II

104TH CONGRESS

2D SESSION S. 1815

To provide for improved regulation of the securities markets, eliminate excess

securities fees, reduce the costs of investing, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 23, 1996

Mr. GRAMM (for himself, Mr. D’AMATO, Mr. DODD, Mr. BRYAN, and Ms.

MOSELEY-BRAUN) introduced the following bill; which was read twice and

referred to the Committee on Banking, Housing and Urban Affairs

A BILL

To provide for improved regulation of the securities markets,

eliminate excess securities fees, reduce the costs of investing, 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; TABLE OF CONTENTS.

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

5 ‘‘Securities Investment Promotion Act of 1996’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Severability.

TITLE I—INVESTMENT ADVISERS INTEGRITY ACT
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Sec. 101. Short title.

Sec. 102. Funding for enhanced enforcement priority.

Sec. 103. Improved supervision through State and Federal cooperation.

Sec. 104. Interstate cooperation.

Sec. 105. Disqualification of convicted felons.

TITLE II—FACILITATING INVESTMENT IN MUTUAL FUNDS

Sec. 201. Short title.

Sec. 202. Funds of funds.

Sec. 203. Flexible registration of securities.

Sec. 204. Facilitating use of current information in advertising.

Sec. 205. Variable insurance contracts.

Sec. 206. Prohibition on deceptive investment company names.

Sec. 207. Excepted investment companies.

Sec. 208. Performance fees exemptions.

TITLE III—REDUCING THE COST OF SAVING AND INVESTMENT

Sec. 301. Exemption for economic, business, and industrial development

companies.

Sec. 302. Intrastate closed-end investment company exemption.

Sec. 303. Definition of eligible portfolio company.

Sec. 304. Definition of business development company.

Sec. 305. Acquisition of assets by business development companies.

Sec. 306. Capital structure amendments.

Sec. 307. Filing of written statements.

Sec. 308. Facilitating national securities markets.

Sec. 309. Regulatory flexibility.

Sec. 310. Analysis of economic effects of regulation.

Sec. 311. Privatization of EDGAR.

Sec. 312. Improving coordination of supervision.

Sec. 313. Increased access to foreign business information.

Sec. 314. Short-form registration.

Sec. 315. Church employee pension plans.

Sec. 316. Promoting global preeminence of American securities markets.

1 SEC. 2. SEVERABILITY.

2 If any provision of this Act, an amendment made by

3 this Act, or the application of such provision or amend4 ment to any person or circumstance is held to be unconsti5 tutional, the remainder of this Act, the amendments made

6 by this Act, and the application of the provisions of such

7 to any person or circumstance shall not be affected

8 thereby.
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1 TITLE I—INVESTMENT ADVISERS

2 INTEGRITY ACT

3 SEC. 101. SHORT TITLE.

4 This title may be cited as the ‘‘Investment Advisers

5 Integrity Act’’.

6 SEC. 102. FUNDING FOR ENHANCED ENFORCEMENT

7 PRIORITY.

8 There are authorized to be appropriated to the Secu9 rities and Exchange Commission, for the enforcement of

10 the Investment Advisers Act of 1940, not more than

11 $16,000,000 in each of fiscal years 1997 and 1998.

12 SEC. 103. IMPROVED SUPERVISION THROUGH STATE AND

13 FEDERAL COOPERATION.

14 (a) STATE AND FEDERAL RESPONSIBILITIES.—The

15 Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et

16 seq.) is amended by inserting after section 203 the follow17 ing new section:

18 ‘‘SEC. 203A. STATE AND FEDERAL RESPONSIBILITIES.

19 ‘‘(a) ADVISERS SUBJECT TO STATE AUTHORITIES.—

20 ‘‘(1) IN GENERAL.—No investment adviser that

21 is regulated or required to be regulated as an invest22 ment adviser in the State in which it maintains its

23 principal office and place of business shall register

24 under section 203(a), unless the adviser—
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1 ‘‘(A) has assets under management of not

2 less than $25,000,000, or such higher amount

3 as the Commission may, by rule, deem appro4 priate in accordance with the purposes of this

5 title; or

6 ‘‘(B) is an adviser to an investment com7 pany registered under title I of this Act, or a

8 company that has elected to be a business de9 velopment company pursuant to section 54 of

10 title I of this Act.

11 ‘‘(2) DEFINITION.—For purposes of this sub12 section, the term ‘assets under management’ means

13 the securities portfolios with respect to which an in14 vestment adviser provides continuous and regular

15 supervisory or management services.

16 ‘‘(b) ADVISERS SUBJECT TO COMMISSION

17 AUTHORITY.—

18 ‘‘(1) IN GENERAL.—No law of any State or po19 litical subdivision thereof requiring the registration,

20 licensing, or qualification as an investment adviser

21 or employee of an investment adviser shall apply to

22 any person—

23 ‘‘(A) that is registered under section 203

24 as an investment adviser, or that is an em25 ployee of such a person; or
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1 ‘‘(B) that is not registered under section

2 203 because that person is excepted from the

3 definition of an investment adviser under sec4 tion 202(a)(11).

5 ‘‘(2) LIMITATION.—Nothing in this subsection

6 shall prohibit the securities commission (or any

7 agency or office performing like functions) of any

8 State from—

9 ‘‘(A) requiring the filing with such com10 mission, agency, or office of any document filed

11 with the Commission by an investment adviser,

12 or any other document, whether or not such

13 document may be required to be filed with the

14 Commission, relating to an employee of an in15 vestment adviser solely for notice purposes, to16 gether with a consent to service of process and

17 requisite fees; or

18 ‘‘(B) investigating and bringing enforce19 ment actions with respect to fraud or deceit

20 against an investment adviser or person associ21 ated with an investment adviser.

