        is not making and does not presently propose to make a 
        public offering of its securities. Such issuer shall be 
        deemed to be an investment company for purposes of the 
        limitations set forth in [subparagraphs (A)(i) and 
        (B)(i)] subparagraphs (A)(i), (B)(i), and (C) 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. For purposes of this 
        paragraph:
                  (A) Beneficial ownership by a company shall 
                be deemed to be beneficial ownership by one 
                person, except that, if the company owns 10 per 
                centum or more of the outstanding voting 
                securities of the issuer, and is or, but for 
                the exception provided for in this paragraph or 
                paragraph (7), would be an investment company, 
                the beneficial ownership shall be deemed to be 
                that of the holders of such company's 
                outstanding securities (other than short-term 
                paper).
                  (B) Beneficial ownership by any person who 
                acquires securities or interests in securities 
                of an issuer described in the first sentence of 
                this paragraph shall be deemed to be beneficial 
                ownership by the person from whom such transfer 
                was made, pursuant to such rules and 
                regulations as the Commission shall prescribe 
                as necessary or appropriate in the public 
                interest and consistent with the protection of 
                investors and the purposes fairly intended by 
                the policy and provisions of this title, where 
                the transfer was caused by legal separation, 
                divorce, death, or other involuntary event.
                  (C)(i) The term ``qualifying venture capital 
                fund'' means a venture capital fund that has 
                not more than $10,000,000 in aggregate capital 
                contributions and uncalled committed capital, 
                with such dollar amount to be indexed for 
                inflation once every 5 years by the Commission, 
                beginning from a measurement made by the 
                Commission on a date selected by the 
                Commission, rounded to the nearest $1,000,000.
                  (ii) The term ``venture capital fund'' has 
                the meaning given the term in section 
                275.203(l)-1 of title 17, Code of Federal 
                Regulations, or any successor regulation.
          (2)(A) Any person primarily engaged in the business 
        of underwriting and distributing securities issued by 
        other persons, selling securities to customers, acting 
        as broker, and acting as market intermediary, or any 
        one or more of such activities, whose gross income 
        normally is derived principally from such business and 
        related activities.
          (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.
          (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, if--
                  (A) such fund is employed by the bank solely 
                as an aid to the administration of trusts, 
                estates, or other accounts created and 
                maintained for a fiduciary purpose;
                  (B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, 
                interests in such fund are not--
                          (i) advertised; or
                          (ii) offered for sale to the general 
                        public; and
                  (C) fees and expenses charged by such fund 
                are not in contravention of fiduciary 
                principles established under applicable Federal 
                or State law.
          (4) Any person substantially all of whose business is 
        confined to making small loans, industrial banking, or 
        similar businesses.
          (5) Any person who is not engaged in the business of 
        issuing redeemable securities, face-amount certificates 
        of the installment type or periodic payment plan 
        certificates, and who is primarily engaged in one or 
        more of the following businesses: (A) Purchasing or 
        otherwise acquiring notes, drafts, acceptances, open 
        accounts receivable, and other obligations representing 
        part or all of the sales price of merchandise, 
        insurance, and services; (B) making loans to 
        manufacturers, wholesalers, and retailers of, and to 
        prospective purchasers of, specified merchandise, 
        insurance, and services; and (C) purchasing or 
        otherwise acquiring mortgages and other liens on and 
        interests in real estate.
          (6) Any company primarily engaged, directly or 
        through majority-owned subsidiaries, in one or more of 
        the businesses described in paragraphs (3), (4), and 
        (5), or in one or more of such businesses (from which 
        not less than 25 centum of such company's gross income 
        during its last fiscal year was derived) together with 
        an additional business or businesses other than 
        investing, reinvesting, owning, holding, or trading in 
        securities.
          (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)] subparagraphs (A)(i), 
        (B)(i), and (C) 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).
          (8)
          (9) Any person substantially all of whose business 
        consists of owning or holding oil, gas, or other 
        mineral royalties or leases, or fractional interests 
        therein, or certificates of interest or participation 
        in or investment contracts relative to such royalties, 
        leases, or fractional interests.
          (10)(A) Any company organized and operated 
        exclusively for religious, educational, benevolent, 
        fraternal, charitable, or reformatory purposes--
                  (i) no part of the net earnings of which 
                inures to the benefit of any private 
                shareholder or individual; or
                  (ii) which is or maintains a fund described 
                in subparagraph (B).
          (B) For the purposes of subparagraph (A)(ii), a fund 
        is described in this subparagraph if such fund is a 
        pooled income fund, collective trust fund, collective 
        investment fund, or similar fund maintained by a 
        charitable organization exclusively for the collective 
        investment and reinvestment of one or more of the 
        following:
                  (i) assets of the general endowment fund or 
                other funds of one or more charitable 
                organizations;
                  (ii) assets of a pooled income fund;
                  (iii) assets contributed to a charitable 
                organization in exchange for the issuance of 
                charitable gift annuities;
                  (iv) assets of a charitable remainder trust 
                or of any other trust, the remainder interests 
                of which are irrevocably dedicated to any 
                charitable organization;
                  (v) assets of a charitable lead trust;
                  (vi) assets of a trust, the remainder 
                interests of which are revocably dedicated to 
                or for the benefit of 1 or more charitable 
                organizations, if the ability to revoke the 
                dedication is limited to circumstances 
                involving--
                          (I) an adverse change in the 
                        financial circumstances of a settlor or 
                        an income beneficiary of the trust;
                          (II) a change in the identity of the 
                        charitable organization or 
                        organizations having the remainder 
                        interest, provided that the new 
                        beneficiary is also a charitable 
                        organization; or
                          (III) both the changes described in 
                        subclauses (I) and (II);
                  (vii) assets of a trust not described in 
                clauses (i) through (v), the remainder 
                interests of which are revocably dedicated to a 
                charitable organization, subject to 
                subparagraph (C); or
                  (viii) such assets as the Commission may 
                prescribe by rule, regulation, or order in 
                accordance with section 6(c).
