104TH CONGRESS

2D SESSION H. R. 3005

AN ACT

To amend the Federal securities laws in order to

regulation.and provide more effective and less burdensomemanagement of mutual funds, protect investors,Company Act of 1940 to promote more efficientfinancial markets, and to amend the Investmentpromote efficiency and capital formation in the
104TH CONGRESS

2D SESSION H. R. 3005

AN ACT

To amend the Federal securities laws in order to promote

efficiency and capital formation in the financial markets,

and to amend the Investment Company Act of 1940

to promote more efficient management of mutual funds,

protect investors, and provide more effective and less

burdensome regulation.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Securities Amendments of 1996’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—CAPITAL MARKETS DEREGULATION AND

LIBERALIZATION

Sec. 101. Short title.

Sec. 102. Creation of national securities markets.

Sec. 103. Margin requirements.

Sec. 104. Prospectus delivery.

Sec. 105. Exemptive authority.

Sec. 106. Promotion of efficiency, competition, and capital formation.

Sec. 107. Privatization of EDGAR.

Sec. 108. Coordination of Examining Authorities.

Sec. 109. Foreign press conferences.

Sec. 110. Report on Trust Indenture Act of 1939.

TITLE II—INVESTMENT COMPANY ACT AMENDMENTS

Sec. 201. Short title.

Sec. 202. Funds of funds.

Sec. 203. Registration of securities.

Sec. 204. Investment company advertising prospectus.

Sec. 205. Variable insurance contracts.

Sec. 206. Reports to the Commission and shareholders.

Sec. 207. Books, records and inspections.

Sec. 208. Investment company names.

Sec. 209. Exceptions from definition of investment company.

TITLE III—SECURITIES AND EXCHANGE COMMISSION

AUTHORIZATION

Sec. 301. Short title.

Sec. 302. Purposes.

Sec. 303. Authorization of appropriations.

Sec. 304. Registration fees.

Sec. 305. Transaction fees.

Sec. 306. Time for payment.

Sec. 307. Sense of the Congress concerning fees.
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1 TITLE I—CAPITAL MARKETS DE2 REGULATION AND LIBERAL3 IZATION

4 SEC. 101. SHORT TITLE.

5 This title may be cited as the ‘‘Capital Markets De6 regulation and Liberalization Act of 1996’’.

7 SEC. 102. CREATION OF NATIONAL SECURITIES MARKETS.

8 (a) SECURITIES ACT OF 1933.—

9 (1) AMENDMENT.—Section 18 of the Securities

10 Act of 1933 (15 U.S.C. 77r) is amended to read as

11 follows:

12 ‘‘SEC. 18. EXEMPTION FROM STATE REGULATION OF SECU13 RITIES OFFERINGS.

14 ‘‘(a) SCOPE OF EXEMPTION.—Except as otherwise

15 provided in this section, no law, rule, regulation, or order,

16 or other administrative action of any State or Territory

17 of the United States, or the District of Columbia, or any

18 political subdivision thereof—

19 ‘‘(1) requiring, or with respect to, registration

20 or qualification of securities, or registration or quali21 fication of securities transactions, shall directly or

22 indirectly apply to a security that—

23 ‘‘(A) is a covered security; or

24 ‘‘(B) will be a covered security upon com25 pletion of the transaction;
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1 ‘‘(2) shall directly or indirectly prohibit, limit,

2 or impose conditions upon the use of—

3 ‘‘(A) with respect to a covered security de4 scribed in subsection (b)(1) or (c)(1)—

5 ‘‘(i) any offering document that is

6 prepared by the issuer; or

7 ‘‘(ii) any offering document that is

8 not prepared by the issuer if such offering

9 document is required to be and is filed

10 with the Commission or any national secu11 rities organization registered under section

12 15A of the Securities Exchange Act of

13 1934 (15 U.S.C. 78o–3);

14 ‘‘(B) with respect to a covered security de15 scribed in paragraph (2), (3), or (4) of sub16 section (b), any offering document; or

17 ‘‘(C) any proxy statement, report to share18 holders, or other disclosure document relating

19 to a covered security or the issuer thereof that

20 is required to be and is filed with the Commis21 sion or any national securities organization reg22 istered under section 15A of the Securities Ex23 change Act of 1934 (15 U.S.C. 78o–3); or

24 ‘‘(3) shall directly or indirectly prohibit, limit,

25 or impose conditions, based on the merits of such of-
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1 fering or issuer, upon the offer or sale of any secu2 rity described in paragraph (1).

3 ‘‘(b) COVERED SECURITIES.—For purposes of this

4 section, the following are covered securities:

5 ‘‘(1) EXCLUSIVE FEDERAL REGISTRATION OF

6 NATIONALLY TRADED SECURITIES.—A security is a

7 covered security if such security is—

8 ‘‘(A) listed, or authorized for listing, on

9 the New York Stock Exchange or the American

10 Stock Exchange, or included or qualified for in11 clusion in the National Market System of the

12 National Association of Securities Dealers

13 Automated Quotation System (or any successor

14 to such entities);

15 ‘‘(B) listed, or authorized for listing, on a

16 national securities exchange (or tier or segment

17 thereof) that has listing standards that the

18 Commission determines by rule (on its own ini19 tiative or on the basis of a petition) are sub20 stantially similar to the listing standards appli21 cable to securities described in subparagraph

22 (A); or

23 ‘‘(C) is a security of the same issuer that

24 is equal in seniority or senior to a security de25 scribed in subparagraph (A) or (B).
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1 ‘‘(2) EXCLUSIVE FEDERAL REGISTRATION OF

2 INVESTMENT COMPANIES.—A security is a covered

3 security if such security is a security issued by an

4 investment company that is registered under the In5 vestment Company Act of 1940 (15 U.S.C. 80a et

6 seq.).

7 ‘‘(3) SALES TO QUALIFIED PURCHASERS.—A

8 security is a covered security with respect to the

9 offer or sale of the security to qualified purchasers,

10 as defined by the Commission by rule. In prescribing

11 such rule, the Commission may define qualified pur12 chaser differently with respect to different categories

13 of securities, consistent with the public interest and

14 the protection of investors.

15 ‘‘(4) EXEMPTION IN CONNECTION WITH CER16 TAIN EXEMPT OFFERINGS.—A security is a covered

17 security if—

18 ‘‘(A) the offer or sale of such security is

19 exempt from registration under this title pursu20 ant to section 4(1) or 4(3), and—

21 ‘‘(i) the issuer of such security files

22 reports with the Commission pursuant to

23 section 13 or 15(d) of the Securities Ex24 change Act of 1934 (15 U.S.C. 78m,

25 78o(d)); or
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1 ‘‘(ii) the issuer is exempt from filing

2 such reports;

3 ‘‘(B) such security is exempt from registra4 tion under this title pursuant to section 4(4);

5 ‘‘(C) the offer or sale of such security is

6 exempt from registration under this title pursu7 ant to section 3(a), other than the offer or sale

8 of a security that is exempt from such registra9 tion pursuant to paragraph (4) or (11) of such

10 section, except that a municipal security that is

11 exempt from such registration pursuant to

12 paragraph (2) of such section is not a covered

13 security with respect to the offer or sale of such

14 security in the State in which the issuer of such

15 security is located; or

16 ‘‘(D) the offer or sale of such security is

17 exempt from registration under this title pursu18 ant to Commission rule or regulation under sec19 tion 4(2) of this title.

20 ‘‘(c) CONDITIONALLY COVERED SECURITIES.—

21 ‘‘(1) FEDERALLY REGISTERED OFFERINGS.—

22 Subject to the limitations contained in paragraphs

23 (2) and (3), a security is a covered security if—
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1 ‘‘(A) the issuer of such security has (or

2 will have upon conclusion of the transaction)

3 total assets exceeding $10,000,000;

4 ‘‘(B) such security is the subject of a reg5 istration statement that is filed with the Com6 mission pursuant to this title; and

7 ‘‘(C) the issuer files with such registration

8 statement audited financial statements for each

9 of the two most recent fiscal years of its oper10 ations ending before the filing of the registra11 tion statement.

12 ‘‘(2) LIMITATIONS FOR CERTAIN OFFERINGS.—

13 Notwithstanding paragraph (1), a security is not a

14 covered security if such security is—

15 ‘‘(A) a security of an issuer which is a

16 blank check company (as defined in section 7(b)

17 of this title), a partnership, a limited liability

18 company, or a direct participation investment

19 program;

20 ‘‘(B) a penny stock (as such term is de21 fined in section 3(a)(51) of the Securities Ex22 change Act of 1934 (15 U.S.C. 78c(a)(51)); or

23 ‘‘(C) a security issued in an offering relat24 ing to a rollup transaction (as such term is de-
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1 fined in paragraphs (4) and (5) of section 14(h)

2 of such Act (15 U.S.C. 78n(h)(4), (5)).