22 ‘‘(c) EXEMPTIONS.—The Commission may, by rule or

23 regulation upon its own motion, or by order upon applica24 tion, exempt any person or class of persons from the prohi25 bitions of subsection (a) and permit the registration with
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1 the Commission of any person or class of persons to which

2 the application of subsection (a) would be unfair, a burden

3 on interstate commerce, or otherwise inconsistent with the

4 purposes of this section.

5 ‘‘(d) FILING DEPOSITORIES.—The Commission may,

6 by rule, require an investment adviser—

7 ‘‘(1) to file with the Commission any fee, appli8 cation, report, or notice required by this title or by

9 the rules issued under this title through any entity

10 designated by the Commission for that purpose; and

11 ‘‘(2) to pay the reasonable costs associated with

12 such filing.

13 ‘‘(e) STATE ASSISTANCE.—Upon request of the secu14 rities commissioner (or any agency or officer performing

15 like functions) of any State, the Commission may provide

16 such training, technical assistance, or other reasonable as17 sistance in connection with the regulation of investment

18 advisers by the State.’’.

19 (b) ADVISERS NOT ELIGIBLE TO REGISTER.—Sec20 tion 203 of the Investment Advisers Act of 1940 (15

21 U.S.C. 80b–3) is amended—

22 (1) in subsection (c), in the matter immediately

23 following paragraph (2), by inserting ‘‘and that the

24 applicant is not prohibited from registering as an in-
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1 vestment adviser under section 203A’’ after ‘‘satis2 fied’’; and

3 (2) in subsection (h), in the second sentence—

4 (A) by striking ‘‘existence or’’ and insert5 ing ‘‘existence,’’; and

6 (B) by inserting ‘‘or is prohibited from

7 registering as an investment adviser under sec8 tion 203A,’’ after ‘‘adviser,’’.

9 (c) CONFORMING AMENDMENT.—Section 203(a) of

10 the Investment Advisers Act of 1940 (15 U.S.C. 80b–

11 3(a)) is amended by striking ‘‘subsection (b)’’ and insert12 ing ‘‘subsection (b) and section 203A’’.

13 SEC. 104. INTERSTATE COOPERATION.

14 Section 222 of the Investment Advisers Act of 1940

15 (15 U.S.C. 80b–18a) is amended to read as follows:

16 ‘‘SEC. 222. STATE REGULATION OF INVESTMENT ADVISERS.

17 ‘‘(a) JURISDICTION OF STATE REGULATORS.—Noth18 ing in this title shall affect the jurisdiction of the securities

19 commissioner (or any agency or officer performing like

20 functions) of any State over any security or any person

21 insofar as it does not conflict with the provisions of this

22 title or the rules and regulations thereunder.

23 ‘‘(b) DUAL COMPLIANCE PURPOSES.—No State may

24 enforce any law or regulation that would require an invest25 ment adviser to maintain any books or records in addition
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1 to those required under the laws of the State in which

2 it maintains its principal place of business, if the invest3 ment adviser—

4 ‘‘(1) is registered or licensed as such in the

5 State in which it maintains its principal place of

6 business; and

7 ‘‘(2) is in compliance with the applicable books

8 and records requirements of the State in which it

9 maintains its principle place of business.

10 ‘‘(c) LIMITATION ON CAPITAL AND BOND REQUIRE11 MENTS.—No State may enforce any law or regulation that

12 would require an investment adviser to maintain a higher

13 minimum net capital or to post any bond in addition to

14 any that is required under the laws of the State in which

15 it maintains its principal place of business, if the invest16 ment adviser—

17 ‘‘(1) is registered or licensed as such in the

18 State in which it maintains its principal place of

19 business; and

20 ‘‘(2) is in compliance with the applicable net

21 capital or bonding requirements of the State in

22 which it maintains its principal place of business.’’.

23 SEC. 105. DISQUALIFICATION OF CONVICTED FELONS.

24 (a) AMENDMENT.—Section 203(e) of the Investment

25 Advisers Act of 1940 (15 U.S.C. 80b–3(e)) is amended—
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1 (1) by redesignating paragraphs (3) through

2 (7) as paragraphs (4) through (8), respectively; and

3 (2) by inserting after paragraph (2) the follow4 ing new paragraph:

5 ‘‘(3) has been convicted during the 10-year pe6 riod preceding the date of filing of any application

7 for registration, or at any time thereafter, of—

8 ‘‘(A) any crime that is punishable by im9 prisonment for 1 or more years, and that is not

10 described in paragraph (2); or

11 ‘‘(B) a substantially equivalent crime by a

12 foreign court of competent jurisdiction.’’.

13 (b) CONFORMING AMENDMENTS.—Section 203 of the

14 Investment Advisers Act of 1940 (15 U.S.C. 80b–3) is

15 amended—

16 (1) in subsection (e)(6) (as redesignated by

17 subsection (a) of this section), by striking ‘‘this

18 paragraph (5)’’ and inserting ‘‘this paragraph’’;

19 (2) in subsection (f)—

20 (A) by striking ‘‘paragraph (1), (4), (5), or

21 (7)’’ and inserting ‘‘paragraph (1), (5), (6), or

22 (8)’’; and

23 (B) by striking ‘‘paragraph (3)’’ and in24 serting ‘‘paragraph (4)’’; and
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1 (3) in subsection (i)(1)(D), by striking ‘‘section

2 203(e)(5) of this title’’ and inserting ‘‘subsection

3 (e)(6) of this section’’.