          (C) A fund that contains assets described in clause 
        (vii) of subparagraph (B) shall be excluded from the 
        definition of an investment company for a period of 3 
        years after the date of enactment of this subparagraph, 
        but only if--
                  (i) such assets were contributed before the 
                date which is 60 days after the date of 
                enactment of this subparagraph; and
                  (ii) such assets are commingled in the fund 
                with assets described in one or more of clauses 
                (i) through (vi) and (viii) of subparagraph 
                (B).
          (D) For purposes of this paragraph--
                  (i) a trust or fund is ``maintained'' by a 
                charitable organization if the organization 
                serves as a trustee or administrator of the 
                trust or fund or has the power to remove the 
                trustees or administrators of the trust or fund 
                and to designate new trustees or 
                administrators;
                  (ii) the term ``pooled income fund'' has the 
                same meaning as in section 642(c)(5) of the 
                Internal Revenue Code of 1986;
                  (iii) the term ``charitable organization'' 
                means an organization described in paragraphs 
                (1) through (5) of section 170(c) or section 
                501(c)(3) of the Internal Revenue Code of 1986;
                  (iv) the term ``charitable lead trust'' means 
                a trust described in section 170(f)(2)(B), 
                2055(e)(2)(B), or 2522(c)(2)(B) of the Internal 
                Revenue Code of 1986;
                  (v) the term ``charitable remainder trust'' 
                means a charitable remainder annuity trust or a 
                charitable remainder unitrust, as those terms 
                are defined in section 664(d) of the Internal 
                Revenue Code of 1986; and
                  (vi) the term ``charitable gift annuity'' 
                means an annuity issued by a charitable 
                organization that is described in section 
                501(m)(5) of the Internal Revenue Code of 1986.
          (11) Any employee's stock bonus, pension, or profit-
        sharing trust which meets the requirements for 
        qualification under section 401 of the Internal Revenue 
        Code of 1986; or any governmental plan described in 
        section 3(a)(2)(C) of the Securities Act of 1933; or 
        any collective trust fund maintained by a bank 
        consisting solely of assets of one or more of such 
        trusts, government plans, or church plans, companies or 
        accounts that are excluded from the definition of an 
        investment company under paragraph (14) of this 
        subsection; or any separate account the assets of which 
        are derived solely from (A) contributions under pension 
        or profit-sharing plans which meet the requirements of 
        section 401 of the Internal Revenue Code of 1986 or the 
        requirements for deduction of the employer's 
        contribution under section 404(a)(2) of such Code, (B) 
        contributions under governmental plans in connection 
        with which interests, participations, or securities are 
        exempted from the registration provisions of section 5 
        of the Securities Act of 1933 by section 3(a)(2)(C) of 
        such Act, and (C) advances made by an insurance company 
        in connection with the operation of such separate 
        account.
          (12) Any voting trust the assets of which consist 
        exclusively of securities of a single issuer which is 
        not an investment company.
          (13) Any security holders' protective committee or 
        similar issuer having outstanding and issuing no 
        securities other than certificates of deposit and 
        short-term paper.
          (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.

           *       *       *       *       *       *       *


               subclassification of management companies

  Sec. 5. (a) For the purposes of this title, management 
companies are divided into open-end and closed-end companies, 
defined as follows:
          (1) ``Open-end company'' means a management company 
        which is offering for sale or has outstanding any 
        redeemable security of which it is the issuer.
          (2) ``Closed-end company'' means any management 
        company other than an open-end company.
  (b) Management companies are further divided into diversified 
companies and non-diversified companies, defined as follows:
          (1) ``Diversified company'' means a management 
        company which meets the following requirements: At 
        least 75 per centum of the value of its total assets is 
        represented by cash and cash items (including 
        receivables), Government securities, securities of 
        other investment companies, and other securities for 
        the purposes of this calculation limited in respect of 
        any one issuer to an amount not greater in value than 5 
        per centum of the value of the total assets of such 
        management company and to not more than 10 per centum 
        of the outstanding voting securities of such issuer.
          (2) ``Non-diversified company'' means any management 
        company other than a diversified company.
  (c) A registered diversified company which at the time of its 
qualification as such meets the requirements of paragraph (1) 
of subsection (b) shall not lose its status as a diversified 
company because of any subsequent discrepancy between the value 
of its various investments and the requirements of said 
paragraph, so long as any such discrepancy existing immediately 
after its acquisition of any security or other property is 
neither wholly nor partly the result of such acquisition.
  (d) Closed-end Company Authority to Invest in Private 
Funds.--
          (1) In general.--Except as otherwise prohibited or 
        restricted by this Act (or any rule issued under this 
        Act), the Commission may not prohibit or otherwise 
        limit a closed-end company from investing any or all of 
        the assets of the closed-end company in securities 
        issued by private funds.
          (2) Other restrictions on commission authority.--
                  (A) In general.--Except as otherwise 
                prohibited or restricted by this Act (or any 
                rule issued under this Act) or to the extent 
                permitted by subparagraph (B), the Commission 
                may not impose any condition on, restrict, or 
                otherwise limit--
                          (i) the offer to sell, or the sale 
                        of, securities issued by a closed-end 
                        company that invests, or proposes to 
                        invest, in securities issued by private 
                        funds; or
                          (ii) the listing of the securities of 
                        a closed-end company described in 
                        clause (i) on a national securities 
                        exchange.
                  (B) Unrelated restrictions.--The Commission 
                may impose a condition on, restrict, or 
                otherwise limit an activity described in clause 
                (i) or (ii) of subparagraph (A) if that 
                condition, restriction or limitation is 
                unrelated to the underlying characteristics of 
                a private fund or the status of a private fund 
                as a private fund.
