I

103D CONGRESS

1ST SESSION H. R. 618

To extend and revise rulemaking authority with respect to government

securities under the Federal securities laws, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 26, 1993

Mr. MARKEY (for himself, Mr. FIELDS of Texas, Mr. DINGELL, Mr. WYDEN,

Mr. SYNAR, and Mr. COOPER) introduced the following bill; which was

referred to the Committee on Energy and Commerce

A BILL

To extend and revise rulemaking authority with respect to

government securities under the Federal securities laws,

and for other purposes.

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.

4 This Act may be cited as the ‘‘Government Securities

5 Reform Act of 1993’’.
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1 SEC. 2. EXTENSION OF GOVERNMENT SECURITIES RULE2 MAKING AUTHORITY.

3 Section 15C(g)(1) of the Securities Exchange Act of

4 1934 (15 U.S.C. 78o–5(g)(1)) is amended by striking

5 ‘‘October 1, 1991’’ and inserting ‘‘October 1, 1997’’.

6 SEC. 3. RECORDKEEPING.

7 Section 17 of the Securities Exchange Act of 1934

8 (15 U.S.C. 78q) is amended by adding at the end thereof

9 the following new subsection:

10 ‘‘(i) GOVERNMENT SECURITIES RECORDKEEPING.—

11 ‘‘(1) MAINTENANCE OF RECORDS.—The Com12 mission may prescribe rules to require any govern13 ment securities broker or government securities deal14 er to make, keep, and maintain for prescribed peri15 ods, in a form and containing such information as

16 may be specified by the Commission, records of gov17 ernment securities transactions, including (but not

18 limited to) records of the date and time of execution

19 of trades.

20 ‘‘(2) EXAMINATION OF RECORDS.—Every gov21 ernment securities broker and government securities

22 dealer shall make such records available for exam23 ination to representatives of the appropriate regu24 latory agency for such government securities broker

25 or government securities dealer and furnish copies

26 thereof to such representatives on request.
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1 ‘‘(3) FURNISHING RECORDS TO RECONSTRUCT

2 TRADING.—Every government securities broker and

3 government securities dealer shall furnish to the

4 Commission on request such of the information re5 quired to be made, kept, or maintained under this

6 subsection as the Commission may require to recon7 struct trading in furtherance of the purposes of this

8 title. In requiring information pursuant to this para9 graph, the Commission shall specify the information

10 required, the period for which it is required, the time

11 and date on which the information must be fur12 nished, and whether the information is to be fur13 nished directly to the Commission, to the Federal

14 Reserve Bank of New York, or to an appropriate

15 regulatory agency or self-regulatory organization

16 with responsibility for examining the government se17 curities broker or government securities dealer. The

18 Commission may require that such information be

19 furnished in machine readable form.

20 ‘‘(4) LIMITATION; CONSTRUCTION.—The Com21 mission shall not utilize its authority under this sub22 section to develop regular reporting requirements for

23 information concerning a substantial segment of all

24 daily transactions in government securities; however,

25 the Commission may require information to be fur-
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1 nished under this subsection as frequently as nec2 essary for particular inquiries or investigations. The

3 Commission shall, where feasible, avoid requiring

4 any information to be furnished under this sub5 section that the Commission may obtain from the

6 Federal Reserve Bank of New York.

7 ‘‘(5) CONSULTATION REQUIREMENT.—In mak8 ing rules under this subsection applicable to govern9 ment securities brokers and government securities

10 dealers for which a Federal banking agency is the

11 appropriate regulatory agency, the Commission shall

12 consult with and consider the views of each such ap13 propriate regulatory agency. If a Federal banking

14 agency comments in writing on a proposed rule

15 under this subsection that has been published for

16 comment, the Commission shall respond in writing

17 to such written comment before adopting the pro18 posed rule. The Commission shall, at the request of

19 the Federal banking agency, publish such comment

20 and response in the Federal Register at the time of

21 publishing the adopted rule. For purposes of this

22 paragraph, the term ‘Federal banking agency’ has

23 the meaning provided in subsection (h)(3)(G).

24 ‘‘(6) AUTHORITY OF THE COMMISSION TO LIMIT

25 DISCLOSURE OF INFORMATION.—Notwithstanding
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1 any other provision of law, the Commission and the

2 appropriate regulatory agencies shall not be com3 pelled to disclose any information required under

4 this subsection. Nothing in this subsection shall au5 thorize the Commission or any appropriate regu6 latory agency to withhold information from Con7 gress, or prevent the Commission or any appropriate

8 regulatory agency from complying with a request for

9 information from any other Federal department or

10 agency requesting information for purposes within

11 the scope of its jurisdiction, or complying with an

12 order of a court of the United States in an action

13 brought by the United States, the Commission, or

14 the appropriate regulatory agency. For purposes of

15 section 552 of title 5, United States Code, this sub16 section shall be considered a statute described in

17 subsection (b)(3)(B) of such section 552.’’.