4 TITLE II—FACILITATING

5 INVESTMENT IN MUTUAL FUNDS

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 that such in17 vestment company is not a registered invest18 ment company,’’ after ‘‘(bb)’’;

19 (2) by redesignating subparagraphs (G) and

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

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

23 ‘‘(G) This paragraph does not apply to securities of

24 a registered open-end investment company or a registered

25 unit investment trust (hereafter in this subparagraph re-
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1 ferred to as the ‘acquired company’) purchased or other2 wise acquired by a registered open-end investment com3 pany or a registered unit investment trust (hereafter in

4 this subparagraph referred to as the ‘acquiring company’)

5 if—

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

7 company are part of the same group of investment

8 companies;

9 ‘‘(ii) the securities of the acquired company, se10 curities of other registered open-end investment

11 companies and registered unit investment trusts that

12 are part of the same group of investment companies,

13 Government securities, and short-term paper are the

14 only investments held by the acquiring company;

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

16 and is not assessed any charges or fees for distribu17 tion-related activities with respect to securities of the

18 acquired company, unless the acquiring company

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

20 for distribution-related activities; or

21 ‘‘(II) any sales loads and other distribution-re22 lated fees charged with respect to securities of the

23 acquiring company, when aggregated with any sales

24 load and distribution-related fees paid by the acquir25 ing company with respect to securities of the ac-
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1 quired fund, are not excessive under rules adopted

2 pursuant to section 22(b) or section 22(c) of this

3 title by a securities association registered under sec4 tion 15A of the Securities Exchange Act of 1934

5 or the Commission;

6 ‘‘(iv) the acquired company has a policy that

7 prohibits it from acquiring any securities of reg8 istered open-end investment companies or registered

9 unit investment trusts in reliance on this subpara10 graph or subparagraph (F); and

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

12 such rules and regulations as the Commission may

13 from time to time prescribe with respect to acquisi14 tions in accordance with this subparagraph, as nec15 essary and appropriate for the protection of

16 investors.

17 For purposes of this subparagraph, the term ‘group of in18 vestment companies’ means any 2 or more registered in19 vestment companies that hold themselves out to investors

20 as related companies for purposes of investment and inves21 tor services.’’; and

22 (4) by adding at the end the following new sub23 paragraph:

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

25 its own motion, or by order upon application, may condi-
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1 tionally or unconditionally exempt any person, security, or

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

3 or transactions from any provision of this subsection, if

4 and to the extent that such exemption is consistent with

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

6 SEC. 203. FLEXIBLE REGISTRATION OF SECURITIES.

7 (a) AMENDMENTS TO REGISTRATION STATE8 MENTS.—Section 24(e) of the Investment Company Act

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

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

11 (2) by redesignating paragraph (3) as sub12 section (e); and

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

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

15 (b) REGISTRATION OF INDEFINITE AMOUNT OF SE16 CURITIES.—Section 24(f) of the Investment Company Act

17 of 1940 (15 U.S.C. 80a–24(f)) is amended to read as

18 follows:

19 ‘‘(f) REGISTRATION OF INDEFINITE AMOUNT OF SE20 CURITIES.—

21 ‘‘(1) REGISTRATION OF SECURITIES.—Upon the

22 effective date, as provided by section 8 of the Securi23 ties Act of 1933, of its registration statement, a

24 face-amount certificate company, open-end manage25 ment company, or unit investment trust, shall be
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1 deemed to have registered an indefinite amount of

2 securities.

3 ‘‘(2) PAYMENT OF REGISTRATION FEES.—Not

4 later than 90 days after the end of the fiscal year

5 of an entity referred to in paragraph (1), the entity

6 shall pay a registration fee to the Commission, cal7 culated in the manner specified in section 6(b) of the

8 Securities Act of 1933, based on the aggregate sales

9 price for which its securities (including, for purposes

10 of this paragraph, all securities issued pursuant to

11 a dividend reinvestment plan) were sold during the

12 previous fiscal year of the entity, reduced by—

13 ‘‘(A) the aggregate redemption or repur14 chase price of the securities of the entity during

15 that year; and

16 ‘‘(B) the aggregate redemption or repur17 chase price of the securities of the entity during

18 any prior fiscal year ending not more than 1

19 year before the date of enactment of the Invest20 ment Company Act Amendments of 1996, that

21 were not used previously by the entity to reduce

22 fees payable under this section.

23 ‘‘(3) INTEREST DUE ON LATE PAYMENT.—An

24 entity paying the fee required by this subsection or

25 any portion thereof more than 90 days after the end
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1 of the fiscal year of the entity shall pay to the Com2 mission interest on unpaid amounts, compounded

3 daily, at the underpayment rate established by the

4 Secretary of the Treasury pursuant to section 3717

5 of title 31, United States Code. The payment of in6 terest pursuant to this paragraph shall not preclude

7 the Commission from bringing an action to enforce

8 the requirements of paragraph (2).

9 ‘‘(4) RULEMAKING AUTHORITY.—The Commis10 sion may adopt rules and regulations to implement

11 this subsection.’’.

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

13 this section shall become effective 180 days after the date

14 of enactment of this Act.

15 SEC. 204. FACILITATING USE OF CURRENT INFORMATION

16 IN ADVERTISING.

17 Section 24 of the Investment Company Act of 1940

18 (15 U.S.C. 80a–24) is amended by adding at the end the

19 following new subsection:

20 ‘‘(g) ADDITIONAL PROSPECTUSES.—In addition to

21 any prospectus permitted or required by section 10(a) of

22 the Securities Act of 1933, the Commission shall permit,

23 by rules or regulations deemed necessary or appropriate

24 in the public interest or for the protection of investors,

25 the use of a prospectus for the purposes of section 5(b)(1)
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1 of that Act with respect to securities issued by a registered

2 investment company. Such a prospectus, which may in3 clude information the substance of which is not included

4 in the prospectus specified in section 10(a) of the Securi5 ties Act of 1933, shall be deemed to be permitted by sec6 tion 10(b) of that Act.’’.