          (3) Application.--Notwithstanding section 6(f), this 
        subsection shall also apply to a closed-end company 
        that elects to be treated as a business development 
        company pursuant to section 54.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


                     national securities exchanges

  Sec. 6. (a) An exchange may be registered as a national 
securities exchange under the terms and conditions hereinafter 
provided in this section and in accordance with the provisions 
of section 19(a) of this title, by filing with the Commission 
an application for registration in such form as the Commission, 
by rule, may prescribe containing the rules of the exchange and 
such other information and documents as the Commission, by 
rule, may prescribe as necessary or appropriate in the public 
interest or for the protection of investors.
  (b) An exchange shall not be registered as a national 
securities exchange unless the Commission determines that--
          (1) Such exchange is so organized and has the 
        capacity to be able to carry out the purposes of this 
        title and to comply, and (subject to any rule or order 
        of the Commission pursuant to section 17(d) or 19(g)(2) 
        of this title) to enforce compliance by its members and 
        persons associated with its members, with the 
        provisions of this title, the rules and regulations 
        thereunder, and the rules of the exchange.
          (2) Subject to the provisions of subsection (c) of 
        this section, the rules of the exchange provide that 
        any registered broker or dealer or natural person 
        associated with a registered broker or dealer may 
        become a member of such exchange and any person may 
        become associated with a member thereof.
          (3) The rules of the exchange assure a fair 
        representation of its members in the selection of its 
        directors and administration of its affairs and provide 
        that one or more directors shall be representative of 
        issuers and investors and not be associated with a 
        member of the exchange, broker, or dealer.
          (4) The rules of the exchange provide for the 
        equitable allocation of reasonable dues, fees, and 
        other charges among its members and issuers and other 
        persons using its facilities.
          (5) The rules of the exchange are designed to prevent 
        fraudulent and manipulative acts and practices, to 
        promote just and equitable principles of trade, to 
        foster cooperation and coordination with persons 
        engaged in regulating, clearing, settling, processing 
        information with respect to, and facilitating 
        transactions in securities, to remove impediments to 
        and perfect the mechanism of a free and open market and 
        a national market system, and, in general, to protect 
        investors and the public interest; and are not designed 
        to permit unfair discrimination between customers, 
        issuers, brokers, or dealers, or to regulate by virtue 
        of any authority conferred by this title matters not 
        related to the purposes of this title or the 
        administration of the exchange.
          (6) The rules of the exchange provide that (subject 
        to any rule or order of the Commission pursuant to 
        section 17(d) or 19(g)(2) of this title) its members 
        and persons associated with its members shall be 
        appropriately disciplined for violation of the 
        provisions of this title, the rules or regulations 
        thereunder, or the rules of the exchange, by expulsion, 
        suspension, limitation of activities, functions, and 
        operations, fine, censure, being suspended or barred 
        from being associated with a member, or any other 
        fitting sanction.
          (7) The rules of the exchange are in accordance with 
        the provisions of subsection (d) of this section, and 
        in general, provide a fair procedure for the 
        disciplining of members and persons associated with 
        members, the denial of membership to any person seeking 
        membership therein, the barring of any person from 
        becoming associated with a member thereof, and the 
        prohibition or limitation by the exchange of any person 
        with respect to access to services offered by the 
        exchange or a member thereof.
          (8) The rules of the exchange do not impose any 
        burden on competition not necessary or appropriate in 
        furtherance of the purposes of this title.
          (9)(A) The rules of the exchange prohibit the listing 
        of any security issued in a limited partnership rollup 
        transaction (as such term is defined in paragraphs (4) 
        and (5) of section 14(h)), unless such transaction was 
        conducted in accordance with procedures designed to 
        protect the rights of limited partners, including--
                  (i) the right of dissenting limited partners 
                to one of the following:
                          (I) an appraisal and compensation;
                          (II) retention of a security under 
                        substantially the same terms and 
                        conditions as the original issue;
                          (III) approval of the limited 
                        partnership rollup transaction by not 
                        less than 75 percent of the outstanding 
                        securities of each of the participating 
                        limited partnerships;
                          (IV) the use of a committee of 
                        limited partners that is independent, 
                        as determined in accordance with rules 
                        prescribed by the exchange, of the 
                        general partner or sponsor, that has 
                        been approved by a majority of the 
                        outstanding units of each of the 
                        participating limited partnerships, and 
                        that has such authority as is necessary 
                        to protect the interest of limited 
                        partners, including the authority to 
                        hire independent advisors, to negotiate 
                        with the general partner or sponsor on 
                        behalf of the limited partners, and to 
                        make a recommendation to the limited 
                        partners with respect to the proposed 
                        transaction; or
                          (V) other comparable rights that are 
                        prescribed by rule by the exchange and 
                        that are designed to protect dissenting 
                        limited partners;
                  (ii) the right not to have their voting power 
                unfairly reduced or abridged;
                  (iii) the right not to bear an unfair portion 
                of the costs of a proposed limited partnership 
                rollup transaction that is rejected; and
                  (iv) restrictions on the conversion of 
                contingent interests or fees into non-
                contingent interests or fees and restrictions 
                on the receipt of a non-contingent equity 
                interest in exchange for fees for services 
                which have not yet been provided.
          (B) As used in this paragraph, the term ``dissenting 
        limited partner'' means a person who, on the date on 
        which soliciting material is mailed to investors, is a 
        holder of a beneficial interest in a limited 
        partnership that is the subject of a limited 
        partnership rollup transaction, and who casts a vote 
        against the transaction and complies with procedures 
        established by the exchange, except that for purposes 
        of an exchange or tender offer, such person shall file 
        an objection in writing under the rules of the exchange 
        during the period during which the offer is 
        outstanding.
