II

104TH CONGRESS

2D SESSION S. 1549

To improve regulation of the purchase and sale of municipal securities,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 1, 1996

Mr. BROWN introduced the following bill; which was read twice and referred

to the Committee on Banking, Housing, and Urban Affairs

A BILL

To improve regulation of the purchase and sale of municipal

securities, 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 ‘‘Municipal Securities

5 Investor Protection Act of 1996’’.

6 SEC. 2. TREATMENT OF MUNICIPAL SECURITIES IN THE SE7 CURITIES ACT OF 1933.

8 Section 3 of the Securities Act of 1933 (15 U.S.C.

9 77c) is amended by adding at the end the following new

10 subsection:
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1 ‘‘(d)(1) Notwithstanding subsection (a)(2), a security

2 issued by a municipal issuer shall only be exempt from

3 the provisions of this title—

4 ‘‘(A) if the municipal issuer pledges the full

5 faith and credit or the taxing power of that munici6 pal issuer to make timely payments of principal and

7 interest on the obligation; or

8 ‘‘(B) if the municipal issuer—

9 ‘‘(i) offers or sells such securities in a sin10 gle transaction in an aggregate principal

11 amount equal to less than $1,000,000,000; or

12 ‘‘(ii) offers or sells such securities in a se13 ries of related transactions, and at the time of

14 the offer or sale of such securities, does not rea15 sonably anticipate that the aggregate principal

16 amount of the series of related transactions will

17 exceed $1,000,000,000.

18 ‘‘(2) For purposes of this subsection—

19 ‘‘(A) the term ‘municipal issuer’ means—

20 ‘‘(i) a State, the District of Columbia, or

21 a Territory of the United States; or

22 ‘‘(ii) a public instrumentality or political

23 subdivision of an entity referred to in clause (i);
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1 ‘‘(B) the term ‘series of related transactions’

2 means a series of separate securities offerings

3 made—

4 ‘‘(i) as part of a single plan of financing;

5 or

6 ‘‘(ii) for the same general purpose; and

7 ‘‘(C) the term ‘reasonably anticipate’ shall have

8 the meaning provided that term by the Commission

9 by regulation, taking into consideration, as necessary

10 or appropriate—

11 ‘‘(i) the public interest;

12 ‘‘(ii) the protection of investors; and

13 ‘‘(iii) the need to prevent the circumven14 tion of the requirements of this subsection.’’.

15 SEC. 3. TREATMENT OF MUNICIPAL SECURITIES IN THE SE16 CURITIES EXCHANGE ACT OF 1934.

17 (a) IN GENERAL.—Section 3(a)(12) of the Securities

18 Exchange Act of 1934 (15 U.S.C. 78c(a)(12)) is amend19 ed—

20 (1) in subparagraph (A), by striking clause (ii)

21 and inserting the following:

22 ‘‘(ii) any security issued by a municipal issuer

23 with respect to which the municipal issuer—

24 ‘‘(I) pledges the full faith and credit or the

25 taxing power of that municipal issuer to make
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1 timely payments of principal and interest on the

2 obligation; or

3 ‘‘(II)(aa) offers or sells such securities in a

4 single transaction in an aggregate principal

5 amount equal to less than $1,000,000,000; or

6 ‘‘(bb) offers or sells such securities in a se7 ries of related transactions, and at the time of

8 the offer or sale of such securities, does not rea9 sonably anticipate that the aggregate principal

10 amount of the series of related transactions will

11 exceed $1,000,000,000;’’;

12 (2) in subparagraph (B)(ii), by striking ‘‘mu13 nicipal securities’’ and inserting ‘‘the securities de14 scribed in subparagraph (A)(ii)’’;

15 (3) by redesignating subparagraph (C) as sub16 paragraph (D); and

17 (4) by inserting after subparagraph (B) the fol18 lowing:

19 ‘‘(C) For purposes of subparagraph (A)(ii)—

20 ‘‘(i) the term ‘municipal issuer’ means—

21 ‘‘(I) a State or any political subdivision

22 thereof, or an agency or instrumentality of a

23 State or any political subdivision thereof; or

24 ‘‘(II) any municipal corporate instrumen25 tality of a State;
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1 ‘‘(ii) the term ‘series of related transactions’

2 means a series of separate securities offerings

3 made—

4 ‘‘(I) as part of a single plan of financing;

5 or

6 ‘‘(II) for the same general purpose; and

7 ‘‘(iii) the term ‘reasonably anticipate’ shall have

8 the meaning provided that term by the Commission

9 by regulation, taking into consideration, as necessary

10 or appropriate—

11 ‘‘(I) the public interest;

12 ‘‘(II) the protection of investors; and

13 ‘‘(III) the need to prevent the circumven14 tion of the requirements of subparagraph

15 (A)(ii).’’.

16 (b) TREATMENT OF MUNICIPAL SECURITIES THAT

17 ARE NOT EXEMPTED SECURITIES.—The third sentence

18 of section 15(d) of the Securities Exchange Act of 1934

19 (15 U.S.C. 78o(d)) is amended by inserting before the pe20 riod the following: ‘‘, except that, with respect to a class

21 of municipal securities that are not exempted securities,

22 the duty to file under this subsection may not be sus23 pended by reason of the number of security holders of

24 record of that class of municipal securities’’.
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1 (c) REPORTING PRIOR TO THE SALE OF SECURI2 TIES.—Section 15B(d)(1) of the Securities Exchange Act

3 of 1934 (15 U.S.C. 78o–4(d)(1)) is amended—

4 (1) by striking ‘‘(d)(1) Neither’’ and inserting

5 ‘‘(d)(1)(A) Except as provided in subparagraph (B),

6 neither’’; and

7 (2) by adding at the end the following new sub8 paragraph:

9 ‘‘(B) Subparagraph (A) does not apply to an issuer

10 of any municipal security that is not an exempted secu11 rity.’’.

12 SEC. 4. TREATMENT OF CERTAIN MUNICIPAL SECURITIES

13 IN THE TRUST INDENTURE ACT OF 1939.

14 Section 304(a)(4) of the Trust Indenture Act of 1939

15 (15 U.S.C. 77ddd(a)(4)) is amended by striking ‘‘of sub16 section 3(a) thereof’’ and inserting ‘‘of subsection (a), or

17 subsection (d) of section 3 of that Act’’.

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