7 SEC. 205. VARIABLE INSURANCE CONTRACTS.

8 (a) UNIT INVESTMENT TRUST TREATMENT.—Sec9 tion 26 of the Investment Company Act of 1940 (15

10 U.S.C. 80a–26) is amended by adding at the end the fol11 lowing new subsection:

12 ‘‘(e) EXEMPTION.—

13 ‘‘(1) IN GENERAL.—Subsection (a) does not

14 apply to any registered separate account funding

15 variable insurance contracts, or to the sponsoring in16 surance company and principal underwriter of such

17 account.

18 ‘‘(2) LIMITATION ON SALES.—It shall be unlaw19 ful for any registered separate account funding vari20 able insurance contracts, or for the sponsoring in21 surance company of such account, to sell any such

22 contract, unless—

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

24 the contract, in the aggregate, are reasonable in

25 relation to the services rendered, the expenses
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1 expected to be incurred, and the risks assumed

2 by the insurance company, and the insurance

3 company so represents in the registration state4 ment for the contract; and

5 ‘‘(B) the insurance company—

6 ‘‘(i) complies with all other applicable

7 provisions of this section, as if it were a

8 trustee or custodian of the registered sepa9 rate account;

10 ‘‘(ii) files with the insurance regu11 latory authority of a State or territory of

12 the United States or of the District of Co13 lumbia in which is located the principal

14 place of business of the insurance com15 pany, an annual statement of its financial

16 condition, which most recent statement in17 dicates that the insurance company has a

18 combined capital and surplus, if a stock

19 company, or an unassigned surplus, if a

20 mutual company, of not less than

21 $1,000,000, or such other amount as the

22 Commission may from time to time pre23 scribe by rule, as necessary or appropriate

24 in the public interest or for the protection

25 of investors; and
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1 ‘‘(iii) together with its registered sepa2 rate accounts, is supervised and examined

3 periodically by the insurance authority of

4 such State, territory, or the District of Co5 lumbia.

6 ‘‘(3) FEES AND CHARGES.—For purposes of

7 paragraph (2), the fees and charges deducted under

8 the contract shall include all fees and charges im9 posed for any purpose and in any manner.

10 ‘‘(4) REGULATORY AUTHORITY.—The Commis11 sion may issue such rules and regulations to carry

12 out paragraph (2)(A) as it determines are necessary

13 or appropriate in the public interest or for the pro14 tection of investors.’’.

15 (b) PERIODIC PAYMENT PLAN TREATMENT.—Sec16 tion 27 of the Investment Company Act of 1940 (15

17 U.S.C. 80a–27) is amended by adding at the end the fol18 lowing new subsection:

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

20 separate account funding variable insurance contracts, or

21 to the sponsoring insurance company and principal under22 writer of such account, except as provided in paragraph

23 (2).

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

25 account funding variable insurance contracts, or for the
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1 sponsoring insurance company of such account, to sell any

2 such contract unless—

3 ‘‘(A) such contract is a redeemable security;

4 and

5 ‘‘(B) the insurance company complies with sec6 tion 26(e) and any rules or regulations adopted by

7 the Commission thereunder.’’.

8 SEC. 206. PROHIBITION ON DECEPTIVE INVESTMENT COM9 PANY NAMES.

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

11 1940 (15 U.S.C. 80a–34(d)) is amended to read as

12 follows:

13 ‘‘(d) It shall be unlawful for any registered invest14 ment company to adopt as a part of the name or title of

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

16 any word or words that are materially deceptive or mis17 leading. The Commission is authorized, by rule, regula18 tion, or order, to define such names or titles as are materi19 ally deceptive or misleading.’’.

20 SEC. 207. EXCEPTED INVESTMENT COMPANIES.

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

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

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

24 sentence the following: ‘‘Such issuer shall be deemed

25 to be an investment company for purposes of the
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1 limitations set forth in subparagraphs (A)(i) and

2 (B)(i) of section 12(d)(1) governing the purchase or

3 other acquisition by such issuer of any security is4 sued by any registered investment company and the

5 sale of any security issued by any registered open6 end investment company to any such issuer.’’;

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

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

9 place that term appears, the following: ‘‘and is

10 or, but for the exception provided for in this

11 paragraph or paragraph (7), would be an in12 vestment company,’’; and

13 (B) by striking ‘‘unless, as of’’ and all that

14 follows through the end of the subparagraph

15 and inserting a period; and

16 (3) by striking paragraph (7) and inserting the

17 following:

18 ‘‘(7)(A) Any issuer, the outstanding securities

19 of which are owned exclusively by persons who, at

20 the time of acquisition of such securities, are quali21 fied purchasers, and which is not making and does

22 not at that time propose to make a public offering

23 of such securities. Securities that are owned by per24 sons who received the securities from a qualified

25 purchaser as a gift or bequest, or in a case in which
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1 the transfer was caused by legal separation, divorce,

2 death, or other involuntary event, shall be deemed to

3 be owned by a qualified purchaser, subject to such

4 rules, regulations, and orders as the Commission

5 may prescribe as necessary or appropriate in the

6 public interest or for the protection of investors.

7 ‘‘(B) Notwithstanding subparagraph (A), an is8 suer is within the exception provided by this para9 graph if—

10 ‘‘(i) in addition to qualified purchasers,

11 outstanding securities of that issuer are bene12 ficially owned by not more than 100 persons

13 who are not qualified purchasers, if—

14 ‘‘(I) such persons acquired such secu15 rities on or before April 30, 1996; and

16 ‘‘(II) at the time such securities were

17 acquired by such persons, the issuer was

18 excepted by paragraph (1); and

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

20 provided by this paragraph—

21 ‘‘(I) such issuer has disclosed to each

22 beneficial owner that future investors will

23 be limited to qualified purchasers, and that

24 ownership in such issuer is no longer lim25 ited to not more than 100 persons; and
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1 ‘‘(II) concurrently with or after such

2 disclosure, such issuer has provided each

3 beneficial owner with a reasonable oppor4 tunity to redeem any part or all of their in5 terests in the issuer, notwithstanding any

6 agreement to the contrary between such is7 suer and persons, for their proportionate

8 share of the issuer’s net assets.