          (10)(A) The rules of the exchange prohibit any member 
        that is not the beneficial owner of a security 
        registered under section 12 from granting a proxy to 
        vote the security in connection with a shareholder vote 
        described in subparagraph (B), unless the beneficial 
        owner of the security has instructed the member to vote 
        the proxy in accordance with the voting instructions of 
        the beneficial owner.
          (B) A shareholder vote described in this subparagraph 
        is a shareholder vote with respect to the election of a 
        member of the board of directors of an issuer, 
        executive compensation, or any other significant 
        matter, as determined by the Commission, by rule, and 
        does not include a vote with respect to the uncontested 
        election of a member of the board of directors of any 
        investment company registered under the Investment 
        Company Act of 1940 (15 U.S.C. 80b-1 et seq.).
          (C) Nothing in this paragraph shall be construed to 
        prohibit a national securities exchange from 
        prohibiting a member that is not the beneficial owner 
        of a security registered under section 12 from granting 
        a proxy to vote the security in connection with a 
        shareholder vote not described in subparagraph (A).
  (c)(1) A national securities exchange shall deny membership 
to (A) any person, other than a natural person, which is not a 
registered broker or dealer or (B) any natural person who is 
not, or is not associated with, a registered broker or dealer.
  (2) A national securities exchange may, and in cases in which 
the Commission, by order, directs as necessary or appropriate 
in the public interest or for the protection of investors 
shall, deny membership to any registered broker or dealer or 
natural person associated with a registered broker or dealer, 
and bar from becoming associated with a member any person, who 
is subject to a statutory disqualification. A national 
securities exchange shall file notice with the Commission not 
less than thirty days prior to admitting any person to 
membership or permitting any person to become associated with a 
member, if the exchange knew, or in the exercise of reasonable 
care should have known, that such person was subject to a 
statutory disqualification. The notice shall be in such form 
and contain such information as the Commission, by rule, may 
prescribe as necessary or appropriate in the public interest or 
for the protection of investors.
  (3)(A) A national securities exchange may deny membership to, 
or condition the membership of, a registered broker or dealer 
if (i) such broker or dealer does not meet such standards of 
financial responsibility or operational capability or such 
broker or dealer or any natural person associated with such 
broker or dealer does not meet such standards of training, 
experience, and competence as are prescribed by the rules of 
the exchange or (ii) such broker or dealer or person associated 
with such broker or dealer has engaged and there is a 
reasonable likelihood he may again engage in acts or practices 
inconsistent with just and equitable principles of trade. A 
national securities exchange may examine and verify the 
qualifications of an applicant to become a member and the 
natural persons associated with such an applicant in accordance 
with procedures established by the rules of the exchange.
  (B) A national securities exchange may bar a natural person 
from becoming a member or associated with a member, or 
condition the membership of a natural person or association of 
a natural person with a member, if such natural person (i) does 
not meet such standards of training, experience, and competence 
as are prescribed by the rules of the exchange or (ii) has 
engaged and there is a reasonable likelihood he may again 
engage in acts or practices inconsistent with just and 
equitable principles of trade. A national securities exchange 
may examine and verify the qualifications of an applicant to 
become a person associated with a member in accordance with 
procedures established by the rules of the exchange and require 
any person associated with a member, or any class of such 
persons, to be registered with the exchange in accordance with 
procedures so established.
  (C) A national securities exchange may bar any person from 
becoming associated with a member if such person does not agree 
(i) to supply the exchange with such information with respect 
to its relationship and dealings with the member as may be 
specified in the rules of the exchange and (ii) to permit the 
examination of its books and records to verify the accuracy of 
any information so supplied.
  (4) A national securities exchange may limit (A) the number 
of members of the exchange and (B) the number of members and 
designated representatives of members permitted to effect 
transactions on the floor of the exchange without the services 
of another person acting as broker: Provided, however, That no 
national securities exchange shall have the authority to 
decrease the number of memberships in such exchange, or the 
number of members and designated representatives of members 
permitted to effect transactions on the floor of such exchange 
without the services of another person acting as broker, below 
such number in effect on May 1, 1975, or the date such exchange 
was registered with the Commission, whichever is later: And 
provided further, That the Commission, in accordance with the 
provisions of section 19(c) of this title, may amend the rules 
of any national securities exchange to increase (but not to 
decrease) or to remove any limitation on the number of 
memberships in such exchange or the number of members or 
designated representatives of members permitted to effect 
transactions on the floor of the exchange without the services 
of another person acting as broker, if the Commission finds 
that such limitation imposes a burden on competition not 
necessary or appropriate in furtherance of the purposes of this 
title.
  (d)(1) In any proceeding by a national securities exchange to 
determine whether a member or person associated with a member 
should be disciplined (other than a summary proceeding pursuant 
to paragraph (3) of this subsection), the exchange shall bring 
specific charges, notify such member or person of, and give him 
an opportunity to defend against, such charges, and keep a 
record. A determination by the exchange to impose a 
disciplinary sanction shall be supported by a statement setting 
forth--
          (A) any act or practice in which such member or 
        person associated with a member has been found to have 
        engaged, or which such member or person has been found 
        to have omitted;
          (B) the specific provision of this title, the rules 
        or regulations thereunder, or the rules of the exchange 
        which any such act or practice, or omission to act, is 
        deemed to violate; and
          (C) the sanction imposed and the reasons therefor.
  (2) In any proceeding by a national securities exchange to 
determine whether a person shall be denied membership, barred 
from becoming associated with a member, or prohibited or 
limited with respect to access to services offered by the 
exchange or a member thereof (other than a summary proceeding 
pursuant to paragraph (3) of this subsection), the exchange 
shall notify such person of, and give him an opportunity to be 
heard upon, the specific grounds for denial, bar, or 
prohibition or limitation under consideration and keep a 
record. A determination by the exchange to deny membership, bar 
a person from becoming associated with a member, or prohibit or 
limit a person with respect to access to services offered by 
the exchange or a member thereof shall be supported by a 
statement setting forth the specific grounds on which the 
denial, bar, or prohibition or limitation is based.