3 ‘‘(3) LIMITATIONS BASED ON MISCONDUCT.—

4 Notwithstanding paragraph (1), a security is not a

5 covered security—

6 ‘‘(A) with respect to any State, if the is7 suer, or a principal officer or principal share8 holder thereof—

9 ‘‘(i) is subject to a statutory disquali10 fication, as defined in subparagraph (A),

11 (B), (C), or (D) of section 3(a)(39) of the

12 Securities Exchange Act of 1934 (15

13 U.S.C. 78c(a)(39));

14 ‘‘(ii) has been convicted within 5 years

15 prior to the offering of any felony under

16 Federal or State law in connection with

17 the offer, purchase, or sale of any security,

18 or any felony under Federal or State law

19 involving fraud or deceit; or

20 ‘‘(iii) is currently named in and sub21 ject to any order, judgment, or decree of

22 any court of competent jurisdiction acting

23 pursuant to Federal or State law tempo24 rarily or permanently restraining or enjoin25 ing such issuer, officer, or shareholder
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1 from engaging in or continuing any con2 duct or practice in connection with a secu3 rity; or

4 ‘‘(B) with respect to a particular State, if

5 the issuer, or a principal officer or principal

6 shareholder thereof—

7 ‘‘(i) has filed a registration statement

8 which is the subject of a currently effective

9 stop order entered pursuant to that State’s

10 securities laws within 5 years prior to the

11 offering;

12 ‘‘(ii) is currently named in and subject

13 to any administrative enforcement order or

14 judgment of that State’s securities com15 mission (or any agency or office perform16 ing like functions) entered within 5 years

17 prior to the offering, or is currently named

18 in and subject to any other administrative

19 enforcement order or judgment of that

20 State entered within 5 years prior to the

21 offering that finds fraud or deceit; or

22 ‘‘(iii) is currently named in and sub23 ject to any administrative enforcement

24 order or judgment of that State which pro25 hibits or denies registration, or revokes the
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1 use of any exemption from registration, in

2 connection with the offer, purchase, or sale

3 of securities.

4 ‘‘(4) EXCEPTIONS TO LIMITATIONS.—

5 (A) DEBT SECURITY EXEMPTION.—The

6 limitations in paragraph (2)(A) shall not apply

7 with respect to the debt securities of any issuer

8 that is a partnership or limited liability com9 pany, provided that (i) the issuer is either a

10 registered dealer or an affiliate of such a dealer,

11 (ii) the issuer has, both before and after the of12 fering, capital or equity (each computed in ac13 cordance with United States generally accepted

14 accounting principles) of not less than

15 $75,000,000, and (iii) if the issuer is not a reg16 istered dealer, such issuer does not use the pro17 ceeds of the offering primarily to fund the non18 financial business of the issuer or any of its af19 filiates that are not registered dealers.

20 ‘‘(B) MISCONDUCT EXEMPTIONS.—The

21 limitations in paragraph (3)(A) shall not apply

22 if the Commission has exempted the subject

23 person from the application of such paragraph

24 by rule or order, and the limitations in para25 graph (3)(B) shall not apply if the securities
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1 commission (or any agency or office performing

2 like functions) of the affected State has exempt3 ed the subject person from the application of

4 such paragraph by rule or order.

5 ‘‘(C) REASONABLE STEPS.—The provisions

6 of paragraph (3) shall not apply if the issuer

7 has taken reasonable steps to ascertain whether

8 any principal officer or principal shareholder is

9 subject to such paragraph, and such steps do

10 not reveal a person who is subject to such para11 graph. An issuer shall be considered to have

12 taken reasonable steps if such issuer or its

13 agent has conducted a search of any centralized

14 data bases that the Commission may designate

15 by rule, and has received an affidavit under

16 oath by each such principal officer or principal

17 shareholder stating that such officer or share18 holder is not subject to the provisions of para19 graph (3).

20 ‘‘(D) EFFECT OF LIMITATIONS ON REM21 EDIES.—Notwithstanding paragraph (3), an is22 suer shall not be subject to a right of rescission

23 under State securities laws solely as a result of

24 the operation of such paragraph.
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1 ‘‘(5) NO EFFECT UNDER SUBSECTION (B).—No

2 limitation under this subsection shall affect the

3 treatment of a security that qualifies as a covered

4 security under subsection (b).

5 ‘‘(d) PRESERVATION OF AUTHORITY.—

6 ‘‘(1) FRAUD AUTHORITY.—Consistent with this

7 section, the securities commission (or any agency or

8 office performing like functions) of any State or Ter9 ritory of the United States, or the District of Colum10 bia, shall retain jurisdiction under the laws of such

11 State, Territory, or District to investigate and bring

12 enforcement actions with respect to fraud or deceit

13 in connection with securities or securities trans14 actions.

15 ‘‘(2) PRESERVATION OF FILING REQUIRE16 MENTS.—

17 ‘‘(A) NOTICE FILINGS PERMITTED.—Noth18 ing contained in this section shall prohibit the

19 securities commission (or any agency or office

20 performing like functions) of any State or Ter21 ritory of the United States, or the District of

22 Columbia, from requiring the filing of any docu23 ments filed with the Commission pursuant to

24 this title solely for notice purposes, together

25 with any required fee.
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1 ‘‘(B) PRESERVATION OF FEES.—Until oth2 erwise provided by State law enacted after the

3 date of enactment of the Securities Amend4 ments of 1996, filing or registration fees with

5 respect to securities or securities transactions

6 may continue to be collected in amounts deter7 mined pursuant to State law as in effect on the

8 day before such date.

9 ‘‘(C) FEES NOT PERMITTED ON LISTED

10 SECURITIES.—Notwithstanding subparagraphs

11 (A) and (B), no filing or fee may be required

12 with respect to any security that is a covered

13 security pursuant to subsection (b)(1) of this

14 section, or will be such a covered security upon

15 completion of the transaction, or is a security of

16 the same issuer that is equal in seniority or

17 senior to a security that is a covered security

18 pursuant to such subsection.

19 ‘‘(3) ENFORCEMENT OF REQUIREMENTS.—

20 Nothing in this section shall prohibit the securities

21 commission (or any agency or office performing like

22 functions) of any State or Territory of the United

23 States, or the District of Columbia, from suspending

24 the offer or sale of securities within such State, Ter25 ritory, or District as a result of the failure to submit
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1 any filing or fee required under law and permitted

2 under this section.

3 ‘‘(e) DEFINITIONS.—For purposes of this section:

4 ‘‘(1) PRINCIPAL OFFICER.—The term ‘principal

5 officer’ means a director, chief executive officer, or

6 chief financial officer of an issuer, or any other offi7 cer performing like functions.

8 ‘‘(2) PRINCIPAL SHAREHOLDER.—The term

9 ‘principal shareholder’ means any person who is di10 rectly or indirectly the beneficial owner of more than

11 20 percent of any class of equity security of an is12 suer. When two or more persons act as a partner13 ship, limited partnership, syndicate, or other group

14 for the purpose of acquiring, holding, or disposing of

15 securities of an issuer, such syndicate or group shall

16 be deemed a ‘person’ for purposes of this paragraph.

17 In determining, for purposes of this paragraph, any

18 percentage of a class of any security, such class shall

19 be deemed to consist of the amount of the outstand20 ing securities of such class, exclusive of any securi21 ties of such class held by or for the account of the

22 issuer or a subsidiary of the issuer.

23 ‘‘(3) OFFERING DOCUMENT.—The term ‘offer24 ing document’ has the meaning given the term ‘pro25 spectus’ by section 2(10), but without regard to the
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1 provisions of clauses (a) and (b) of such section, ex2 cept that, with respect to a security described in

3 subsection (b)(2) of this section, such term also in4 cludes a communication that is not deemed to offer

5 such a security pursuant to a rule of the Commis6 sion.

7 ‘‘(4) PREPARED BY THE ISSUER.—Within 6

8 months after the date of enactment of the Securities

9 Amendments of 1996, the Commission shall, by rule,

10 define the term ‘prepared by the issuer’ for purposes

11 of this section.’’.

12 (2) STUDY OF UNIFORMITY.—The Securities

13 Exchange Commission shall conduct a study after

14 consultation with States, issuers, brokers, and deal15 ers on the extent to which uniformity of State regu16 latory requirements for securities or securities trans17 actions has been achieved for securities that are not

18 covered securities (within the meaning of section 18

19 of the Securities Act of 1933 as amended by para20 graph (1) of this subsection). Such study shall spe21 cifically focus on the impact of such uniformity or

22 lack thereof on the cost of capital, innovation and

23 technological development in securities markets, and

24 duplicative regulation with respect to securities issu25 ers (including small business), brokers, and dealers
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1 and the effect on investor protection. The Commis2 sion shall submit to the Congress a report on the re3 sults of such study within one year after the date of

4 enactment of this Act.