18 SEC. 4. LARGE POSITION REPORTING.

19 (a) AMENDMENT.—Section 15C of the Securities Ex20 change Act of 1934 (15 U.S.C. 78o–5) is amended—

21 (1) by redesignating subsections (f) and (g) as

22 subsections (g) and (h); and

23 (2) by inserting after subsection (e) the follow24 ing new subsection:

25 ‘‘(f) LARGE POSITION REPORTING.—
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1 ‘‘(1) REPORTING REQUIREMENTS.—The Sec2 retary may adopt rules to require specified persons

3 holding, maintaining, or controlling large positions

4 in to-be-issued or recently issued Treasury securities

5 to file such reports regarding such positions as the

6 Secretary determines to be necessary or appropriate

7 for the purpose of monitoring the impact in the

8 Treasury securities market of concentrations of posi9 tions in Treasury securities and for the purpose of

10 otherwise assisting the Commission in the enforce11 ment of this title. Reports required under this sub12 section shall be filed with the Federal Reserve Bank

13 of New York, acting as agent for the Secretary, and

14 shall be provided by that Federal Reserve Bank to

15 the Commission on a timely basis.

16 ‘‘(2) LIMITATION ON REQUIRING CERTAIN RE17 PORTS.—The Secretary may not require under this

18 subsection—

19 ‘‘(A) reports from persons that are not

20 government securities brokers or government

21 securities dealers, or

22 ‘‘(B) reports from government securities

23 brokers and government securities dealers that

24 identify particular customers and customer po25 sitions,
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1 except when the Secretary determines, after con2 sultation with the Commission and the Board of

3 Governors of the Federal Reserve System, that mar4 ket conditions exist that require such information be

5 obtained to carry out the purposes of this sub6 section.

7 ‘‘(3) ADDITIONAL CONSIDERATIONS.—In mak8 ing determinations under paragraphs (1) and (2),

9 the Secretary shall take into account any impact on

10 the efficiency and liquidity of the Treasury securities

11 market and on the cost to the taxpayers of funding

12 the Federal debt.

13 ‘‘(4) RECORDKEEPING REQUIREMENTS.—Rules

14 under this subsection may require persons holding,

15 maintaining, or controlling large positions in Treas16 ury securities to make and keep for prescribed peri17 ods such records as the Secretary determines are

18 necessary or appropriate to ensure that such persons

19 can comply with reporting requirements under this

20 subsection.

21 ‘‘(5) AGGREGATION RULES.—Rules under this

22 subsection—

23 ‘‘(A) may prescribe the manner in which

24 positions and accounts shall be aggregated for

25 the purpose of this subsection, including aggre-
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1 gation on the basis of common ownership or

2 control; and

3 ‘‘(B) may define which persons (individ4 ually or as a group) hold, maintain, or control

5 large positions.

6 ‘‘(6) DEFINITIONAL AUTHORITY; DETERMINA7 TION OF REPORTING THRESHOLD.—

8 ‘‘(A) In prescribing rules under this sub9 section, the Secretary may, consistent with the

10 purpose of this subsection, define terms used in

11 this subsection that are not otherwise defined in

12 section 3 of this title.

13 ‘‘(B) Rules under this subsection shall

14 specify—

15 ‘‘(i) the minimum size of positions

16 subject to reporting under this subsection,

17 taking into account the purposes of this

18 subsection and the potential for price dis19 tortions or other anomalies resulting from

20 large positions;

21 ‘‘(ii) the types of positions (which may

22 include financing arrangements) to be re23 ported;

24 ‘‘(iii) the securities to be covered; and
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1 ‘‘(iv) the form and manner in which

2 reports shall be transmitted, which may in3 clude transmission in machine readable

4 form.

5 ‘‘(7) LIMITATION ON DISCLOSURE OF INFORMA6 TION.—Notwithstanding any other provision of law,

7 the Secretary and the Commission shall not be com8 pelled to disclose any information required to be

9 kept or reported under this subsection. Nothing in

10 this subsection shall authorize the Secretary or the

11 Commission to withhold information from Congress,

12 or prevent the Secretary or the Commission comply13 ing with a request for information from any other

14 Federal department or agency requesting informa15 tion for purposes within the scope of its jurisdiction,

16 or complying with an order of a court of the United

17 States in an action brought by the United States,

18 the Secretary, or the Commission. For purposes of

19 section 552 of title 5, United States Code, this sub20 section shall be considered a statute described in

21 subsection (b)(3)(B) of such section 552.’’.