9 ‘‘(C) Each person that elects to redeem under

10 subparagraph (B)(ii)(II) shall receive an amount in

11 cash equal to that person’s proportionate share of

12 the issuer’s net assets, unless the issuer elects to

13 provide such person with the option of receiving, and

14 such person agrees to receive, all or a portion of

15 such person’s share in assets of the issuer. If the is16 suer elects to provide such persons with such an op17 portunity, disclosure concerning such opportunity

18 shall be made in the disclosure required by subpara19 graph (B)(ii)(I).

20 ‘‘(D) An issuer that is excepted under this

21 paragraph shall nonetheless be deemed to be an in22 vestment company for purposes of the limitations set

23 forth in subparagraphs (A)(i) and (B)(i) of section

24 12(d)(1) relating to the purchase or other acquisi25 tion by such issuer of any security issued by any
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1 registered investment company and the sale of any

2 security issued by any registered open-end invest3 ment company to any such issuer.

4 ‘‘(E) For purposes of determining compliance

5 with this paragraph and paragraph (1), an issuer

6 that is otherwise excepted under this paragraph and

7 an issuer that is otherwise excepted under paragraph

8 (1) shall not be treated by the Commission as being

9 a single issuer for purposes of determining whether

10 the outstanding securities of the issuer excepted

11 under paragraph (1) are beneficially owned by not

12 more than 100 persons or whether the outstanding

13 securities of the issuer excepted under this para14 graph are owned by persons that are not qualified

15 purchasers. Nothing in this subparagraph shall be

16 construed to establish that a person is a bona fide

17 qualified purchaser for purposes of this paragraph

18 or a bona fide beneficial owner for purposes of para19 graph (1).’’.

20 (b) DEFINITION OF QUALIFIED PURCHASER.—Sec21 tion 2(a) of the Investment Company Act of 1940 (15

22 U.S.C. 80a–2(a)) is amended by adding at the end the

23 following new paragraph:

24 ‘‘(51)(A) ‘Qualified purchaser’ means—
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1 ‘‘(i) any natural person who owns at least

2 $5,000,000 in investments, as defined by the

3 Commission;

4 ‘‘(ii) any company that owns not less than

5 $5,000,000 in investments and that is owned

6 directly or indirectly by or for 2 or more natu7 ral persons who are related as siblings or

8 spouse (including former spouses), or direct lin9 eal descendants by birth, marriage, or adoption,

10 spouses of such persons, the estates of such

11 persons, or foundations, charitable organiza12 tions, or trusts established by or for the benefit

13 of such persons;

14 ‘‘(iii) any trust that is not covered by sub15 paragraph (B) and that was not formed for the

16 specific purpose of acquiring the securities of17 fered, as to which the trustee or other person

18 authorized to make decisions with respect to the

19 trust, and each settlor or other person who has

20 contributed assets to the trust, is a person de21 scribed in clause (i), (ii), or (iv);

22 ‘‘(iv) any person, acting for its own ac23 count or the accounts of other qualified pur24 chasers, who in the aggregate owns and invests
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1 on a discretionary basis, not less than

2 $25,000,000 in investments; or

3 ‘‘(v) any person that the Commission, by

4 rule or regulation, has determined does not

5 need the protections of this title, after consider6 ation of factors such as—

7 ‘‘(I) a high degree of financial sophis8 tication, including extensive knowledge of

9 and experience in financial matters;

10 ‘‘(II) a substantial amount of assets

11 owned or under management;

12 ‘‘(III) relationship with an issuer; or

13 ‘‘(IV) such other factors as the Com14 mission may determine to be consistent

15 with the purposes of this paragraph.

16 ‘‘(B) The Commission may adopt such rules

17 and regulations applicable to the persons and trusts

18 specified in clauses (i) through (v) of subparagraph

19 (A) as it determines are necessary or appropriate in

20 the public interest and for the protection of inves21 tors.

22 ‘‘(C) The term ‘qualified purchaser’ does not in23 clude a company that, but for the exceptions pro24 vided for in paragraph (1) or (7) of section 3(c),

25 would be an investment company (hereafter in this
26

•S 1815 IS

1 paragraph referred to as an ‘excepted investment

2 company’), unless all beneficial owners of its out3 standing securities (other than short-term paper),

4 determined in accordance with section 3(c)(1)(A),

5 that acquired such securities on or before April 30,

6 1996 (hereafter in this paragraph referred to as

7 ‘pre-amendment beneficial owners’), and all pre8 amendment beneficial owners of the outstanding se9 curities (other than short-term paper) of any ex10 cepted investment company that, directly or indi11 rectly, owns any outstanding securities of such ex12 cepted investment company, have consented to its

13 treatment as a qualified purchaser.’’.

14 (c) CONFORMING AMENDMENT.—Section 3(a) of the

15 Investment Company Act of 1940 (15 U.S.C. 80a–3(a))

16 is amended in the matter immediately following paragraph

17 (3)—

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

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

20 ‘‘, and (ii) which are not relying on the exception

21 from the definition of investment company in para22 graph (1) or (7) of subsection (c)’’.

23 (d) RULEMAKING REQUIRED.—

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

25 Not later than 1 year after the date of enactment
27

•S 1815 IS

1 of this Act, the Commission shall prescribe rules to

2 implement the requirements of section 3(c)(1)(B) of

3 the Investment Company Act of 1940 (15 U.S.C.

4 80a–3(c)(1)(B)).