5 (b) BROKER/DEALER REGULATION.—

6 (1) AMENDMENT.—Section 15 of the Securities

7 Exchange Act of 1934 (15 U.S.C. 78o) is amended

8 by adding at the end the following new subsection:

9 ‘‘(h) LIMITATIONS ON STATE LAW.—

10 ‘‘(1) CAPITAL, MARGIN, BOOKS AND RECORDS,

11 BONDING, AND REPORTS.—No law, rule, regulation,

12 or order, or other administrative action of any State

13 or political subdivision thereof shall establish capital,

14 custody, margin, financial responsibility, making and

15 keeping records, bonding, or financial or operational

16 reporting requirements for brokers, dealers, munici17 pal securities dealers, government securities brokers,

18 or government securities dealers that differ from, or

19 are in addition to, the requirements in those areas

20 established under this title. The Commission shall

21 consult periodically the securities commissions (or

22 any agency or office performing like functions) of

23 the States concerning the adequacy of such require24 ments as established under this title.
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1 ‘‘(2) EXEMPTION TO PERMIT SERVICE TO CUS2 TOMERS.—No law, rule, regulation, or order, or

3 other administrative action of any State or political

4 subdivision thereof shall require an associated per5 son to register with such State prior to effecting a

6 transaction described in paragraph (3) for a cus7 tomer in such State if—

8 ‘‘(A) such transaction is effected on behalf

9 of a customer that, for 30 days prior to the day

10 of the transaction, maintains an account with

11 the broker or dealer;

12 ‘‘(B) such associated person is not ineli13 gible to register with such State for any reason

14 other than such a transaction;

15 ‘‘(C) such associated person is registered

16 with a registered securities association and at

17 least one State; and

18 ‘‘(D) the broker or dealer with which such

19 person is associated is registered with such

20 State.

21 ‘‘(3) DESCRIBED TRANSACTIONS.—A trans22 action is described in this paragraph if—

23 ‘‘(A) such transaction is effected by an as24 sociated person (i) to which the customer was

25 assigned for 14 days prior to the day of the
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1 transaction, and (ii) who is registered with a

2 State in which the customer was a resident or

3 was present for at least 30 consecutive days

4 during the one-year period prior to the trans5 action; except that, if the customer is present in

6 another State for 30 or more consecutive days

7 or has permanently changed his or her resi8 dence to another State, such transaction is not

9 described in this subparagraph unless the asso10 ciated person files with such State an applica11 tion for registration within 10 calendar days of

12 the later of the date of the transaction or the

13 date of the discovery of the presence of the cus14 tomer in the State for 30 or more consecutive

15 days or the change in the customer’s residence;

16 ‘‘(B) the transaction is effected within the

17 period beginning on the date on which such as18 sociated person files with the State in which the

19 transaction is effected an application for reg20 istration and ending on the earlier of (i) 60

21 days after the date the application is filed, or

22 (ii) the time at which such State notifies the as23 sociated person that it has denied the applica24 tion for registration or has stayed the pendency

25 of the application for cause; or
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1 ‘‘(C) the transaction is one of 10 or fewer

2 transactions in a calendar year (excluding any

3 transactions described in subparagraph (A) or

4 (B)) which the associated person effects in the

5 States in which the associated person is not

6 registered.

7 ‘‘(4) ALTERNATE ASSOCIATED PERSONS.—For

8 purposes of paragraph (3)(A)(ii), each of up to 3 as9 sociated persons who are designated to effect trans10 actions during the absence or unavailability of the

11 principal associated person for a customer may be

12 treated as an associated person to which such cus13 tomer is assigned for purposes of such paragraph.’’.

14 (2) STUDY.—Within 6 months after the date of

15 enactment of this Act, the Commission, after con16 sultation with registered securities associations, na17 tional securities exchanges, and States, shall conduct

18 a study of—

19 (A) the impact of disparate State licensing

20 requirements on associated persons of reg21 istered brokers or dealers; and

22 (B) methods for States to attain uniform

23 licensing requirements for such persons.

24 (3) REPORT.—Within one year after the date of

25 enactment of this Act, the Commission shall submit
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1 to the Congress a report on the study conducted

2 under paragraph (2). Such report shall include rec3 ommendations concerning appropriate methods de4 scribed in paragraph (2)(B), including any necessary

5 legislative changes to implement such recommenda6 tions.

7 (4) TECHNICAL AMENDMENT.—Section 28(a) of

8 the Securities Exchange Act of 1934 (15 U.S.C.

9 78bb(a)) is amended by striking ‘‘Nothing’’ and in10 serting ‘‘Except as otherwise specifically provided

11 elsewhere in this title, nothing’’.

12 SEC. 103. MARGIN REQUIREMENTS.

13 (a) MARGIN REQUIREMENTS.—

14 (1) EXTENSIONS OF CREDIT BY BROKER-DEAL15 ERS.—Section 7(c) of the Securities Exchange Act

16 of 1934 (15 U.S.C. 78g(c)) is amended to read as

17 follows:

18 ‘‘(c) UNLAWFUL CREDIT EXTENSION TO CUS19 TOMERS.—

20 ‘‘(1) PROHIBITION.—It shall be unlawful for

21 any member of a national securities exchange or any

22 broker or dealer, directly or indirectly, to extend or

23 maintain credit or arrange for the extension or

24 maintenance of credit to or for any customer—
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1 ‘‘(A) on any security (other than an ex2 empted security), in contravention of the rules

3 and regulations which the Board of Governors

4 of the Federal Reserve System shall prescribe

5 under subsections (a) and (b) of this section;

6 ‘‘(B) without collateral or on any collateral

7 other than securities, except in accordance with

8 such rules and regulations as the Board of Gov9 ernors of the Federal Reserve System may pre10 scribe—

11 ‘‘(i) to permit under specified condi12 tions and for a limited period any such

13 member, broker, or dealer to maintain a

14 credit initially extended in conformity with

15 the rules and regulations of the Board of

16 governors of the Federal Reserve System;

17 and

18 ‘‘(ii) to permit the extension or main19 tenance of credit in cases where the exten20 sion or maintenance of credit is not for the

21 purpose of purchasing or carrying securi22 ties or of evading or circumventing the

23 provisions of subparagraph (A) of this

24 paragraph.
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1 ‘‘(2) EXCEPTION.—This subsection and the

2 rules and regulations thereunder shall not apply to

3 any credit extended, maintained, or arranged by a

4 member of a national securities exchange or a

5 broker or dealer to or for a member of a national

6 securities exchange or a registered broker or deal7 er—

8 ‘‘(A) a substantial portion of whose busi9 ness consists of transactions with persons other

10 than brokers or dealers; or

11 ‘‘(B) to finance its activities as a market

12 maker or an underwriter;

13 except that the Board of Governors of the Federal

14 Reserve System may impose such rules and regula15 tions, in whole or in part, on any credit otherwise

16 exempted by this paragraph if it determines that

17 such action is necessary or appropriate in the public

18 interest or for the protection of investors.’’.

19 (2) EXTENSIONS OF CREDIT BY OTHER LEND20 ERS.—Section 7(d) of the Securities Exchange Act

21 of 1934 (78 U.S.C. 78g(d)) is amended to read as

22 follows:

23 ‘‘(d) UNLAWFUL CREDIT EXTENSION IN VIOLATION

24 OF RULES AND REGULATIONS; EXCEPTION TO APPLICA25 TION OF RULES, ETC.—
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1 ‘‘(1) PROHIBITION.—It shall be unlawful for

2 any person not subject to subsection (c) of this sec3 tion to extend or maintain credit or to arrange for

4 the extension or maintenance of credit for the pur5 pose of purchasing or carrying any security, in con6 travention of such rules and regulations as the

7 Board of Governors of the Federal Reserve System

8 shall prescribe to prevent the excessive use of credit

9 for the purchasing or carrying of or trading in secu10 rities in circumvention of the other provisions of this

11 section. Such rules and regulations may impose upon

12 all loans made for the purpose of purchasing or car13 rying securities limitations similar to those imposed

14 upon members, brokers, or dealers by subsection (c)

15 of this section and the rules and regulations there16 under.

17 ‘‘(2) EXCEPTIONS.—This subsection and the

18 rules and regulations thereunder shall not apply to

19 any credit extended, maintained, or arranged—

20 ‘‘(A) by a person not in the ordinary

21 course of business;

22 ‘‘(B) on an exempted security;

23 ‘‘(C) to or for a member of a national se24 curities exchange or a registered broker or deal25 er—
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1 ‘‘(i) a substantial portion of whose

2 business consists of transactions with per3 sons other than brokers or dealers; or

4 ‘‘(ii) to finance its activities as a mar5 ket maker or an underwriter;

6 ‘‘(D) by a bank on a security other than

7 an equity security; or

8 ‘‘(E) as the Board of Governors of the

9 Federal Reserve System shall, by such rules,

10 regulations, or orders as it may deem necessary

11 or appropriate in the public interest or for the

12 protection of investors, exempt, either uncondi13 tionally or upon specified terms and conditions

14 or for stated periods, from the operation of this

15 subsection and the rules and regulations there16 under;

17 except that the Board of Governors of the Federal

18 Reserve System may impose such rules and regula19 tions, in whole or in part, on any credit otherwise

20 exempted by subparagraph (C) of this paragraph if

21 it determines that such action is necessary or appro22 priate in the public interest or for the protection of

23 investors.’’.
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1 (b) BORROWING BY MEMBERS, BROKERS, AND

2 DEALERS.—Section 8 of the Securities Exchange Act of

3 1934 (15 U.S.C. 78h) is amended—

4 (1) by striking subsection (a), and

5 (2) by redesignating subsections (b) and (c) as

6 subsections (a) and (b), respectively.

7 SEC. 104. PROSPECTUS DELIVERY.

8 (a) REPORT ON ELECTRONIC DELIVERY.—Within six

9 months after the date of enactment of this Act, the Com10 mission shall report to Congress on the steps the Commis11 sion has taken, or anticipates taking, to facilitate the elec12 tronic delivery of prospectuses to institutional and other

13 investors.

14 (b) REPORT ON ADVISORY COMMITTEE REC15 OMMENDATIONS.—Within one year after the date of en16 actment of this Act, the Commission shall report to Con17 gress on the Commission’s views on the recommendations

18 of the Advisory Committee on Capital Formation, includ19 ing any actions taken to implement the recommendations

20 of the Advisory Committee.