22 (b) CONFORMING AMENDMENT.—Section 15C(d)(2)

23 of such Act is amended to read as follows:

24 ‘‘(2) Information received by an appropriate regu25 latory agency, the Secretary, or the Commission from or
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1 with respect to any government securities broker, govern2 ment securities dealer, any person associated with a gov3 ernment securities broker or government securities dealer,

4 or any other person subject to this section or rules promul5 gated thereunder, may be made available by the Secretary

6 or the recipient agency to the Commission, the Secretary,

7 the Department of Justice, the Commodity Futures Trad8 ing Commission, any appropriate regulatory agency, any

9 self-regulatory organization, or any Federal Reserve

10 Bank.’’.

11 SEC. 5. AUTHORITY OF THE COMMISSION TO REGULATE

12 TRANSACTIONS IN EXEMPTED SECURITIES.

13 (a) PREVENTION OF FRAUDULENT AND MANIPULA14 TIVE ACTS AND PRACTICES.—Section 15(c)(2) of the Se15 curities Exchange Act of 1934 (15 U.S.C. 78o(c)(2)) is

16 amended—

17 (1) by inserting ‘‘(A)’’ after ‘‘(2)’’;

18 (2) by striking ‘‘fictitious quotation, and no

19 municipal securities dealer’’ and inserting the follow20 ing:

21 ‘‘fictitious quotation.

22 ‘‘(B) No municipal securities dealer’’;

23 (3) by striking ‘‘fictitious quotation. The Com24 mission shall’’ and inserting the following:

25 ‘‘fictitious quotation.
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1 ‘‘(C) No government securities broker or government

2 securities dealer shall make use of the mails or any means

3 or instrumentality of interstate commerce to effect any

4 transaction in, or induce or attempt to induce the pur5 chase or sale of, any government security in connection

6 with which such government securities broker or govern7 ment securities dealer engages in any fraudulent, decep8 tive, or manipulative act or practice, or makes any ficti9 tious quotation.

10 ‘‘(D) The Commission shall’’; and

11 (4) by inserting at the end thereof the follow12 ing:

13 ‘‘(E) The Commission shall, prior to adopting rules

14 or regulations under subparagraph (C), consult with and

15 consider the views of the Secretary of the Treasury and

16 the Board of Governors of the Federal Reserve System.

17 If the Secretary of the Treasury or the Board of Gov18 ernors of the Federal Reserve System comments in writing

19 on a proposed rule or regulation of the Commission under

20 such subparagraph (C) that has been published for com21 ment, the Commission shall respond in writing to such

22 written comment before adopting the proposed rule.’’.

23 (b) FRAUDULENT AND MANIPULATIVE DEVICES AND

24 CONTRIVANCES.—Section 15(c)(1) of the Securities Ex25 change Act of 1934 (15 U.S.C. 78o(c)(1)) is amended—
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1 (1) by inserting ‘‘(A)’’ after ‘‘(c)(1)’’;

2 (2) by striking ‘‘contrivance, and no municipal

3 securities dealer’’ and inserting the following:

4 ‘‘contrivance.

5 ‘‘(B) No municipal securities dealer’’;

6 (3) by striking ‘‘contrivance. The Commission

7 shall’’ and inserting the following:

8 ‘‘contrivance.

9 ‘‘(C) No government securities broker or government

10 securities dealer shall make use of the mails or any means

11 or instrumentality of interstate commerce to effect any

12 transaction in, or to induce or attempt to induce the pur13 chase or sale of, any government security by means of any

14 manipulative, deceptive, or other fraudulent device or con15 trivance.

16 ‘‘(D) The Commission shall’’; and

17 (4) by inserting at the end thereof the follow18 ing:

19 ‘‘(E) The Commission shall, prior to adopting rules

20 or regulations under subparagraph (C), consult with and

21 consider the views of the Secretary of the Treasury and

22 the Board of Governors of the Federal Reserve System.

23 If the Secretary of the Treasury or the Board of Gov24 ernors of the Federal Reserve System comments in writing

25 on a proposed rule or regulation of the Commission under
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1 such subparagraph (C) that has been published for com2 ment, the Commission shall respond in writing to such

3 written comment before adopting the proposed rule.’’.

4 SEC. 6. BROKER/DEALER SUPERVISION RESPONSIBILITIES.

5 Section 15 of the Securities Exchange Act of 1934

6 (15 U.S.C. 78o) is amended by adding at the end thereof

7 the following new subsection:

8 ‘‘(h) POLICIES AND PROCEDURES TO PREVENT AND

9 DETECT VIOLATIONS.—Every government securities

10 broker and government securities dealer shall establish,

11 maintain, and enforce written policies and procedures rea12 sonably designed, taking into consideration the nature of

13 such person’s business, to prevent and detect in connection

14 with the purchase or sale of government securities, insofar

15 as practicable, fraud and manipulation in violation of this

16 title and the rules and regulations thereunder and viola17 tions of such other provisions of this title and the rules

18 and regulations thereunder as the Commission shall des19 ignate by rule. The Commission, as it deems necessary or

20 appropriate in the public interest or for the protection of

21 investors, shall prescribe rules or regulations to require

22 specific policies or procedures reasonably designed to pre23 vent such violations.’’.
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1 SEC. 7. SALES PRACTICE RULEMAKING AUTHORITY.