  (3) A national securities exchange may summarily (A) suspend 
a member or person associated with a member who has been and is 
expelled or suspended from any self-regulatory organization or 
barred or suspended from being associated with a member of any 
self-regulatory organization, (B) suspend a member who is in 
such financial or operating difficulty that the exchange 
determines and so notifies the Commission that the member 
cannot be permitted to continue to do business as a member with 
safety to investors, creditors, other members, or the exchange, 
or (C) limit or prohibit any person with respect to access to 
services offered by the exchange if subparagraph (A) or (B) of 
this paragraph is applicable to such person or, in the case of 
a person who is not a member, if the exchange determines that 
such person does not meet the qualification requirements or 
other prerequisites for such access and such person cannot be 
permitted to continue to have such access with safety to 
investors, creditors, members, or the exchange. Any person 
aggrieved by any such summary action shall be promptly afforded 
an opportunity for a hearing by the exchange in accordance with 
the provisions of paragraph (1) or (2) of this subsection. The 
Commission, by order, may stay any such summary action on its 
own motion or upon application by any person aggrieved thereby, 
if the Commission determines summarily or after notice and 
opportunity for hearing (which hearing may consist solely of 
the submission of affidavits or presentation of oral arguments) 
that such stay is consistent with the public interest and the 
protection of investors.
  (e)(1) On and after the date of enactment of the Securities 
Acts Amendments of 1975, no national securities exchange may 
impose any schedule or fix rates of commissions, allowances, 
discounts, or other fees to be charged by its members: 
Provided, however, That until May 1, 1976, the preceding 
provisions of this paragraph shall not prohibit any such 
exchange from imposing or fixing any schedule of commissions, 
allowances, discounts, or other fees to be charged by its 
members for acting as broker on the floor of the exchange or as 
odd-lot dealer: And provided further, That the Commission, in 
accordance with the provisions of section 19(b) of this title 
as modified by the provisions of paragraph (3) of this 
subsection, may--
          (A) permit a national securities exchange, by rule, 
        to impose a reasonable schedule or fix reasonable rates 
        of commissions, allowances, discounts, or other fees to 
        be charged by its members for effecting transactions on 
        such exchange prior to November 1, 1976, if the 
        Commission finds that such schedule or fixed rates of 
        commissions, allowances, discounts, or other fees are 
        in the public interest; and
          (B) permit a national securities exchange, by rule, 
        to impose a schedule or fix rates of commissions, 
        allowances, discounts, or other fees to be charged by 
        its members for effecting transactions on such exchange 
        after November 1, 1976, if the Commission finds that 
        such schedule or fixed rates of commissions, 
        allowances, discounts, or other fees (i) are reasonable 
        in relation to the costs of providing the service for 
        which such fees are charged (and the Commission 
        publishes the standards employed in adjudging 
        reasonableness) and (ii) do not impose any burden on 
        competition not necessary or appropriate in furtherance 
        of the purposes of this title, taking into 
        consideration the competitive effects of permitting 
        such schedule or fixed rates weighed against the 
        competitive effects of other lawful actions which the 
        Commission is authorized to take under this title.
  (2) Notwithstanding the provisions of section 19(c) of this 
title, the Commission, by rule, may abrogate any exchange rule 
which imposes a schedule or fixes rates of commissions, 
allowances, discounts, or other fees, if the Commission 
determines that such schedule or fixed rates are no longer 
reasonable, in the public interest, or necessary to accomplish 
the purposes of this title.
  (3)(A) Before approving or disapproving any proposed rule 
change submitted by a national securities exchange which would 
impose a schedule or fix rates of commissions, allowances, 
discounts, or other fees to be charged by its members for 
effecting transactions on such exchange, the Commission shall 
afford interested persons (i) an opportunity for oral 
presentation of data, views, and arguments and (ii) with 
respect to any such rule concerning transactions effected after 
November 1, 1976, if the Commission determines there are 
disputed issues of material fact, to present such rebuttal 
submissions and to conduct (or have conducted under 
subparagraph (B) of this paragraph) such cross-examination as 
the Commission determines to be appropriate and required for 
full disclosure and proper resolution of such disputed issues 
of material fact.
  (B) The Commission shall prescribe rules and make rulings 
concerning any proceeding in accordance with subparagraph (A) 
of this paragraph designed to avoid unnecessary costs or delay. 
Such rules or rulings may (i) impose reasonable time limits on 
each interested person's oral presentations, and (ii) require 
any cross-examination to which a person may be entitled under 
subparagraph (A) of this paragraph to be conducted by the 
Commission on behalf of that person in such manner as the 
Commission determines to be appropriate and required for full 
disclosure and proper resolution of disputed issues of material 
fact.
  (C)(i) If any class of persons, the members of which are 
entitled to conduct (or have conducted) cross-examination under 
subparagraphs (A) and (B) of this paragraph and which have, in 
the view of the Commission, the same or similar interests in 
the proceeding, cannot agree upon a single representative of 
such interests for purposes of cross-examination, the 
Commission may make rules and rulings specifying the manner in 
which such interests shall be represented and such cross-
examination conducted.
  (ii) No member of any class of persons with respect to which 
the Commission has specified the manner in which its interests 
shall be represented pursuant to clause (i) of this 
subparagraph shall be denied, pursuant to such clause (i), the 
opportunity to conduct (or have conducted) cross-examination as 
to issues affecting his particular interests if he satisfies 
the Commission that he has made a reasonable and good faith 
effort to reach agreement upon group representation and there 
are substantial and relevant issues which would not be 
presented adequately by group representation.