21 SEC. 105. EXEMPTIVE AUTHORITY.

22 (a) GENERAL EXEMPTIVE AUTHORITY UNDER THE

23 SECURITIES ACT OF 1933.—Title I of the Securities Act

24 of 1933 (15 U.S.C. 77a et seq.) is amended by adding

25 at the end the following new section:
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1 ‘‘SEC. 28. GENERAL EXEMPTIVE AUTHORITY.

2 ‘‘The Commission, by rules and regulations, may con3 ditionally or unconditionally exempt any person, security,

4 or transaction, or any class or classes of persons, securi5 ties, or transactions, from any provision or provisions of

6 this title or of any rule or regulation thereunder, to the

7 extent that such exemption is necessary or appropriate in

8 the public interest, and is consistent with the protection

9 of investors.’’.

10 (b) GENERAL EXEMPTIVE AUTHORITY UNDER THE

11 SECURITIES EXCHANGE ACT OF 1934.—Title I of the Se12 curities Exchange Act of 1934 (15 U.S.C. 78a et seq.)

13 is amended by adding at the end the following new section:

14 ‘‘SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

15 ‘‘(a) AUTHORITY.—Except as provided in subsection

16 (b) but notwithstanding any other provision of this title,

17 the Commission, by rule, regulation, or order, may condi18 tionally or unconditionally exempt any person, security, or

19 transaction, or any class or classes of persons, securities,

20 or transactions, from any provision or provisions of this

21 title or of any rule or regulation thereunder, to the extent

22 that such exemption is necessary or appropriate in the

23 public interest, and is consistent with the protection of in24 vestors. The Commission shall by rules and regulations de25 termine the procedures under which an exemptive order

26 under this section shall be granted and may, in its sole
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1 discretion, decline to entertain any application for an

2 order of exemption under this section.

3 ‘‘(b) LIMITATION.—The Commission shall not exer4 cise authority under this section to exempt any person,

5 security, or transaction, or any class or classes of persons,

6 securities, or transactions, from section 15C of this title

7 or the rules or regulations thereunder, or (for purposes

8 of such section 15C or such rules or regulations) from the

9 definitions in paragraphs (42) through (45) of section 3(a)

10 of this title.’’.

11 SEC. 106. PROMOTION OF EFFICIENCY, COMPETITION, AND

12 CAPITAL FORMATION.

13 (a) SECURITIES ACT OF 1933.—Section 2 of the Se14 curities Act of 1933 (15 U.S.C. 77b) is amended—

15 (1) by inserting ‘‘(a) DEFINITIONS.—’’ after

16 ‘‘SEC. 2.’’; and

17 (2) by adding at the end the following new sub18 section:

19 ‘‘(b) CONSIDERATION OF PROMOTION OF EFFI20 CIENCY, COMPETITION, AND CAPITAL FORMATION.—

21 Whenever pursuant to this title the Commission is en22 gaged in rulemaking and is required to consider or deter23 mine whether an action is necessary or appropriate in the

24 public interest, the Commission shall also consider, in ad25 dition to the protection of investors, whether the action
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1 will promote efficiency, competition, and capital forma2 tion.’’.

3 (b) SECURITIES EXCHANGE ACT of 1934.—Section

4 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)

5 is amended by adding at the end the following new sub6 section:

7 ‘‘(f) CONSIDERATION OF PROMOTION OF EFFI8 CIENCY, COMPETITION, AND CAPITAL FORMATION.—

9 Whenever pursuant to this title the Commission is en10 gaged in rulemaking, or in the review of a rule of a self11 regulatory organization, and is required to consider or de12 termine whether an action is necessary or appropriate in

13 the public interest, the Commission shall also consider, in

14 addition to the protection of investors, whether the action

15 will promote efficiency, competition, and capital forma16 tion.’’.

17 (c) INVESTMENT COMPANY ACT of 1940.—Section 2

18 of the Investment Company Act of 1940 (15 U.S.C. 80a–

19 2) is amended by adding at the end the following new sub20 section:

21 ‘‘(c) CONSIDERATION OF PROMOTION OF EFFI22 CIENCY, COMPETITION, AND CAPITAL FORMATION.—

23 Whenever pursuant to this title the Commission is en24 gaged in rulemaking and is required to consider or deter25 mine whether an action is consistent with the public inter-
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1 est, the Commission shall also consider, in addition to the

2 protection of investors, whether the action will promote ef3 ficiency, competition, and capital formation.’’.

4 SEC. 107. PRIVATIZATION OF EDGAR.

5 (a) EXAMINATION.—The Securities and Exchange

6 Commission shall examine proposals for the privatization

7 of the EDGAR system. Such examination shall promote

8 competition in the automation and rapid collection and

9 dissemination of information required to be disclosed.

10 Such examination shall include proposals that maintain

11 free public access to data filings in the EDGAR system.

12 (b) REVIEW AND REPORT.—Within 180 days after

13 the date of enactment of this Act, the Commission shall

14 submit to the Congress a report on the examination under

15 subsection (a). Such report shall include such rec16 ommendations for such legislative action as may be nec17 essary to implement the proposal that the Commission de18 termines most effectively achieves the objectives described

19 in subsection (a).

20 SEC. 108. COORDINATION OF EXAMINING AUTHORITIES.

21 (a) AMENDMENTS.—Section 17 of the Securities Ex22 change Act of 1934 (15 U.S.C. 78q) is amended by adding

23 at the end the following new subsection:

24 ‘‘(i) COORDINATION OF EXAMINING AUTHORITIES.—
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1 ‘‘(1) ELIMINATION OF DUPLICATION.—The

2 Commission and the examining authorities, through

3 cooperation and coordination of examination and

4 oversight as required by this subsection, shall elimi5 nate any unnecessary and burdensome duplication in

6 the examination process.

7 ‘‘(2) PLANNING CONFERENCES.—

8 ‘‘(A) The Commission and the examining

9 authorities shall meet at least annually for a

10 national general planning conference to discuss

11 coordination of examination schedules and pri12 orities and other areas of interest relevant to

13 examination coordination and cooperation.

14 ‘‘(B) Within each geographic region des15 ignated by the Commission, the Commission

16 and the relevant examining authorities shall

17 meet at least annually for a regional planning

18 conference to discuss examination schedules and

19 priorities and other areas of related interest,

20 and to encourage information-sharing and to

21 avoid unnecessary duplication of examinations.

22 ‘‘(3) COORDINATION TRACKING SYSTEM FOR

23 BROKER-DEALER EXAMINATIONS.—

24 ‘‘(A) The Commission and the examining

25 authorities shall prepare, on a periodic basis in
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1 a uniform computerized format, information on

2 registered broker and dealer examinations and

3 shall submit such information to the Commis4 sion.

5 ‘‘(B) The Commission shall maintain a

6 computerized database of consolidated examina7 tion information to be used for examination

8 planning and scheduling and for monitoring co9 ordination of registered broker and dealer ex10 aminations under this section.

11 ‘‘(4) COORDINATION OF EXAMINATIONS.—

12 ‘‘(A) The examining authorities shall share

13 among themselves such information, including

14 reports of examinations, customer complaint in15 formation, and other non-public regulatory in16 formation, as appropriate to foster a coordi17 nated approach to regulatory oversight of reg18 istered brokers and dealers subject to examina19 tion by more than one examining authority.

20 ‘‘(B) To the extent practicable, the exam21 ining authorities shall assure that each reg22 istered broker and dealer subject to examina23 tion by more than one examining authority that

24 requests a coordinated examination shall have

25 all requested aspects of the examination con-
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1 ducted simultaneously and without duplication

2 of the areas covered. The examining authorities

3 shall also prepare an advance schedule of all

4 such coordinated examinations.

5 ‘‘(5) PROHIBITED NON-COORDINATED EXAMI6 NATIONS.—Any examining authority that does not

7 participate in a coordinated examination pursuant to

8 paragraph (4) of this subsection shall not conduct a

9 routine examination other than a coordinated exam10 ination of that broker or dealer within 9 months of

11 the conclusion of a scheduled coordinated examina12 tion.

13 ‘‘(6) EXAMINATIONS FOR CAUSE.—At any time,

14 any examining authority may conduct an examina15 tion for cause of any broker or dealer subject to its

16 jurisdiction.

17 ‘‘(7) BROKER-DEALER EXAMINATION EVALUA18 TION PANEL.—The Commission shall establish an

19 examination evaluation panel composed of represent20 atives of registered brokers and dealers that are

21 members of more than one self-regulatory organiza22 tion that conducts routine examinations. Prior to

23 each national general planning conference required

24 by paragraph (2)(A) of this subsection, the Commis25 sion shall convene the examination evaluation panel
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1 to review consolidated and statistical information on

2 the coordination of examinations and information on

3 examinations that are not coordinated, including the

4 findings of Commission examiners on the effective5 ness of the examining authorities in achieving co6 ordinated examinations. The Commission shall

7 present any findings and recommendations of the ex8 amination evaluation panel to the next meeting of

9 the national general planning conference, and shall

10 report back to the examination evaluation panel on

11 the actions taken by the examining authorities re12 garding those findings and recommendations. The

13 examination evaluation panel shall not be subject to

14 the Federal Advisory Committee Act (5 U.S.C.

15 App.).

16 ‘‘(8) REPORT TO CONGRESS.—Within one year

17 after the date of enactment of this Act, the Commis18 sion shall report to the Congress on the progress it

19 and the examining authorities have made in reduc20 ing duplication and improving coordination in reg21 istered broker and dealer examinations, and on the

22 activities of the examination evaluation panel. Such

23 report shall also indicate whether the Commission

24 has identified additional redundancies that have

25 failed to be addressed in the coordination of examin-
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1 ing authorities, or any recommendations of the ex2 amination evaluation panel established under para3 graph (7) of this subsection that have not been ad4 dressed by the examining authorities or the Commis5 sion.’’.