2 (a) RULES FOR FINANCIAL INSTITUTIONS.—Section

3 15C(b) of the Securities Exchange Act of 1934 (15 U.S.C.

4 78o–5(b)) is amended—

5 (1) by redesignating paragraphs (3), (4), (5),

6 and (6) as paragraphs (4), (5), (6), and (7), respec7 tively; and

8 (2) by inserting after paragraph (2) the follow9 ing new paragraph:

10 ‘‘(3) SALES PRACTICE RULES.—(A) With respect to

11 any financial institution that has filed notice as a govern12 ment securities broker or government securities dealer or

13 that is required to file notice under subsection (a)(1)(B)

14 of this section, the appropriate regulatory agency for such

15 government securities broker or government securities

16 dealer may issue such rules with respect to transactions

17 in government securities as may be necessary to prevent

18 fraudulent and manipulative acts and practices and to pro19 mote just and equitable principles of trade.

20 ‘‘(B) Each appropriate regulatory agency shall con21 sult with the other appropriate regulatory agencies for the

22 purpose of ensuring the consistency of the rules prescribed

23 by such agencies under this paragraph. The appropriate

24 regulatory agencies shall consult with and consider the

25 views of the Secretary and the Commission with respect

26 to the impact of such rules on the operations of the market
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1 for government securities, consistency with analogous

2 rules of self-regulatory organizations, and the enforcement

3 and administration of such rules. The consultation re4 quired by this paragraph shall be conducted prior to the

5 appropriate regulatory agency adopting a rule under this

6 paragraph, unless the appropriate regulatory agency de7 termines that an emergency exists requiring expeditious

8 and summary action and publishes its reasons therefor.

9 If the Secretary or the Commission comments in writing

10 to the appropriate regulatory agency on a proposed rule

11 that has been published for comment, the appropriate reg12 ulatory agency shall respond in writing to such written

13 comment before adopting the rule.’’.

14 (b) RULES BY REGISTERED SECURITIES ASSOCIA15 TIONS.—

16 (1) REMOVAL OF LIMITATIONS ON AUTHOR17 ITY.—(A) Section 15A of the Securities Exchange

18 Act of 1934 (15 U.S.C. 78o–3) is amended—

19 (i) by striking subsections (f)(1) and

20 (f)(2); and

21 (ii) by redesignating subsection (f)(3) as

22 subsection (f).

23 (B) Section 15A(g) of such Act is amended—
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1 (i) by striking ‘‘exempted securities’’ in

2 paragraph (3)(D) and inserting ‘‘municipal se3 curities’’;

4 (ii) by striking paragraph (4); and

5 (iii) by redesignating paragraph (5) as

6 paragraph (4).

7 (2) OVERSIGHT OF REGISTERED SECURITIES

8 ASSOCIATIONS.—Section 19 of the Securities Ex9 change Act of 1934 (15 U.S.C. 78s) is amended—

10 (A) in subsection (b), by adding at the end

11 thereof the following new paragraph:

12 ‘‘(5) The Commission shall consult with and consider

13 the views of the Secretary of the Treasury prior to approv14 ing a proposed rule change filed by a registered securities

15 association that primarily concerns conduct related to

16 transactions in government securities, except where the

17 Commission determines that an emergency exists requir18 ing expeditious or summary action and publishes its rea19 sons therefor. If the Secretary comments in writing to the

20 Commission on such proposed rule change that has been

21 published for comment, the Commission shall respond in

22 writing to such written comment before approving the pro23 posed rule change.’’;

24 (B) in subsection (c), by adding at the end

25 thereof the following new paragraph:
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1 ‘‘(5) Before adopting a rule to amend a rule of a reg2 istered securities association that primarily concerns con3 duct related to transactions in government securities, the

4 Commission shall consult with and consider the views of

5 the Secretary, except where the Commission determines

6 that an emergency exists requiring expeditious or sum7 mary action and publishes its reasons therefor. If the Sec8 retary comments in writing to the Commission on such

9 proposed rule change that has been published for com10 ment, the Commission shall respond in writing to such

11 written comment before approving the proposed rule

12 change.’’.

13 (3) CONFORMING AMENDMENT.—

14 (A) Section 3(a)(12)(B)(ii) of such Act (15

15 U.S.C. 78b(a)(12)(B)(ii)) is amended by strik16 ing ‘‘15, 15A (other than subsection (g)(3)),

17 and 17A’’ and inserting ‘‘15 and 17A’’.

18 (B) Section 15(b)(7) of such Act (15

19 U.S.C. 78o(b)(7)) is amended by inserting ‘‘or

20 government securities broker or government se21 curities dealer registered (or required to reg22 ister) under section 15C(a)(1)(A)’’ after ‘‘No

23 registered broker or dealer’’.
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1 SEC. 8. MARKET INFORMATION.