  (D) A transcript shall be kept of any oral presentation and 
cross-examination.
  (E) In addition to the bases specified in subsection 25(a), a 
reviewing Court may set aside an order of the Commission under 
section 19(b) approving an exchange rule imposing a schedule or 
fixing rates of commissions, allowances, discounts, or other 
fees, if the Court finds--
          (1) a Commission determination under subparagraph (A) 
        of this paragraph that an interested person is not 
        entitled to conduct cross-examination or make rebuttal 
        submissions, or
          (2) a Commission rule or ruling under subparagraph 
        (B) of this paragraph limiting the petitioner's cross-
        examination or rebuttal submissions,
                                has precluded full disclosure 
                                and proper resolution of 
                                disputed issues of material 
                                fact which were necessary for 
                                fair determination by the 
                                Commission.
  (f) The Commission, by rule or order, as it deems necessary 
or appropriate in the public interest and for the protection of 
investors, to maintain fair and orderly markets, or to assure 
equal regulation, may require--
          (1) any person not a member or a designated 
        representative of a member of a national securities 
        exchange effecting transactions on such exchange 
        without the services of another person acting as a 
        broker, or
          (2) any broker or dealer not a member of a national 
        securities exchange effecting transactions on such 
        exchange on a regular basis,
to comply with such rules of such exchange as the Commission 
may specify.
  (g) Notice Registration of Security Futures Product 
Exchanges.--
          (1) Registration required.--An exchange that lists or 
        trades security futures products may register as a 
        national securities exchange solely for the purposes of 
        trading security futures products if--
                  (A) the exchange is a board of trade, as that 
                term is defined by the Commodity Exchange Act 
                (7 U.S.C. 1a(2)), that has been designated a 
                contract market by the Commodity Futures 
                Trading Commission and such designation is not 
                suspended by order of the Commodity Futures 
                Trading Commission; and
                  (B) such exchange does not serve as a market 
                place for transactions in securities other 
                than--
                          (i) security futures products; or
                          (ii) futures on exempted securities 
                        or groups or indexes of securities or 
                        options thereon that have been 
                        authorized under section 2(a)(1)(C) of 
                        the Commodity Exchange Act.
          (2) Registration by notice filing.--
                  (A) Form and content.--An exchange required 
                to register only because such exchange lists or 
                trades security futures products may register 
                for purposes of this section by filing with the 
                Commission a written notice in such form as the 
                Commission, by rule, may prescribe containing 
                the rules of the exchange and such other 
                information and documents concerning such 
                exchange, comparable to the information and 
                documents required for national securities 
                exchanges under section 6(a), as the 
                Commission, by rule, may prescribe as necessary 
                or appropriate in the public interest or for 
                the protection of investors. If such exchange 
                has filed documents with the Commodity Futures 
                Trading Commission, to the extent that such 
                documents contain information satisfying the 
                Commission's informational requirements, copies 
                of such documents may be filed with the 
                Commission in lieu of the required written 
                notice.
                  (B) Immediate effectiveness.--Such 
                registration shall be effective 
                contemporaneously with the submission of 
                notice, in written or electronic form, to the 
                Commission, except that such registration shall 
                not be effective if such registration would be 
                subject to suspension or revocation.
                  (C) Termination.--Such registration shall be 
                terminated immediately if any of the conditions 
                for registration set forth in this subsection 
                are no longer satisfied.
          (3) Public availability.--The Commission shall 
        promptly publish in the Federal Register an 
        acknowledgment of receipt of all notices the Commission 
        receives under this subsection and shall make all such 
        notices available to the public.
          (4) Exemption of exchanges from specified 
        provisions.--
                  (A) Transaction exemptions.--An exchange that 
                is registered under paragraph (1) of this 
                subsection shall be exempt from, and shall not 
                be required to enforce compliance by its 
                members with, and its members shall not, solely 
                with respect to those transactions effected on 
                such exchange in security futures products, be 
                required to comply with, the following 
                provisions of this title and the rules 
                thereunder:
                          (i) Subsections (b)(2), (b)(3), 
                        (b)(4), (b)(7), (b)(9), (c), (d), and 
                        (e) of this section.
                          (ii) Section 8.
                          (iii) Section 11.
                          (iv) Subsections (d), (f), and (k) of 
                        section 17.
                          (v) Subsections (a), (f), and (h) of 
                        section 19.
                  (B) Rule change exemptions.--An exchange that 
                registered under paragraph (1) of this 
                subsection shall also be exempt from submitting 
                proposed rule changes pursuant to section 19(b) 
                of this title, except that--
                          (i) such exchange shall file proposed 
                        rule changes related to higher margin 
                        levels, fraud or manipulation, 
                        recordkeeping, reporting, listing 
                        standards, or decimal pricing for 
                        security futures products, sales 
                        practices for security futures products 
                        for persons who effect transactions in 
                        security futures products, or rules 
                        effectuating such exchange's obligation 
                        to enforce the securities laws pursuant 
                        to section 19(b)(7);
                          (ii) such exchange shall file 
                        pursuant to sections 19(b)(1) and 
                        19(b)(2) proposed rule changes related 
                        to margin, except for changes resulting 
                        in higher margin levels; and
                          (iii) such exchange shall file 
                        pursuant to section 19(b)(1) proposed 
                        rule changes that have been abrogated 
                        by the Commission pursuant to section 
                        19(b)(7)(C).
          (5) Trading in security futures products.--
                  (A) In general.--Subject to subparagraph (B), 
                it shall be unlawful for any person to execute 
                or trade a security futures product until the 
                later of--
                          (i) 1 year after the date of the 
                        enactment of the Commodity Futures 
                        Modernization Act of 2000; or
                          (ii) such date that a futures 
                        association registered under section 17 
                        of the Commodity Exchange Act has met 
                        the requirements set forth in section 
                        15A(k)(2) of this title.