6 (b) DEFINITION.—Section 3(a) of the Securities Ex7 change Act of 1934 (15 U.S.C. 78e) is amended by adding

8 at the end the following paragraph:

9 ‘‘(54) The term ‘examining authority’ means

10 any self-regulatory organization registered with the

11 Commission under this title (other than registered

12 clearing agencies) with the authority to examine, in13 spect, and otherwise oversee the activities of a reg14 istered broker or dealer.’’.

15 SEC. 109. FOREIGN PRESS CONFERENCES.

16 No later than one year after the date of enactment

17 of this Act, the Commission shall adopt rules under the

18 Securities Act of 1933 concerning the status under the

19 registration provisions of the Securities Act of 1933 of for20 eign press conferences and foreign press releases by per21 sons engaged in the offer and sale of securities.

22 SEC. 110. REPORT ON TRUST INDENTURE ACT OF 1939.

23 Within 6 months after the date of enactment of this

24 Act, the Securities and Exchange Commission shall sub25 mit to the Congress a report on the benefits of, the con-
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1 tinuing need for, and, if necessary, options for the modi2 fication or elimination of, the Trust Indenture Act of 1939

3 (15 U.S.C. 77aaa et seq.).

4 TITLE II—INVESTMENT

5 COMPANY ACT AMENDMENTS

6 SEC. 201. SHORT TITLE.

7 This title may be cited as the ‘‘Investment Company

8 Act Amendments of 1996’’.

9 SEC. 202. FUNDS OF FUNDS.

10 Section 12(d)(1) of the Investment Company Act of

11 1940 (15 U.S.C. 80a–12(d)(1)) is amended—

12 (1) in subparagraph (E)(iii)—

13 (A) by striking ‘‘in the event such invest14 ment company is not a registered investment

15 company,’’; and

16 (B) by inserting ‘‘in the event such invest17 ment company is not a registered investment

18 company’’ after ‘‘(bb)’’;

19 (2) by redesignating existing subparagraphs (G)

20 and (H) as subparagraphs (H) and (I), respectively;

21 (3) by inserting after subparagraph (F) the fol22 lowing new subparagraph:

23 ‘‘(G) The provisions of this paragraph (1) shall not

24 apply to securities of a registered open-end company (the

25 ‘acquired company’) purchased or otherwise acquired by
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1 a registered open-end company (the ‘acquiring company’)

2 if—

3 ‘‘(i) the acquired company and the acquiring

4 company are part of the same group of investment

5 companies;

6 ‘‘(ii) the securities of the acquired company, se7 curities of other registered open-end companies that

8 are part of the same group of investment companies,

9 Government securities, and short-term paper are the

10 only investments held by the acquiring company;

11 ‘‘(iii)(I) the acquiring company does not pay

12 and is not assessed any charges or fees for distribu13 tion-related activities with respect to securities of the

14 acquired company unless the acquiring company

15 does not charge a sales load or other fees or charges

16 for distribution-related activities; or

17 ‘‘(II) any sales loads and other distribution-re18 lated fees charged with respect to securities of the

19 acquiring company, when aggregated with any sales

20 load and distribution-related fees paid by the acquir21 ing company with respect to securities of the ac22 quired company, are not excessive under rules adopt23 ed pursuant to either section 22(b) or section 22(c)

24 of this title by a securities association registered
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1 under section 15A of the Securities Exchange Act of

2 1934 or the Commission;

3 ‘‘(iv) the acquired company shall have a fun4 damental policy that prohibits it from acquiring any

5 securities of registered open-end companies in reli6 ance on this subparagraph or subparagraph (F) of

7 this subsection; and

8 ‘‘(v) such acquisition is not in contravention of

9 such rules and regulations as the Commission may

10 from time to time prescribe with respect to acquisi11 tions in accordance with this subparagraph as nec12 essary and appropriate for the protection of inves13 tors.

14 For purposes of this subparagraph, a ‘group of investment

15 companies’ shall mean any two or more registered invest16 ment companies that hold themselves out to investors as

17 related companies for purposes of investment and investor

18 services.’’; and

19 (4) adding at the end the following new sub20 paragraph:

21 ‘‘(J) The Commission, by rules and regulations upon

22 its own motion or by order upon application, may condi23 tionally or unconditionally exempt any person, security, or

24 transaction, or any class or classes of persons, securities,

25 or transactions from any provisions of this subsection, if
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1 and to the extent such exemption is consistent with the

2 public interest and the protection of investors.’’.

3 SEC. 203. REGISTRATION OF SECURITIES.

4 (a) AMENDMENTS TO REGISTRATION STATE5 MENTS.—Section 24(e) of the Investment Company Act

6 of 1940 (15 U.S.C. 80a–24(e)) is amended—

7 (1) by striking paragraphs (1) and (2);

8 (2) by redesignating paragraph (3) as sub9 section (e); and

10 (3) in subsection (e) (as so redesignated) by

11 striking ‘‘pursuant to this subsection or otherwise’’.

12 (b) REGISTRATION OF INDEFINITE AMOUNT OF SE13 CURITIES.—Section 24(f) of the Investment Company Act

14 of 1940 (15 U.S.C. 80a–24(f)) is amended to read as fol15 lows:

16 ‘‘(f) REGISTRATION OF INDEFINITE AMOUNT OF SE17 CURITIES.—

18 ‘‘(1) INDEFINITE REGISTRATION OF SECURI19 TIES.—Upon the effectiveness of its registration

20 statement under the Securities Act of 1933, a face21 amount certificate company, open-end management

22 company, or unit investment trust shall be deemed

23 to have registered an indefinite amount of securities.

24 ‘‘(2) PAYMENT OF REGISTRATION FEES.—With25 in 90 days after the end of the company’s fiscal
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1 year, the company shall pay a registration fee to the

2 Commission, calculated in the manner specified in

3 section 6(b) of the Securities Act of 1933, based on

4 the aggregate sales price for which its securities (in5 cluding, for this purpose, all securities issued pursu6 ant to a dividend reinvestment plan) were sold pur7 suant to a registration of an indefinite amount of se8 curities under this subsection during the company’s

9 previous fiscal year reduced by—

10 ‘‘(A) the aggregate redemption or repur11 chase price of the securities of the company

12 during that year, and

13 ‘‘(B) the aggregate redemption or repur14 chase price of the securities of the company

15 during any prior fiscal year ending not more

16 than 1 year before the date of enactment of the

17 Investment Company Act Amendments of 1996

18 that were not used previously by the company

19 to reduce fees payable under this section.

20 ‘‘(3) INTEREST DUE ON LATE PAYMENT.—A

21 company paying the fee or any portion thereof more

22 than 90 days after the end of the company’s fiscal

23 year shall pay to the Commission interest on unpaid

24 amounts, compounded daily, at the underpayment

25 rate established by the Secretary of the Treasury
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1 pursuant to section 3717(a) of title 31, United

2 States Code. The payment of interest pursuant to

3 the requirement of this paragraph shall not preclude

4 the Commission from bringing an action to enforce

5 the requirements of paragraph (2) of this subsection.

6 ‘‘(4) RULEMAKING AUTHORITY.—The Commis7 sion may adopt rules and regulations to implement

8 the provisions of this subsection.’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall be effective 6 months after the date of

11 enactment of this Act or on such earlier date as the Com12 mission may specify by rule.

13 SEC. 204. INVESTMENT COMPANY ADVERTISING PROSPEC14 TUS.

15 Section 24 of the Investment Company Act of 1940

16 (15 U.S.C. 80a–24) is amended by adding at the end the

17 following new subsection:

18 ‘‘(g) In addition to the prospectuses permitted or re19 quired in section 10 of the Securities Act of 1933, the

20 Commission shall permit, by rules or regulations deemed

21 necessary or appropriate in the public interest or for the

22 protection of investors, the use of a prospectus for the pur23 poses of section 5(b)(1) of such Act with respect to securi24 ties issued by a registered investment company. Such a

25 prospectus, which may include information the substance
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1 of which is not included in the prospectus specified in sec2 tion 10(a) of the Securities Act of 1933, shall be deemed

3 to be permitted by section 10(b) of such Act.’’.

4 SEC. 205. VARIABLE INSURANCE CONTRACTS.

5 (a) UNIT INVESTMENT TRUST TREATMENT.—Sec6 tion 26 of the Investment Company Act of 1940 (15

7 U.S.C. 80a–26) is amended by adding at the end the fol8 lowing new subsection:

9 ‘‘(e)(1) Subsection (a) shall not apply to any reg10 istered separate account funding variable insurance con11 tracts, or to the sponsoring insurance company and prin12 cipal underwriter of such account.