2 (a) TRANSPARENCY.—The Securities Exchange Act

3 of 1934 is amended by adding at the end of section 11A

4 (15 U.S.C. 78k–1) the following:

5 ‘‘MARKET INFORMATION WITH RESPECT TO GOVERNMENT

6 SECURITIES

7 ‘‘SEC. 11B. (a) FINDINGS.—The Congress finds

8 that—

9 ‘‘(1) it is necessary and appropriate for the pro10 tection of investors to assure public dissemination of

11 information concerning government securities trans12 actions and quotations;

13 ‘‘(2) government securities brokers, government

14 securities dealers, and government securities infor15 mation systems have created substantial trans16 parency through the dissemination of information

17 concerning government securities transactions and

18 quotations and are expected to maintain and im19 prove such transparency through voluntary actions;

20 and

21 ‘‘(3) if such voluntary actions do not attain the

22 objectives stated in subsections (b) and (c), the

23 Commission should have the authority, in accord24 ance with the requirements of this section, to assure

25 the attainment of those objectives.
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1 ‘‘(b) GOVERNMENT SECURITIES INFORMATION SYS2 TEMS.—

3 ‘‘(1) CONDITIONAL AUTHORITY.—Upon a find4 ing by the Commission that information available to

5 investors generally through government securities in6 formation systems taken as a whole does not meet

7 the objectives set forth in paragraph (2) with respect

8 to a class or category of regularly traded govern9 ment securities, the Commission, having due regard

10 for the public interest, the protection of investors,

11 the maintenance of fair and orderly markets, the in12 tegrity, liquidity, and efficiency of the government

13 securities market, and the fostering of competition,

14 may prescribe rules applicable to government securi15 ties information systems to the extent necessary to

16 assure that government securities information sys17 tems meet the objectives set forth in paragraph (2)

18 with respect to such class or category of securities.

19 The Commission (A) shall not utilize its authority

20 under this paragraph to regulate the amount of fees

21 charged for information, and (B) shall not require

22 dissemination through government securities infor23 mation systems of information not transmitted by or

24 through government securities interdealer brokers

25 (or their functional equivalents).
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1 ‘‘(2) OBJECTIVES.—The Commission may not

2 take action under paragraph (1) of this subsection

3 unless the Commission makes the finding required

4 by paragraph (1) and determines that such action is

5 necessary or appropriate—

6 ‘‘(A) to assure that information on trans7 actions in and quotations for a class or category

8 of regularly traded government securities being

9 reported through government securities infor10 mation systems taken as a whole is available to

11 investors generally and includes—

12 ‘‘(i) information concerning price and

13 volume with respect to a reasonably suffi14 cient number or proportion of transactions

15 in any security in such class or category to

16 permit the determination of the prevailing

17 market price for such security; and

18 ‘‘(ii) reports of the highest bids and

19 lowest offers for any security in such class

20 or category being reported through such

21 systems (including the size at which gov22 ernment securities brokers and dealers are

23 willing to trade with respect to such bids

24 and offers);
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1 ‘‘(B) to assure that such information is

2 timely reported;

3 ‘‘(C) to assure that such information is

4 made available to investors generally on a fair,

5 reasonable, and nondiscriminatory basis; and

6 ‘‘(D) to assure the ability of investors to

7 obtain and retain such information for analyt8 ical purposes.

9 ‘‘(c) STANDBY AUTHORITY WITH RESPECT TO MAR10 KET INFORMATION.—

11 ‘‘(1) AUTHORITY.—Subject to paragraph (2),

12 the Commission by rule—

13 ‘‘(A) may require any government securi14 ties broker or government securities dealer that

15 regularly trades a security as to which the Sec16 retary of the Treasury has made a determina17 tion under paragraph (2) to report any pur18 chase or sale of such a security to any securities

19 information processor that has the capability

20 and agrees to disseminate such reports or, if

21 there is no such processor, to a self-regulatory

22 organization designated by the Commission to

23 receive such reports, and may require such se24 curities information processor or self-regulatory

25 organization to make information with respect
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1 to such purchase or sale publicly available on

2 fair, reasonable, and nondiscriminatory terms

3 and conditions; and

4 ‘‘(B) may require any self-regulatory orga5 nization, and any government securities broker

6 or government securities dealer that regularly

7 trades such securities, to act jointly in plan8 ning, developing, or operating facilities for the

9 dissemination of information with respect to

10 purchases or sales of government securities.