                  (B) Principal-to-principal transactions.--
                Notwithstanding subparagraph (A), a person may 
                execute or trade a security futures product 
                transaction if--
                          (i) the transaction is entered into--
                                  (I) on a principal-to-
                                principal basis between parties 
                                trading for their own accounts 
                                or as described in section 
                                1a(18)(B)(ii) of the Commodity 
                                Exchange Act; and
                                  (II) only between eligible 
                                contract participants (as 
                                defined in subparagraphs (A), 
                                (B)(ii), and (C) of such 
                                section 1a(18)) at the time at 
                                which the persons enter into 
                                the agreement, contract, or 
                                transaction; and
                          (ii) the transaction is entered into 
                        on or after the later of--
                                  (I) 8 months after the date 
                                of the enactment of the 
                                Commodity Futures Modernization 
                                Act of 2000; or
                                  (II) such date that a futures 
                                association registered under 
                                section 17 of the Commodity 
                                Exchange Act has met the 
                                requirements set forth in 
                                section 15A(k)(2) of this 
                                title.
  (h) Trading in Security Futures Products.--
          (1) Trading on exchange or association required.--It 
        shall be unlawful for any person to effect transactions 
        in security futures products that are not listed on a 
        national securities exchange or a national securities 
        association registered pursuant to section 15A(a).
          (2) Listing standards required.--Except as otherwise 
        provided in paragraph (7), a national securities 
        exchange or a national securities association 
        registered pursuant to section 15A(a) may trade only 
        security futures products that (A) conform with listing 
        standards that such exchange or association files with 
        the Commission under section 19(b) and (B) meet the 
        criteria specified in section 2(a)(1)(D)(i) of the 
        Commodity Exchange Act.
          (3) Requirements for listing standards and conditions 
        for trading.--Such listing standards shall--
                  (A) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to 
                paragraph (4), require that any security 
                underlying the security future, including each 
                component security of a narrow-based security 
                index, be registered pursuant to section 12 of 
                this title;
                  (B) require that if the security futures 
                product is not cash settled, the market on 
                which the security futures product is traded 
                have arrangements in place with a registered 
                clearing agency for the payment and delivery of 
                the securities underlying the security futures 
                product;
                  (C) be no less restrictive than comparable 
                listing standards for options traded on a 
                national securities exchange or national 
                securities association registered pursuant to 
                section 15A(a) of this title;
                  (D) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to 
                paragraph (4), require that the security future 
                be based upon common stock and such other 
                equity securities as the Commission and the 
                Commodity Futures Trading Commission jointly 
                determine appropriate;
                  (E) require that the security futures product 
                is cleared by a clearing agency that has in 
                place provisions for linked and coordinated 
                clearing with other clearing agencies that 
                clear security futures products, which permits 
                the security futures product to be purchased on 
                one market and offset on another market that 
                trades such product;
                  (F) require that only a broker or dealer 
                subject to suitability rules comparable to 
                those of a national securities association 
                registered pursuant to section 15A(a) effect 
                transactions in the security futures product;
                  (G) require that the security futures product 
                be subject to the prohibition against dual 
                trading in section 4j of the Commodity Exchange 
                Act (7 U.S.C. 6j) and the rules and regulations 
                thereunder or the provisions of section 11(a) 
                of this title and the rules and regulations 
                thereunder, except to the extent otherwise 
                permitted under this title and the rules and 
                regulations thereunder;
                  (H) require that trading in the security 
                futures product not be readily susceptible to 
                manipulation of the price of such security 
                futures product, nor to causing or being used 
                in the manipulation of the price of any 
                underlying security, option on such security, 
                or option on a group or index including such 
                securities;
                  (I) require that procedures be in place for 
                coordinated surveillance among the market on 
                which the security futures product is traded, 
                any market on which any security underlying the 
                security futures product is traded, and other 
                markets on which any related security is traded 
                to detect manipulation and insider trading;
                  (J) require that the market on which the 
                security futures product is traded has in place 
                audit trails necessary or appropriate to 
                facilitate the coordinated surveillance 
                required in subparagraph (I);
                  (K) require that the market on which the 
                security futures product is traded has in place 
                procedures to coordinate trading halts between 
                such market and any market on which any 
                security underlying the security futures 
                product is traded and other markets on which 
                any related security is traded; and
                  (L) require that the margin requirements for 
                a security futures product comply with the 
                regulations prescribed pursuant to section 
                7(c)(2)(B), except that nothing in this 
                subparagraph shall be construed to prevent a 
                national securities exchange or national 
                securities association from requiring higher 
                margin levels for a security futures product 
                when it deems such action to be necessary or 
                appropriate.
          (4) Authority to modify certain listing standard 
        requirements.--
                  (A) Authority to modify.--The Commission and 
                the Commodity Futures Trading Commission, by 
                rule, regulation, or order, may jointly modify 
                the listing standard requirements specified in 
                subparagraph (A) or (D) of paragraph (3) to the 
                extent such modification fosters the 
                development of fair and orderly markets in 
                security futures products, is necessary or 
                appropriate in the public interest, and is 
                consistent with the protection of investors.
                  (B) Authority to grant exemptions.--The 
                Commission and the Commodity Futures Trading 
                Commission, by order, may jointly exempt any 
                person from compliance with the listing 
                standard requirement specified in subparagraph 
                (E) of paragraph (3) to the extent such 
                exemption fosters the development of fair and 
                orderly markets in security futures products, 
                is necessary or appropriate in the public 
                interest, and is consistent with the protection 
                of investors.