13 ‘‘(2) It shall be unlawful for any registered separate

14 account funding variable insurance contracts, or for the

15 sponsoring insurance company of such account, to sell any

16 such contract, unless—

17 ‘‘(A) the fees and charges deducted under the

18 contract in the aggregate are reasonable in relation

19 to the services rendered, the expenses expected to be

20 incurred, and the risks assumed by the insurance

21 company, and the insurance company so represents

22 in the registration statement for the contract; and

23 ‘‘(B) the insurance company (i) complies with

24 all other applicable provisions of this section as if it

25 were a trustee or custodian of the registered sepa-
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1 rate account; (ii) files with the insurance regulatory

2 authority of a State an annual statement of its fi3 nancial condition, which most recent statement indi4 cates that it has a combined capital and surplus, if

5 a stock company, or an unassigned surplus, if a mu6 tual company, of not less than $1,000,000, or such

7 other amount as the Commission may from time to

8 time prescribe by rule as necessary or appropriate in

9 the public interest or for the protection of investors;

10 and (iii) together with its registered separate ac11 counts, is supervised and examined periodically by

12 the insurance authority of such State.

13 ‘‘(3) The Commission may adopt such rules and regu14 lations under paragraph (2)(A) as it determines are nec15 essary or appropriate in the public interest or for the pro16 tection of investors. For the purposes of such paragraph,

17 the fees and charges deducted under the contract shall in18 clude all fees and charges imposed for any purpose and

19 in any manner.’’.

20 (b) PERIODIC PAYMENT PLAN TREATMENT.—Sec21 tion 27 of such Act (15 U.S.C. 80a–27) is amended by

22 adding at the end the following new subsection:

23 ‘‘(i)(1) This section shall not apply to any registered

24 separate account funding variable insurance contracts, or

25 to the sponsoring insurance company and principal under-
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1 writer of such account, except as provided in paragraph

2 (2).

3 ‘‘(2) It shall be unlawful for any registered separate

4 account funding variable insurance contracts, or for the

5 sponsoring insurance company of such account, to sell any

6 such contract unless (A) such contract is a redeemable se7 curity, and (B) the insurance company complies with sec8 tion 26(e) and any rules or regulations adopted by the

9 Commission thereunder.’’.

10 SEC. 206. REPORTS TO THE COMMISSION AND SHAREHOLD11 ERS.

12 Section 30 of the Investment Company Act of 1940

13 (15 U.S.C. 80a–29) is amended—

14 (1) by striking paragraph (1) of subsection (b)

15 and inserting the following:

16 ‘‘(1) such information, documents, and reports

17 (other than financial statements), as the Commis18 sion may require to keep reasonably current the in19 formation and documents contained in the registra20 tion statement of such company filed under this

21 title; and’’;

22 (2) by redesignating subsections (c), (d), (e),

23 and (f) as subsections (d), (e), (g), and (h), respec24 tively;
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1 (3) by inserting after subsection (b) the follow2 ing new subsection:

3 ‘‘(c) In exercising its authority under subsection

4 (b)(1) to require the filing of information, documents, and

5 reports on a basis more frequently than semi-annually, the

6 Commission shall take such steps as it deems necessary

7 or appropriate, consistent with the public interest and the

8 protection of investors, to avoid unnecessary reporting by,

9 and minimize the compliance burdens on, registered in10 vestment companies and their affiliated persons. Such

11 steps shall include considering and requesting public com12 ment on—

13 ‘‘(1) feasible alternatives that minimize the re14 porting burdens on registered investment companies;

15 and

16 ‘‘(2) the utility of such information, documents,

17 and reports to the Commission in relation to the

18 costs to registered investment companies and their

19 affiliated persons of providing such information, doc20 uments, and reports.’’;

21 (4) by inserting after subsection (e) (as redesig22 nated by paragraph (2) of this section) the following

23 new subsection:

24 ‘‘(f) The Commission may by rule require that semi25 annual reports containing the information set forth in sub-
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1 section (e) include such other information as the Commis2 sion deems necessary or appropriate in the public interest

3 or for the protection of investors. In exercising its author4 ity under this subsection, the Commission shall take such

5 steps as it deems necessary or appropriate, consistent with

6 the public interest and the protection of investors, to avoid

7 unnecessary reporting by, and minimize the compliance

8 burdens on, registered investment companies and their af9 filiated persons. Such steps shall include considering and

10 requesting public comment on—

11 ‘‘(1) feasible alternatives that minimize the re12 porting burdens on registered investment companies;

13 and

14 ‘‘(2) the utility of such information to share15 holders in relation to the costs to registered invest16 ment companies and their affiliated persons of pro17 viding such information to shareholders.’’; and

18 (5) in subsection (g) (as so redesignated) by

19 striking ‘‘subsections (a) and (d)’’ and inserting

20 ‘‘subsections (a) and (e)’’.

21 SEC. 207. BOOKS, RECORDS AND INSPECTIONS.

22 Section 31 of the Investment Company Act of 1940

23 (15 U.S.C. 80a–30) is amended—

24 (1) by striking subsections (a) and (b) and in25 serting the following:
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1 ‘‘(a) Every registered investment company, and every

2 underwriter, broker, dealer, or investment adviser that is

3 a majority-owned subsidiary of such a company, shall

4 maintain and preserve such records (as defined in section

5 3(a)(37) of the Securities Exchange Act of 1934) for such

6 period or periods as the Commission, by rules and regula7 tions, may prescribe as necessary or appropriate in the

8 public interest or for the protection of investors. Every in9 vestment adviser not a majority-owned subsidiary of, and

10 every depositor of any registered investment company, and

11 every principal underwriter for any registered investment

12 company other than a closed-end company, shall maintain

13 and preserve for such period or periods as the Commission

14 shall prescribe by rules and regulations, such records as

15 are necessary or appropriate to record such person’s trans16 actions with such registered company. In exercising its au17 thority under this subsection, the Commission shall take

18 such steps as it deems necessary or appropriate, consistent

19 with the public interest and for the protection of investors,

20 to avoid unnecessary recordkeeping by, and minimize the

21 compliance burden on, persons required to maintain

22 records under this subsection (hereinafter in this section

23 referred to as ‘subject persons’). Such steps shall include

24 considering, and requesting public comment on—
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1 ‘‘(1) feasible alternatives that minimize the rec2 ordkeeping burdens on subject persons;

3 ‘‘(2) the necessity of such records in view of the

4 public benefits derived from the independent scru5 tiny of such records through Commission examina6 tion;

7 ‘‘(3) the costs associated with maintaining the

8 information that would be required to be reflected in

9 such records; and

10 ‘‘(4) the effects that a proposed recordkeeping

11 requirement would have on internal compliance poli12 cies and procedures.

13 ‘‘(b) All records required to be maintained and pre14 served in accordance with subsection (a) of this section

15 shall be subject at any time and from time to time to such

16 reasonable periodic, special, and other examinations by the

17 Commission, or any member or representative thereof, as

18 the Commission may prescribe. For purposes of such ex19 aminations, any subject person shall make available to the

20 Commission or its representatives any copies or extracts

21 from such records as may be prepared without undue ef22 fort, expense, or delay as the Commission or its represent23 atives may reasonably request. The Commission shall exer24 cise its authority under this subsection with due regard

25 for the benefits of internal compliance policies and proce-
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1 dures and the effective implementation and operation

2 thereof.’’;

3 (2) by redesignating existing subsections (c)

4 and (d) as subsections (e) and (f), respectively; and

5 (3) by inserting after subsection (b) the follow6 ing new subsections:

7 ‘‘(c) Notwithstanding any other provision of law, the

8 Commission shall not be compelled to disclose any internal

9 compliance or audit records, or information contained

10 therein, provided to the Commission under this section.

11 Nothing in this subsection shall authorize the Commission

12 to withhold information from Congress or prevent the

13 Commission from complying with a request for informa14 tion from any other Federal department or agency re15 questing the information for purposes within the scope of

16 its jurisdiction, or complying with an order of a court of

17 the United States in an action brought by the United

18 States or the Commission. For purposes of section 552

19 of title 5, United States Code, this section shall be consid20 ered a statute described in subsection (b)(3)(B) of such

21 section 552.

22 ‘‘(d) For purposes of this section—

23 ‘‘(1) ‘internal compliance policies and proce24 dures’ means policies and procedures designed by
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1 subject persons to promote compliance with the Fed2 eral securities laws; and

3 ‘‘(2) ‘internal compliance and audit record’

4 means any record prepared by a subject person in

5 accordance with internal compliance policies and

6 procedures.’’.

7 SEC. 208. INVESTMENT COMPANY NAMES.

8 Section 35(d) of the Investment Company Act of

9 1940 (15 U.S.C. 80a–34(d)) is amended to read as fol10 lows:

11 ‘‘(d) It shall be unlawful for any registered invest12 ment company to adopt as a part of the name or title of

13 such company, or of any securities of which it is the issuer,

14 any word or words that the Commission finds are materi15 ally deceptive or misleading. The Commission is author16 ized, by rule, regulation, or order, to define such names

17 or titles as are materially deceptive or misleading.’’.