11 ‘‘(2) INADEQUATE PRICE INFORMATION FIND12 ING REQUIRED.—The Commission may not take an

13 action authorized by paragraph (1) of this sub14 section with respect to any class or category of regu15 larly traded government securities unless the Sec16 retary of the Treasury, after consultation with the

17 Commission, determines that information that is

18 available to investors generally with respect to such

19 class or category either—

20 ‘‘(A) does not permit investors in general

21 to determine readily the prevailing market price

22 of securities in such class or category of regu23 larly traded government securities; or
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1 ‘‘(B) is no longer representative of the

2 market for such class or category of govern3 ment securities.

4 ‘‘(3) RULE OF CONSTRUCTION.—This sub5 section is not intended to authorize the Commission

6 to require the establishment or use of a consolidated

7 trading system for government securities.

8 ‘‘(d) RULEMAKING.—

9 ‘‘(1) CONSULTATION.—In making rules under

10 this section, the Commission shall consult with and

11 consider the views of the Secretary of the Treasury

12 and the Board of Governors of the Federal Reserve

13 System. If the Secretary of the Treasury or the

14 Board of Governors of the Federal Reserve System

15 comments in writing on a proposed rule that has

16 been published for comment, the Commission shall

17 respond in writing to such written comment before

18 adopting the proposed rule. Prior to prescribing a

19 rule pursuant to subsection (c), the Commission

20 shall consult with representatives of the persons de21 scribed in subsection (a)(2).

22 ‘‘(2) STANDARDS.—In making rules under this

23 subsection, the Commission may designate classes or

24 categories of government securities, establish stand25 ards for determining whether they are regularly
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1 traded, and establish standards for determining

2 whether a person regularly trades such government

3 securities or a class or category of such government

4 securities.

5 ‘‘(e) EXAMINATION ACCESS.—

6 ‘‘(1) AUTHORITY TO EXAMINE.—Systems and

7 operations of government securities information sys8 tems (and records relating thereto) are subject to

9 reasonable examination by representatives of the

10 Commission—

11 ‘‘(A) to assess whether the objectives set

12 forth in subsection (b)(2) of this section are

13 being met; and

14 ‘‘(B) to assess compliance with any rules

15 or regulations under this section.

16 ‘‘(2) LIMITATIONS.—The Commission shall

17 have no authority under this section—

18 ‘‘(A) to examine the financial, personnel,

19 marketing, sales, product, and service develop20 ment, or similar business records of such per21 son; or

22 ‘‘(B) to examine systems and operations

23 unrelated to dissemination of government secu24 rities information.
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1 The Commission may not examine contracts except

2 to the extent necessary to assess whether the objec3 tives set forth in subsections (b)(2)(C) and (b)(2)(D)

4 of this section are being met, and to determine com5 pliance with rules prescribed for purposes of such

6 subsections.

7 ‘‘(3) PROTECTION OF INFORMATION.—Notwith8 standing any other provision of law, the Commission

9 (and any Federal agency or department to which

10 such information is disclosed) shall not be compelled

11 to disclose any information obtained by the Commis12 sion in an examination under this subsection. Fur13 thermore, the Commission (and any Federal agency

14 or department to which such information is dis15 closed) shall not publicly disclose information ob16 tained by the Commission in such an examination,

17 except that this sentence shall not prohibit the dis18 closure of such information in a proceeding brought

19 by the Commission. Nothing in this section shall au20 thorize the Commission to withhold information

21 from Congress, or prevent the Commission or any

22 appropriate regulatory agency from complying with

23 a request for information from any other Federal de24 partment or agency requesting information for pur25 poses within the scope of its jurisdiction, or comply-
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1 ing with an order of a court of the United States in

2 an action brought by the United States, the Com3 mission, or the appropriate regulatory agency. For

4 purposes of section 552 of title 5, United States

5 Code, this subsection shall be considered a statute

6 described in subsection (b)(3)(B) of such section

7 552.

8 ‘‘(f) VIOLATIONS OF RULES PROHIBITED.—No gov9 ernment securities broker, government securities dealer,

10 securities information processor, or government securities

11 information system shall make use of the mails or any

12 means or instrumentality of interstate commerce to effect

13 any transaction in, to induce the purchase or sale of, or

14 to distribute or disseminate any quotation or transaction

15 report for, any government security in contravention of

16 any rule adopted pursuant to this section.

17 ‘‘(g) EFFECTIVE DATE OF RULEMAKING AUTHOR18 ITY.—The authority of the Commission to prescribe rules

19 under subsections (b) and (c) is effective on October 1,

20 1993.