          (5) Requirements for other persons trading security 
        future products.--It shall be unlawful for any person 
        (other than a national securities exchange or a 
        national securities association registered pursuant to 
        section 15A(a)) to constitute, maintain, or provide a 
        marketplace or facilities for bringing together 
        purchasers and sellers of security future products or 
        to otherwise perform with respect to security future 
        products the functions commonly performed by a stock 
        exchange as that term is generally understood, unless a 
        national securities association registered pursuant to 
        section 15A(a) or a national securities exchange of 
        which such person is a member--
                  (A) has in place procedures for coordinated 
                surveillance among such person, the market 
                trading the securities underlying the security 
                future products, and other markets trading 
                related securities to detect manipulation and 
                insider trading;
                  (B) has rules to require audit trails 
                necessary or appropriate to facilitate the 
                coordinated surveillance required in 
                subparagraph (A); and
                  (C) has rules to require such person to 
                coordinate trading halts with markets trading 
                the securities underlying the security future 
                products and other markets trading related 
                securities.
          (6) Deferral of options on security futures 
        trading.--No person shall offer to enter into, enter 
        into, or confirm the execution of any put, call, 
        straddle, option, or privilege on a security future, 
        except that, after 3 years after the date of the 
        enactment of this subsection, the Commission and the 
        Commodity Futures Trading Commission may by order 
        jointly determine to permit trading of puts, calls, 
        straddles, options, or privileges on any security 
        future authorized to be traded under the provisions of 
        this Act and the Commodity Exchange Act.
          (7) Deferral of linked and coordinated clearing.--
                  (A) Notwithstanding paragraph (2), until the 
                compliance date, a national securities exchange 
                or national securities association registered 
                pursuant to section 15A(a) may trade a security 
                futures product that does not--
                          (i) conform with any listing standard 
                        promulgated to meet the requirement 
                        specified in subparagraph (E) of 
                        paragraph (3); or
                          (ii) meet the criterion specified in 
                        section 2(a)(1)(D)(i)(IV) of the 
                        Commodity Exchange Act.
                  (B) The Commission and the Commodity Futures 
                Trading Commission shall jointly publish in the 
                Federal Register a notice of the compliance 
                date no later than 165 days before the 
                compliance date.
                  (C) For purposes of this paragraph, the term 
                ``compliance date'' means the later of--
                          (i) 180 days after the end of the 
                        first full calendar month period in 
                        which the average aggregate comparable 
                        share volume for all security futures 
                        products based on single equity 
                        securities traded on all national 
                        securities exchanges, any national 
                        securities associations registered 
                        pursuant to section 15A(a), and all 
                        other persons equals or exceeds 10 
                        percent of the average aggregate 
                        comparable share volume of options on 
                        single equity securities traded on all 
                        national securities exchanges and any 
                        national securities associations 
                        registered pursuant to section 15A(a); 
                        or
                          (ii) 2 years after the date on which 
                        trading in any security futures product 
                        commences under this title.
  (i) Consistent with this title, each national securities 
exchange registered pursuant to subsection (a) of this section 
shall issue such rules as are necessary to avoid duplicative or 
conflicting rules applicable to any broker or dealer registered 
with the Commission pursuant to section 15(b) (except paragraph 
(11) thereof), that is also registered with the Commodity 
Futures Trading Commission pursuant to section 4f(a) of the 
Commodity Exchange Act (except paragraph (2) thereof), with 
respect to the application of--
          (1) rules of such national securities exchange of the 
        type specified in section 15(c)(3)(B) involving 
        security futures products; and
          (2) similar rules of national securities exchanges 
        registered pursuant to section 6(g) and national 
        securities associations registered pursuant to section 
        15A(k) involving security futures products.
  (j) Procedures and Rules for Security Future Products.--A 
national securities exchange registered pursuant to subsection 
(a) shall implement the procedures specified in section 
6(h)(5)(A) of this title and adopt the rules specified in 
subparagraphs (B) and (C) of section 6(h)(5) of this title not 
later than 8 months after the date of receipt of a request from 
an alternative trading system for such implementation and 
rules.
  (k)(1) To the extent necessary or appropriate in the public 
interest, to promote fair competition, and consistent with the 
promotion of market efficiency, innovation, and expansion of 
investment opportunities, the protection of investors, and the 
maintenance of fair and orderly markets, the Commission and the 
Commodity Futures Trading Commission shall jointly issue such 
rules, regulations, or orders as are necessary and appropriate 
to permit the offer and sale of a security futures product 
traded on or subject to the rules of a foreign board of trade 
to United States persons.
  (2) The rules, regulations, or orders adopted under paragraph 
(1) shall take into account, as appropriate, the nature and 
size of the markets that the securities underlying the security 
futures product reflect.
  (l) Security-based Swaps.--It shall be unlawful for any 
person to effect a transaction in a security-based swap with or 
for a person that is not an eligible contract participant, 
unless such transaction is effected on a national securities 
exchange registered pursuant to subsection (b).
  (m)(1) Except as otherwise prohibited or restricted by rules 
of the exchange that are consistent with section 5(d) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-5(d)), an 
exchange may not prohibit, condition, restrict, or impose any 
other limitation on the listing or trading of the securities of 
a closed-end company when the closed-end company invests, or 
may invest, some or all of the assets of the closed-end company 
in securities issued by private funds.
  (2) In this paragraph--
          (A) the term ``closed-end company''--
                  (i) has the meaning given the term in section 
                5(a) of the Investment Company Act of 1940 (15 
                U.S.C. 80a-5(a)); and
                  (ii) includes a closed-end company that 
                elects to be treated as a business development 
                company pursuant to section 54 of the 
                Investment Company Act of 1940 (15 U.S.C. 80a-
                53); and
          (B) the term ``private fund'' has the meaning given 
        the term in section 2(a) of the Investment Company Act 
        of 1940 (15 U.S.C. 80a-2(a))).

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