5 (2) IDENTIFICATION OF INVESTMENTS.—Not

6 later than 180 days after the date of enactment of

7 this Act, the Commission shall prescribe rules defin8 ing or otherwise identifying ‘‘investments’’ for the

9 purposes of section 2(a)(51) of the Investment Com10 pany Act of 1940, as amended by this Act.

11 (3) EMPLOYEE EXCEPTION.—Not later than 1

12 year after the date of enactment of this Act, the

13 Commission shall prescribe rules pursuant to its au14 thority under section 6 of the Investment Company

15 Act of 1940 to permit the ownership by knowledge16 able employees of an issuer of the securities or an

17 affiliated person without loss of the exception of the

18 issuer under paragraph (1) or (7) of section 3(c) of

19 that Act from treatment as an investment company

20 under that Act.

21 (e) EFFECTIVE DATE.—The amendments made by

22 this section shall become effective on the earlier of—

23 (1) 180 days after the date of enactment of this

24 Act; or
28

•S 1815 IS

1 (2) the date on which the rulemaking required

2 under subsection (d)(2) is completed.

3 SEC. 208. PERFORMANCE FEES EXEMPTIONS.

4 Section 205 of the Investment Advisers Act of 1940

5 (15 U.S.C. 80b–5) is amended—

6 (1) in subsection (b)—

7 (A) in paragraph (2), by striking ‘‘or’’ at

8 the end;

9 (B) in paragraph (3), by striking the pe10 riod at the end and inserting ‘‘; or’’; and

11 (C) by adding at the end the following new

12 paragraph:

13 ‘‘(4) apply to an investment advisory contract

14 with a company excepted from the definition of an

15 investment company under section 3(c)(7) of title I

16 of this Act.’’; and

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

19 ‘‘(e) The Commission, by rule or regulation, upon its

20 own motion, or by order upon application, may condi21 tionally or unconditionally exempt any person or trans22 action, or any class or classes of persons or transactions,

23 from subsection (a)(1), if and to the extent that the ex24 emption relates to an investment advisory contract with—
29

•S 1815 IS

1 ‘‘(1) any person that the Commission deter2 mines does not need the protections of subsection

3 (a)(1), on the basis of such factors as financial so4 phistication, net worth, knowledge and experience in

5 financial matters, amount of assets under manage6 ment, relationship with a registered investment ad7 viser, and such other factors as the Commission de8 termines are consistent with this section; or

9 ‘‘(2) a person who is not a resident of the Unit10 ed States.’’.

11 TITLE III—REDUCING THE COST

12 OF SAVING AND INVESTMENT

13 SEC. 301. EXEMPTION FOR ECONOMIC, BUSINESS, AND IN14 DUSTRIAL DEVELOPMENT COMPANIES.

15 Section 6(a) of the Investment Company Act of 1940

16 (15 U.S.C. 80a–6(a)) is amended by adding at the end

17 the following new paragraph:

18 ‘‘(5)(A) Any company that is not engaged in

19 the business of issuing redeemable securities, the op20 erations of which are subject to regulation by the

21 State in which the company is organized under a

22 statute governing entities that provide financial or

23 managerial assistance to enterprises doing business,

24 or proposing to do business, in that State if—
30

•S 1815 IS

1 ‘‘(i) the organizational documents of the

2 company state that the activities of the com3 pany are limited to the promotion of economic,

4 business, or industrial development in the State

5 through the provision of financial or managerial

6 assistance to enterprises doing business, or pro7 posing to do business, in that State, and such

8 other activities that are incidental or necessary

9 to carry out that purpose;

10 ‘‘(ii) immediately following each sale of the

11 securities of the company by the company or

12 any underwriter for the company, not less than

13 80 percent of the securities of the company

14 being offered in such sale, on a class-by-class

15 basis, are held by persons who reside or who

16 have a substantial business presence in that

17 State;

18 ‘‘(iii) the securities of the company are

19 sold, or proposed to be sold, by the company or

20 by any underwriter for the company, solely to

21 accredited investors, as that term is defined in

22 section 2(15) of the Securities Act of 1933, or

23 to such other persons that the Commission, as

24 necessary or appropriate in the public interest
31

•S 1815 IS

1 and consistent with the protection of investors,

2 may permit by rule, regulation, or order; and

3 ‘‘(iv) the company does not purchase any

4 security issued by an investment company or by

5 any company that would be an investment com6 pany except for the exclusions from the defini7 tion of the term ‘‘investment company’’ under

8 paragraph (1) or (7) of section 3(c), other

9 than—

10 ‘‘(I) any debt security that is rated in11 vestment grade by not less than 1 nation12 ally recognized statistical rating organiza13 tion; or

14 ‘‘(II) any security issued by a reg15 istered open-end investment company that

16 is required by its investment policies to in17 vest not less than 65 percent of its total

18 assets in securities described in subclause

19 (I) or securities that are determined by

20 such registered open-end investment com21 pany to be comparable in quality to securi22 ties described in subclause (I).

23 ‘‘(B) Notwithstanding the exemption provided

24 by this paragraph, section 9 (and, to the extent nec25 essary to enforce section 9, sections 38 through 51)
32

•S 1815 IS

1 shall apply to a company described in this paragraph

2 as if the company were an investment company reg3 istered under this title.

4 ‘‘(C) Any company proposing to rely on the ex5 emption provided by this paragraph shall file with

6 the Commission a notification stating that the com7 pany intends to do so, in such form and manner as

8 the Commission may prescribe by rule.

9 ‘‘(D) Any company meeting the requirements of

10 this paragraph may rely on the exemption provided

11 by this paragraph upon filing with the Commission

12 the notification required by subparagraph (C), until

13 such time as the Commission determines by order

14 that such reliance is not in the public interest or is

15 not consistent with the protection of investors.