21 ‘‘(h) DEFINITION.—For purposes of this section, the

22 term ‘government securities’ does not include a security

23 secured by an interest in pools of mortgages representing

24 liens on residential real estate.’’.
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1 (b) CONFORMING AMENDMENTS.—The Securities

2 Exchange Act of 1934 is amended—

3 (1) by striking ‘‘(other than an exempted secu4 rity)’’ in section 3(a)(22)(A);

5 (2) by adding at the end of section 3(a) the fol6 lowing:

7 ‘‘(53) The term ‘government securities informa8 tion system’ means any person engaged in the busi9 ness of operating a system for the timely, automated

10 dissemination to more than 10 persons of (A)

11 quotations for government securities of or through

12 government securities interdealer brokers (or their

13 functional equivalents), or (B) reports of purchases

14 or sales of government securities by or through gov15 ernment securities interdealer brokers (or their func16 tional equivalents).’’; and

17 (3) by inserting at the end of section 11A(b)(1)

18 the following: ‘‘The Commission shall not require

19 any securities information processor to register

20 under this section in connection with its activities

21 with respect to quotations for or transactions in ex22 empted securities.’’.

23 (c) STUDIES WITH RESPECT TO MORTGAGE-BACKED

24 GOVERNMENT SECURITIES.—
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1 (1) STUDIES REQUIRED.—With respect to gov2 ernment securities (as defined in section 3(a)(42) of

3 the Securities Exchange Act of 1934) that are se4 cured by an interest in pools of mortgages represent5 ing liens on residential real estate (hereafter in this

6 subsection referred to as ‘mortgage-backed govern7 ment securities’), the Secretary of the Treasury, the

8 Securities and Exchange Commission, and the

9 Board of Governors of the Federal Reserve System

10 shall monitor and evaluate the effectiveness of pri11 vate sector efforts to disseminate mortgage-backed

12 government securities price and volume information,

13 and determine whether such efforts—

14 (A) assure the prompt, accurate, reliable,

15 and fair reporting, collection, processing, dis16 tribution, and publication of information with

17 respect to quotations for and transactions in

18 mortgage-backed government securities and the

19 fairness and usefulness of the form and content

20 of such information;

21 (B) assure that all mortgage-backed gov22 ernment securities information processors may,

23 for the purpose of distribution and publication,

24 obtain on fair and reasonable terms such infor25 mation with respect to quotations for and
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1 transactions in mortgage-backed government se2 curities, as reported, collected, processed, or

3 prepared for distribution or publication by any

4 processor of such information (including self5 regulatory organizations) acting in an exclusive

6 capacity; and

7 (C) assure that all mortgage-backed gov8 ernment securities brokers, mortgage-backed

9 government securities dealers, mortgage-backed

10 government securities information processors,

11 and other appropriate persons may obtain on

12 nondiscriminatory terms such information with

13 respect to quotations for and transactions in

14 mortgage-backed government securities as is

15 distributed or published.

16 (2) REPORTS.—The Secretary of the Treasury,

17 the Securities and Exchange Commission, and the

18 Board of Governors of the Federal Reserve System

19 shall each submit a report to the Congress describ20 ing its findings under this subsection and any rec21 ommendations for legislation not later than 18

22 months after the date of enactment of this Act.
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1 SEC. 9. STUDY OF REGULATORY SYSTEM FOR GOVERN2 MENT SECURITIES.

3 (a) JOINT STUDY.—The Secretary of the Treasury,

4 the Securities and Exchange Commission, and the Board

5 of Governors of the Federal Reserve System shall—

6 (1) evaluate the effectiveness of any rules pro7 mulgated or amended after October 1, 1991, pursu8 ant to section 15C of the Securities Exchange Act

9 of 1934 or any amendment made by this title, and

10 any national securities association rule changes ap11 plicable principally to government securities trans12 actions approved after October 1, 1991, in carrying

13 out the purposes of such Act;

14 (2) evaluate the effectiveness of surveillance

15 and enforcement with respect to government securi16 ties, and the impact on such surveillance and en17 forcement of defects in any available audit trails

18 with respect to transactions in such securities; and

19 (3) submit to the Congress, not later than

20 March 31, 1997, any recommendations they may

21 consider appropriate concerning—

22 (A) the regulation of government securities

23 brokers and government securities dealers,

24 (B) the dissemination of information con25 cerning quotations for and transactions in gov26 ernment securities,
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1 (C) the prevention of sales practice abuses

2 in connection with transactions in government

3 securities, and

4 (D) such other matters as they consider

5 appropriate.

6 (b) GAO STUDY.—The Comptroller General shall—

7 (1) conduct a study of the effectiveness of regu8 lation of government securities brokers and govern9 ment securities dealers pursuant to section 15C of

10 the Securities Exchange Act of 1934 and the effec11 tiveness of the amendments made by this title; and

12 (2) submit to the Congress, not later than

13 March 31, 1996, the Comptroller General’s rec14 ommendations for change, if any, or such other rec15 ommendations as the Comptroller General considers

16 appropriate.