18 SEC. 209. EXCEPTIONS FROM DEFINITION OF INVESTMENT

19 COMPANY.

20 (a) AMENDMENTS.—Section 3(c) of the Investment

21 Company Act of 1940 (15 U.S.C. 80a–3(c)) is amended—

22 (1) in paragraph (1), by inserting after the first

23 sentence the following new sentence: ‘‘Such issuer

24 nonetheless is deemed to be an investment company

25 for purposes of the limitations set forth in section
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1 12(d)(1)(A)(i) and (B)(i) governing the purchase or

2 other acquisition by such issuer of any security is3 sued by any registered investment company and the

4 sale of any security issued by any registered open5 end company to any such issuer.’’;

6 (2) in subparagraph (A) of paragraph (1)—

7 (A) by inserting after ‘‘issuer,’’ the first

8 place it appears the following: ‘‘and is or, but

9 for the exception in this paragraph or para10 graph (7), would be an investment company,’’;

11 and

12 (B) by striking all that follows ‘‘(other

13 than short-term paper)’’ and inserting a period;

14 (3) in paragraph (2)—

15 (A) by striking ‘‘and acting as broker,’’

16 and inserting ‘‘acting as broker, and acting as

17 market intermediary,’’; and

18 (B) by adding at the end of such para19 graph the following new sentences: ‘‘For the

20 purposes of this paragraph, the term ‘market

21 intermediary’ means any person that regularly

22 holds itself out as being willing contempora23 neously to engage in, and is regularly engaged

24 in the business of entering into, transactions on

25 both sides of the market for a financial contract
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1 or one or more such financial contracts. For

2 purposes of the preceding sentence, the term ‘fi3 nancial contract’ means any arrangement that

4 (A) takes the form of an individually negotiated

5 contract, agreement, or option to buy, sell, lend,

6 swap, or repurchase, or other similar individ7 ually negotiated transaction commonly entered

8 into by participants in the financial markets;

9 (B) is in respect of securities, commodities, cur10 rencies, interest or other rates, other measures

11 of value, or any other financial or economic in12 terest similar in purpose or function to any of

13 the foregoing; and (C) is entered into in re14 sponse to a request from a counterparty for a

15 quotation or is otherwise entered into and

16 structured to accommodate the objectives of the

17 counterparty to such arrangement.’’; and

18 (4) by striking paragraph (7) and inserting the

19 following:

20 ‘‘(7)(A) Any issuer (i) whose outstanding secu21 rities are owned exclusively by persons who, at the

22 time of acquisition of such securities, are qualified

23 purchasers, and (ii) who is not making and does not

24 presently propose to make a public offering of such

25 securities. Securities that are owned by persons who
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1 received the securities from a qualified purchaser as

2 a gift or bequest, or where the transfer was caused

3 by legal separation, divorce, death, or other involun4 tary event, shall be deemed to be owned by a quali5 fied purchaser, subject to such rules, regulations,

6 and orders as the Commission may prescribe as nec7 essary or appropriate in the public interest or for

8 the protection of investors.

9 ‘‘(B) Notwithstanding subparagraph (A), an is10 suer is within the exception provided by this para11 graph if—

12 ‘‘(i) in addition to qualified purchasers, its

13 outstanding securities are beneficially owned by

14 not more than 100 persons who are not quali15 fied purchasers if (I) such persons acquired

16 such securities on or before December 31,

17 1995, and (II) at the time such securities were

18 acquired by such persons, the issuer was ex19 cepted by paragraph (1) of this subsection; and

20 ‘‘(ii) prior to availing itself of the exception

21 provided by this paragraph—

22 ‘‘(I) such issuer has disclosed to such

23 persons that future investors will be lim24 ited to qualified purchasers, and that own-
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1 ership in such issuer is no longer limited to

2 not more than 100 persons, and

3 ‘‘(II) concurrently with or after such

4 disclosure, such issuer has provided such

5 persons with a reasonable opportunity to

6 redeem any part or all of their interests in

7 the issuer for their proportionate share of

8 the issuer’s current net assets, or the cash

9 equivalent thereof.

10 ‘‘(C) An issuer that is excepted under this para11 graph shall nonetheless be deemed to be an invest12 ment company for purposes of the limitations set

13 forth in section 12(d)(1)(A)(i) and (B)(i) governing

14 the purchase or other acquisition by such issuer of

15 any security issued by any registered investment

16 company and the sale of any security issued by any

17 registered open-end company to any such issuer.

18 ‘‘(D) For purposes of determining compliance

19 with this paragraph and paragraph (1) of this sub20 section, an issuer that is otherwise excepted under

21 this paragraph and an issuer that is otherwise ex22 cepted under paragraph (1) shall not be treated by

23 the Commission as being a single issuer for purposes

24 of determining whether the outstanding securities of

25 the issuer excepted under paragraph (1) are bene-
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1 ficially owned by not more than 100 persons or

2 whether the outstanding securities of the issuer ex3 cepted under this paragraph are owned by persons

4 that are not qualified purchasers. Nothing in this

5 provision shall be deemed to establish that a person

6 is a bona fide qualified purchaser for purposes of

7 this paragraph or a bona fide beneficial owner for

8 purposes of paragraph (1) of this subsection.’’.

9 (b) DEFINITION OF QUALIFIED PURCHASER.—Sec10 tion 2(a) of the Investment Company Act of 1940 (15

11 U.S.C. 80a–2(a)) is amended by inserting after paragraph

12 (50) the following new paragraph:

13 ‘‘(51) ‘Qualified purchaser’ means—

14 ‘‘(A) any natural person who owns at least

15 $10,000,000 in securities of issuers that are not

16 controlled by such person, except that securities

17 of such a controlled issuer may be counted to18 ward such amount if such issuer is, or but for

19 the exception in paragraph (1) or (7) of section

20 3(c) would be, an investment company;

21 ‘‘(B) any trust not formed for the specific

22 purpose of acquiring the securities offered, as

23 to which the trustee or other person authorized

24 to make decisions with respect to the trust, and

25 each settlor or other person who has contrib-
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1 uted assets to the trust, is a person described

2 in subparagraph (A) or (C); or

3 ‘‘(C) any person, acting for its own ac4 count or the accounts of other qualified pur5 chasers, who in the aggregate owns and invests

6 on a discretionary basis, not less than

7 $100,000,000 in securities of issuers that are

8 not affiliated persons (as defined in paragraph

9 (3)(C) of this subsection) of such person, except

10 that securities of such an affiliated person is11 suer may be counted toward such amount if

12 such issuer is, or but for the exception in para13 graph (1) or (7) of section 3(c) would be, an in14 vestment company.

15 The Commission may adopt such rules and regula16 tions governing the persons and trusts specified in

17 subparagraphs (A), (B), and (C) of this paragraph

18 as it determines are necessary or appropriate in the

19 public interest and for the protection of investors.’’.

20 (c) CONFORMING AMENDMENT.—The last sentence

21 of section 3(a) of the Investment Company Act of 1940

22 (15 U.S.C. 80a–3(a)) is amended—

23 (1) by inserting ‘‘(i)’’ after ‘‘of the owner’’; and

24 (2) by inserting before the period the following:

25 ‘‘, and (ii) which are not relying on the exception
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1 from the definition of investment company in sub2 section (c)(1) or (c)(7) of this section’’.

3 (d) RULEMAKING REQUIRED.—

4 (1) IMPLEMENTATION OF SECTION 3(c)(1)(B).—

5 Within one year after the date of enactment of this

6 Act, the Commission shall prescribe rules to imple7 ment the requirements of section 3(c)(1)(B) of the

8 Investment Company Act of 1940 (15 U.S.C. 80a–

9 3(c)(1)(B)).

10 (2) EMPLOYEE EXCEPTION.—Within one year

11 after the date of enactment of this Act, the Commis12 sion shall prescribe rules pursuant to its authority

13 under section 6 of the Investment Company Act of

14 1940 (15 U.S.C. 80a–6) to permit the ownership by

15 knowledgeable employees of an issuer or an affiliated

16 person of the issuer of the securities of that issuer

17 or affiliated person without loss of the issuer’s ex18 ception under section 3(c)(1) or 3(c)(7) of such Act

19 from treatment as an investment company under

20 such Act.
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1 TITLE III—SECURITIES AND EX2 CHANGE COMMISSION AU3 THORIZATION

4 SEC. 301. SHORT TITLE.

5 This title may be cited as the ‘‘Securities and Ex6 change Commission Authorization Act of 1996’’.

7 SEC. 302. PURPOSES.

8 The purposes of this title are—

9 (1) to authorize appropriations for the Securi10 ties and Exchange Commission for fiscal year 1997;

11 and

12 (2) to reduce over time the rates of fees

13 charged under the Federal securities laws.

14 SEC. 303. AUTHORIZATION OF APPROPRIATIONS.

15 Section 35 of the Securities Exchange Act of 1934

16 is amended to read as follows:

17 ‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

18 ‘‘There are authorized to be appropriated to carry out

19 the functions, powers, and duties of the Commission

20 $317,000,000 for fiscal year 1997.’’.

21 SEC. 304. REGISTRATION FEES.

22 Section 6(b) of the Securities Act of 1933 (15 U.S.C.

23 77f(b)) is amended to read as follows:

24 ‘‘(b) REGISTRATION FEE.—
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1 ‘‘(1) RECOVERY OF COST OF SERVICES.—The

2 Commission shall, in accordance with this sub3 section, collect registration fees that are designed to

4 recover the costs to the government of the securities

5 registration process, and costs related to such proc6 ess, including enforcement activities, policy and rule7 making activities, administration, legal services, and

8 international regulatory activities.

9 ‘‘(2) FEE PAYMENT REQUIRED.—At the time of

10 filing a registration statement, the applicant shall

11 pay to the Commission a fee that shall be equal to

12 the sum of the amounts (if any) determined under

13 the rates established by paragraphs (3) and (4). The

14 Commission shall publish in the Federal Register

15 notices of the fee rates applicable under this section

16 for each fiscal year. In no case shall the fee required

17 by this subsection be less than $200, except that

18 during fiscal year 2002 or any succeeding fiscal year

19 such minimum fee shall be $182.