16 ‘‘(E) The exemption provided by this paragraph

17 may be subject to such additional terms and condi18 tions as the Commission may by rule, regulation, or

19 order determine are necessary or appropriate in the

20 public interest or for the protection of investors.’’.

21 SEC. 302. INTRASTATE CLOSED-END INVESTMENT COM22 PANY EXEMPTION.

23 Section 6(d)(1) of the Investment Company Act of

24 1940 (15 U.S.C. 80a–6(d)(1)) is amended by striking

25 ‘‘$100,000’’ and inserting ‘‘$10,000,000, or such other
33

•S 1815 IS

1 amount as the Commission may set by rule, regulation,

2 or order’’.

3 SEC. 303. DEFINITION OF ELIGIBLE PORTFOLIO COMPANY.

4 Section 2(a)(46)(C) of the Investment Company Act

5 of 1940 (15 U.S.C. 80a–2(a)(46)(C)) is amended—

6 (1) in clause (ii), by striking ‘‘or’’ at the end;

7 (2) by redesignating clause (iii) as clause (iv);

8 and

9 (3) by inserting after clause (ii) the following:

10 ‘‘(iii) it has total assets of not more

11 than $4,000,000, and capital and surplus

12 (shareholders’ equity less retained earn13 ings) of not more than $2,000,000, except

14 that the Commission may adjust such

15 amounts by rule, regulation, or order to re16 flect changes in 1 or more generally ac17 cepted indices or other indicators for small

18 businesses; or’’.

19 SEC. 304. DEFINITION OF BUSINESS DEVELOPMENT COM20 PANY.

21 Section 2(a)(48)(B) of the Investment Company Act

22 of 1940 (15 U.S.C. 80a–2(a)(48)(B)) is amended by in23 serting before the semicolon at the end the following: ‘‘,

24 and provided further that a business development com25 pany need not make available significant managerial as-
34

•S 1815 IS

1 sistance with respect to any company described in section

2 2(a)(46)(C)(iii), or with respect to any other company that

3 meets such criteria as the Commission may by rule, regu4 lation, or order permit, as consistent with the public inter5 est, the protection of investors, and the purposes fairly in6 tended by the policy and provisions of this title’’.

7 SEC. 305. ACQUISITION OF ASSETS BY BUSINESS DEVELOP8 MENT COMPANIES.

9 Section 55(a)(1)(A) of the Investment Company Act

10 of 1940 (15 U.S.C. 80a–54(a)(1)(A)) is amended—

11 (1) by striking ‘‘or from any person’’ and in12 serting ‘‘from any person’’; and

13 (2) by inserting before the semicolon ‘‘, or from

14 any other person, subject to such rules and regula15 tions as the Commission may prescribe as necessary

16 or appropriate in the public interest or for the pro17 tection of investors’’.

18 SEC. 306. CAPITAL STRUCTURE AMENDMENTS.

19 Section 61(a) of the Investment Company Act of

20 1940 (15 U.S.C. 80a–60(a)) is amended—

21 (1) in paragraph (2), by striking ‘‘if such busi22 ness development company’’ and all that follows

23 through the end of paragraph (2) and inserting a

24 period;

25 (2) in paragraph (3)(A)—
35

•S 1815 IS

1 (A) by striking ‘‘senior securities rep2 resenting indebtedness accompanied by’’;

3 (B) inserting ‘‘accompanied by securities,’’

4 after ‘‘of such company,’’; and

5 (C) in clause (ii), by striking ‘‘senior’’; and

6 (3) in paragraph (3)—

7 (A) in subparagraph (A), by striking

8 ‘‘and’’ at the end;

9 (B) in subparagraph (B), by striking the

10 period at the end of clause (iv) and inserting ‘‘;

11 and’’; and

12 (C) by inserting after subparagraph (B)

13 the following new subparagraph:

14 ‘‘(C) a business development company may

15 issue warrants, options, or rights to subscribe

16 to, convert to, or purchase voting securities not

17 accompanied by securities, if—

18 ‘‘(i) such warrants, options, or rights

19 satisfy the conditions in clauses (i) and

20 (iii) of subparagraph (A); and

21 ‘‘(ii) the proposal to issue such war22 rants, options, or rights is authorized by

23 the shareholders or partners of such busi24 ness development company, and such issu25 ance is approved by the required majority
36

•S 1815 IS

1 (as defined in section 57(o)) of the direc2 tors of or general partners in such com3 pany on the basis that such issuance is in

4 the best interests of the company and its

5 shareholders or partners.’’.

6 SEC. 307. FILING OF WRITTEN STATEMENTS.

7 Section 64(b)(1) of the Investment Company Act of

8 1940 (15 U.S.C. 80a–63(b)(1)) is amended by inserting

9 ‘‘and capital structure’’ after ‘‘portfolio’’.

10 SEC. 308. FACILITATING NATIONAL SECURITIES MARKETS.

11 Section 18 of the Securities Act of 1933 (15 U.S.C.

12 77r) is amended to read as follows:

13 ‘‘SEC. 18. EXEMPTION FROM STATE CONTROL OF

14 SECURITIES OFFERINGS.

15 ‘‘(a) EXEMPTION FROM STATE LAW FOR REG16 ISTERED SECURITIES.—Except with respect to offerings

17 described in subsection (b) and as otherwise specifically

18 provided in this section, no law, rule, regulation, order,

19 or other administrative action of any State or Territory

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

21 political subdivision thereof—

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

23 or qualification of securities or securities trans24 actions shall directly or indirectly apply to an offer-
37

•S 1815 IS

1 ing subject to a registration statement filed pursu2 ant to this title;

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

4 or impose conditions upon the use of any offering

5 document, including any prospectus contained in a

6 registration statement that has been filed with the

7 Commission; or

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

9 or impose conditions upon the offer or sale of any

10 security registered with the Commission under this

11 title based on the merits of such offering or issuer.