17 SEC. 10. TECHNICAL AMENDMENTS.

18 (a) AMENDMENTS TO DEFINITIONS.—Section 3(a) of

19 the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))

20 is amended—

21 (1) in paragraph (34)(G) (relating to the defini22 tion of appropriate regulatory agency), by amending

23 clauses (ii), (iii), and (iv) to read as follows:

24 ‘‘(ii) the Board of Governors of the

25 Federal Reserve System, in the case of a
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1 State member bank of the Federal Reserve

2 System, a foreign bank, an uninsured

3 State branch or State agency of a foreign

4 bank, a commercial lending company

5 owned or controlled by a foreign bank (as

6 such terms are used in the International

7 Banking Act of 1978), or a corporation or8 ganized or having an agreement with the

9 Board of Governors of the Federal Reserve

10 System pursuant to section 25 or section

11 25A of the Federal Reserve Act;

12 ‘‘(iii) the Federal Deposit Insurance

13 Corporation, in the case of a bank insured

14 by the Federal Deposit Insurance Corpora15 tion (other than a member of the Federal

16 Reserve System or a Federal savings bank)

17 or an insured State branch of a foreign

18 bank (as such terms are used in the Inter19 national Banking Act of 1978);

20 ‘‘(iv) the Director of the Office of

21 Thrift Supervision, in the case of a savings

22 association (as defined in section 3(b) of

23 the Federal Deposit Insurance Act) the de24 posits of which are insured by the Federal

25 Deposit Insurance Corporation;’’;
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1 (2) by amending paragraph (46) (relating to

2 the definition of financial institution) to read as fol3 lows:

4 ‘‘(46) The term ‘financial institution’ means—

5 ‘‘(A) a bank (as defined in paragraph (6)

6 of this subsection);

7 ‘‘(B) a foreign bank (as such term is used

8 in the International Banking Act of 1978); and

9 ‘‘(C) a savings association (as defined in

10 section 3(b) of the Federal Deposit Insurance

11 Act) the deposits of which are insured by the

12 Federal Deposit Insurance Corporation.’’; and

13 (3) by redesignating paragraph (51) (as added

14 by section 204 of the International Securities En15 forcement Cooperation Act) as paragraph (52).

16 (b) EFFECTIVE DATE OF BROKER/DEALER REG17 ISTRATION.—

18 (1) GOVERNMENT SECURITIES BROKERS AND

19 DEALERS.—Section 15C(a)(2)(ii) of the Securities

20 Exchange Act of 1934 (15 U.S.C. 78o–5(a)(2)(ii)) is

21 amended by inserting before ‘‘At the conclusion’’ the

22 following: ‘‘The order granting registration shall not

23 be effective until such government securities broker

24 or government securities dealer has become a mem25 ber of a national securities exchange registered
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1 under section 6 of this title, or a securities associa2 tion registered under section 15A of this title, unless

3 the Commission has exempted such government se4 curities broker or government securities dealer, by

5 rule or order, from such membership.’’.

6 (2) OTHER BROKERS AND DEALERS.—Section

7 15(b)(1)(B) of such Act (15 U.S.C. 78o(b)(1)(B)) is

8 amended by inserting before ‘‘At the conclusion’’ the

9 following: ‘‘The order granting registration shall not

10 be effective until such broker or dealer has become

11 a member of a registered securities association, or

12 until such broker or dealer has become a member of

13 a national securities exchange if such broker or deal14 er effects transactions solely on that exchange, un15 less the Commission has exempted such broker or

16 dealer, by rule or order, from such membership.’’.

17 SEC. 11. OFFERINGS OF CERTAIN GOVERNMENT SECURI18 TIES.

19 Section 15 of the Securities Exchange Act of 1934

20 (15 U.S.C. 78o) is amended by inserting after paragraph

21 (6) of subsection (c) the following new paragraph:

22 ‘‘(7) In connection with any bid for or purchase

23 of a government security related to an offering of

24 government securities by or on behalf of an issuer,

25 no government securities broker, government securi-
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1 ties dealer, or bidder for or purchaser of securities

2 in such offering shall knowingly or willfully make

3 any false or misleading written statement or omit

4 any fact necessary to make any written statement

5 made not misleading. For purposes of the preceding

6 sentence, the term ‘government security’ shall not

7 include any obligation subject to the public debt

8 limit established in section 3101 of title 31, United

9 States Code.’’.

10 SEC. 12. RULE OF CONSTRUCTION.

11 (a) IN GENERAL.—No provision of, or amendment

12 made by, this title may be construed—

13 (1) to apply to the initial issuance of any public

14 debt obligation, or

15 (2) to grant any authority to (or extend any au16 thority of) the Securities and Exchange Commis17 sion—

18 (A) to prescribe any procedure, term, or

19 condition governing such initial issuance,

20 (B) to require any recordkeeping, or the

21 furnishing of any information, with respect to

22 such initial issuance, or

23 (C) to otherwise regulate in any manner

24 such initial issuance.
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1 (b) PUBLIC DEBT OBLIGATION.—For purposes of

2 this section, the term ‘‘public debt obligation’’ means an

3 obligation subject to the public debt limit established in

4 section 3101 of title 31, United States Code.

Æ

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