20 ‘‘(3) GENERAL REVENUE FEES.—The rate de21 termined under this paragraph is a rate equal to

22 $200 for each $1,000,000 of the maximum aggre23 gate price at which such securities are proposed to

24 be offered, except that during fiscal year 2002 and

25 any succeeding fiscal year such rate is equal to $182
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1 for each $1,000,000 of the maximum aggregate

2 price at which such securities are proposed to be of3 fered. Fees collected during any fiscal year pursuant

4 to this paragraph shall be deposited and credited as

5 general revenues of the Treasury.

6 ‘‘(4) OFFSETTING COLLECTION FEES.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 subparagraphs (B) and (C), the rate deter9 mined under this paragraph is a rate equal to

10 the following amount for each $1,000,000 of

11 the maximum aggregate price at which such se12 curities are proposed to be offered:

13 ‘‘(i) $103 during fiscal year 1997;

14 ‘‘(ii) $70 during fiscal year 1998;

15 ‘‘(iii) $38 during fiscal year 1999;

16 ‘‘(iv) $17 during fiscal year 2000; and

17 ‘‘(v) $0 during fiscal year 2001 or any

18 succeeding fiscal year.

19 ‘‘(B) LIMITATION; DEPOSIT.—Except as

20 provided in subparagraph (C), no amounts shall

21 be collected pursuant to this paragraph (4) for

22 any fiscal year except to the extent provided in

23 advance in appropriations acts. Fees collected

24 during any fiscal year pursuant to this para25 graph shall be deposited and credited as offset-
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1 ting collections in accordance with appropria2 tions Acts.

3 ‘‘(C) LAPSE OF APPROPRIATIONS.—If on

4 the first day of a fiscal year a regular appro5 priation to the Commission has not been en6 acted, the Commission shall continue to collect

7 fees (as offsetting collections) under this para8 graph at the rate in effect during the preceding

9 fiscal year, until such a regular appropriation is

10 enacted.’’.

11 SEC. 305. TRANSACTION FEES.

12 (a) AMENDMENT.—Section 31 of the Securities Ex13 change Act of 1934 (15 U.S.C. 78ee) is amended to read

14 as follows:

15 ‘‘SEC. 31. TRANSACTION FEES.

16 ‘‘(a) RECOVERY OF COST OF SERVICES.—The Com17 mission shall, in accordance with this subsection, collect

18 transaction fees that are designed to recover the costs to

19 the Government of the supervision and regulation of secu20 rities markets and securities professionals, and costs relat21 ed to such supervision and regulation, including enforce22 ment activities, policy and rulemaking activities, adminis23 tration, legal services, and international regulatory activi24 ties.
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1 ‘‘(b) EXCHANGE-TRADED SECURITIES.—Every na2 tional securities exchange shall pay to the Commission a

3 fee at a rate equal to $33 for each $1,000,000 of the ag4 gregate dollar amount of sales of securities (other than

5 bonds, debentures, and other evidences of indebtedness)

6 transacted on such national securities exchange, except

7 that for fiscal year 2002 or any succeeding fiscal year such

8 rate shall be equal to $25 for each $1,000,000 of such

9 aggregate dollar amount of sales. Fees collected pursuant

10 to this subsection shall be deposited and collected as gen11 eral revenue of the Treasury.

12 ‘‘(c) OFF-EXCHANGE-TRADES OF EXCHANGE REG13 ISTERED SECURITIES.—Every national securities associa14 tion shall pay to the Commission a fee at a rate equal

15 $33 for each $1,000,000 of the aggregate dollar amount

16 of sales transacted by or through any member of such as17 sociation otherwise than on a national securities exchange

18 of securities registered on such an exchange (other than

19 bonds, debentures, and other evidences of indebtedness),

20 except that for fiscal year 2002 or any succeeding fiscal

21 year such rate shall be equal to $25 for each $1,000,000

22 of such aggregate dollar amount of sales. Fees collected

23 pursuant to this subsection shall be deposited and col24 lected as general revenue of the Treasury.
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1 ‘‘(d) OFF-EXCHANGE-TRADES OF LAST-SALE-RE2 PORTED SECURITIES.—

3 ‘‘(1) COVERED TRANSACTIONS.—Every national

4 securities association shall pay to the Commission a

5 fee at a rate equal to the dollar amount determined

6 under paragraph (2) for each $1,000,000 of the ag7 gregate dollar amount of sales transacted by or

8 through any member of such association otherwise

9 than on a national securities exchange of securities

10 (other than bonds, debentures, and other evidences

11 of indebtedness) subject to prompt last sale report12 ing pursuant to the rules of the Commission or a

13 registered national securities association, excluding

14 any sales for which a fee is paid under subsection

15 (c).

16 ‘‘(2) FEE RATES.—Except as provided in para17 graph (4), the dollar amount determined under this

18 paragraph is—

19 ‘‘(A) $12 for fiscal year 1997;

20 ‘‘(B) $14 for fiscal year 1998;

21 ‘‘(C) $17 for fiscal year 1999;

22 ‘‘(D) $18 for fiscal year 2000;

23 ‘‘(E) $20 for fiscal year 2001; and

24 ‘‘(F) $25 for fiscal year 2002 or for any

25 succeeding fiscal year.
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1 ‘‘(3) LIMITATION; DEPOSIT OF FEES.—Except

2 as provided in paragraph (4), no amounts shall be

3 collected pursuant to this subsection (d) for any fis4 cal year beginning before October 1, 2001, except to

5 the extent provided in advance in appropriations

6 Acts. Fees collected during any such fiscal year pur7 suant to this subsection shall be deposited and cred8 ited as offsetting collections to the account providing

9 appropriations to the Commission, except that any

10 amounts in excess of the following amounts (and any

11 amount collected for fiscal years beginning on or

12 after October 1, 2001) shall be deposited and cred13 ited as general revenues of the Treasury:

14 ‘‘(A) $20,000,000 for fiscal year 1997;

15 ‘‘(B) $26,000,000 for fiscal year 1998;

16 ‘‘(C) $32,000,000 for fiscal year 1999;

17 ‘‘(D) $32,000,000 for fiscal year 2000;

18 ‘‘(E) $32,000,000 for fiscal year 2001; and

19 ‘‘(F) $0 for fiscal year 2002 and any suc20 ceeding fiscal year.

21 ‘‘(4) LAPSE OF APPROPRIATIONS.—If on the

22 first day of a fiscal year a regular appropriation to

23 the Commission has not been enacted, the Commis24 sion shall continue to collect fees (as offsetting col25 lections) under this subsection at the rate in effect
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1 during the preceding fiscal year, until such a regular

2 appropriation is enacted.

3 ‘‘(e) DATES FOR PAYMENT OF FEES.—The fees re4 quired by subsections (b), (c), and (d) of this section shall

5 be paid—

6 ‘‘(1) on or before March 15, with respect to

7 transactions and sales occurring during the period

8 beginning on the preceding September 1 and ending

9 at the close of the preceding December 31; and

10 ‘‘(2) on or before September 30, with respect to

11 transactions and sales occurring during the period

12 beginning on the preceding January 1 and ending at

13 the close of the preceding August 31.

14 ‘‘(f) EXEMPTIONS.—The Commission, by rule, may

15 exempt any sale of securities or any class of sales of secu16 rities from any fee imposed by this section, if the Commis17 sion finds that such exemption is consistent with the pub18 lic interest, the equal regulation of markets and brokers

19 and dealers, and the development of a national market

20 system.

21 ‘‘(g) PUBLICATION.—The Commission shall publish

22 in the Federal Register notices of the fee rates applicable

23 under this section for each fiscal year.’’.

24 (b) EFFECTIVE DATES; TRANSITION.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendment made by subsection (a)

3 shall apply with respect to transactions in securities

4 that occur on or after January 1, 1997.

5 (2) OFF-EXCHANGE TRADES OF LAST SALE RE6 PORTED TRANSACTIONS.—The amendment made by

7 subsection (a) shall apply with respect to trans8 actions described in section 31(d)(1) of the Securi9 ties Exchange Act of 1934 (as amended by sub10 section (a) of this section) that occur on or after

11 September 1, 1996.

12 (3) RULE OF CONSTRUCTION.—Nothing in this

13 subsection shall be construed to affect the obligation

14 of national securities exchanges and registered bro15 kers and dealers under section 31 of the Securities

16 Exchange Act of 1934 (15 U.S.C. 78ee) as in effect

17 prior to the amendment made by subsection (a) to

18 make the payments required by such section on

19 March 15, 1997.

20 SEC. 306. TIME FOR PAYMENT.

21 Section 4(e) of the Securities Exchange Act of 1934

22 (15 U.S.C. 78d(e)) is amended by inserting before the pe23 riod at the end thereof the following: ‘‘and the Commission

24 may also specify the time that such fee shall be determined
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1 and paid relative to the filing of any statement or docu2 ment with the Commission’’.

3 SEC. 307. SENSE OF THE CONGRESS CONCERNING FEES.

4 It is the sense of the Congress that—

5 (1) the fees authorized by the amendments

6 made by this Act are in lieu of, and not in addition

7 to, any fees that the Securities and Exchange Com8 mission is authorized to impose or collect pursuant

9 to section 9701 of title 31, United States Code; and

10 (2) in order to maintain the competitiveness of

11 United States securities markets relative to foreign

12 markets, no fee should be assessed on transactions

13 involving portfolios of equity securities taking place

14 at times of day characterized by low volume and

15 during non-traditional trading hours.

Passed the House of Representatives June 19, 1996.

Attest:

Clerk.