12 ‘‘(b) SPECIAL RULES FOR CERTAIN OFFERINGS.—

13 Except with respect to a security of an investment com14 pany that is registered under the Investment Company

15 Act of 1940, the provisions of subsection (a) shall not

16 apply to—

17 ‘‘(1) an offering—

18 ‘‘(A) by an issuer that is a blank check

19 company, as defined in section 7(b), a partner20 ship, a limited liability company, or a direct

21 participation investment program;

22 ‘‘(B) of penny stock; or

23 ‘‘(C) giving effect to a limited partnership

24 rollup transaction;
38

•S 1815 IS

1 ‘‘(2) an offering of a security, if a person asso2 ciated with the offering is subject to a statutory dis3 qualification, as defined in section 3(a)(39) of the

4 Securities Exchange Act of 1934 or any substan5 tially equivalent State law; or

6 ‘‘(3) an offering of a security that—

7 ‘‘(A) is not listed on the New York Stock

8 Exchange, the American Stock Exchange, or as

9 part of a category of securities on another ex10 change or trading system, as determined by the

11 Commission consistent with the purposes of this

12 title and the protection of investors;

13 ‘‘(B) is not authorized for trading on the

14 National Market System of the National Asso15 ciation of Securities Dealers Automated

16 Quotation System; or

17 ‘‘(C) will not be listed or authorized for

18 quotation as described in subparagraph (A) or

19 (B) upon completion of the transaction.

20 ‘‘(c) EXEMPTION FROM STATE LAW FOR TRANS21 ACTIONS IN SECURITIES WITH QUALIFIED PUR22 CHASERS.—Notwithstanding subsection (b), subsection

23 (a) shall apply with respect to offers and sales to qualified

24 purchasers, as defined by the Commission.
39

•S 1815 IS

1 ‘‘(d) PRESERVATION OF FILING REQUIREMENTS.—

2 Nothing in this section shall prohibit the securities com3 mission (or any agency or office performing like functions)

4 of any State or Territory of the United States, or the Dis5 trict of Columbia, from requiring the filing of any docu6 ments filed with the Commission pursuant to this title

7 solely for notice purposes, along with a consent to service

8 of process and requisite fee, except that no such filing,

9 consent, or fee may be required with respect to securities,

10 or transactions relating to securities that are of the same

11 class as securities, or are senior to such a class, as de12 scribed in subsection (b)(3). Nothing in this section shall

13 prohibit States from enforcing fee requirements in effect

14 on May 31, 1996.

15 ‘‘(e) PRESERVATION OF STATE AUTHORITY.—Noth16 ing in this section shall affect the jurisdiction of the secu17 rities commission (or any agency or office performing like

18 functions) of any State or Territory of the United States,

19 or the District of Columbia, pursuant to the laws of such

20 State or Territory, with respect to any fraud or broker21 dealer conduct in connection with securities or securities

22 transactions.’’.
40

•S 1815 IS

1 SEC. 309. REGULATORY FLEXIBILITY.

2 (a) UNDER THE SECURITIES ACT OF 1933.—Title I

3 of the Securities Act of 1933 (15 U.S.C. 77a et seq.) is

4 amended by adding at the end the following new section:

5 ‘‘SEC. 28. GENERAL EXEMPTIVE AUTHORITY.

6 ‘‘The Commission, by rule or regulation, may condi7 tionally or unconditionally exempt any person, security, or

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

9 or transactions, from any provision or provisions of this

10 title or of any rule or regulation issued thereunder, to the

11 extent that such exemption is necessary or appropriate in

12 the public interest, and is consistent with the protection

13 of investors.’’.

14 (b) UNDER THE SECURITIES EXCHANGE ACT OF

15 1934.—Title I of the Securities Exchange Act of 1934 (15

16 U.S.C. 78a et seq.) is amended by adding at the end the

17 following new section:

18 ‘‘SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

19 ‘‘Notwithstanding any other provision of this title,

20 the Commission, by rule, regulation, or order, may condi21 tionally or unconditionally exempt any person, security, or

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

23 or transactions, from any provision or provisions of this

24 title or of any rule or regulation issued thereunder, to the

25 extent that such exemption is necessary or appropriate in

26 the public interest, and is consistent with the protection
41

•S 1815 IS

1 of investors. The Commission shall, by rule or regulation,

2 determine the procedures under which an exemptive order

3 under this section shall be granted and may, in its sole

4 discretion, decline to entertain any application for an

5 order of exemption under this section.’’.

6 SEC. 310. ANALYSIS OF ECONOMIC EFFECTS OF REGULA7 TION.

8 (a) AUTHORIZATION OF APPROPRIATIONS.—There

9 are authorized to be appropriated to carry out the Eco10 nomic Analysis Program, including funding for the Office

11 of Economic Analysis of the Securities and Exchange

12 Commission, $6,000,000 for fiscal year 1997, and

13 $6,000,000 for fiscal year 1998.

14 (b) ANALYSIS OF ECONOMIC EFFECTS OF REGULA15 TION.—

16 (1) IN GENERAL.—The Chief Economist of the

17 Commission shall prepare a report on each proposed

18 regulation of the Commission. Such report shall be

19 provided to each Commissioner and shall be pub20 lished in the Federal Register before any such regu21 lation of the Commission may become effective.

22 (2) REPORT CONTENTS.—The report required

23 by this subsection shall include—

24 (A) an analysis of the likely effects of the

25 proposed regulation on the economy of the
42

•S 1815 IS

1 United States, and particularly upon the securi2 ties markets and the participants in those mar3 kets; and

4 (B) the estimated impact of the proposed

5 regulation upon economic and market behavior,

6 including any impact on market liquidity, the

7 costs of investment, and the financial risks of

8 investment.

9 SEC. 311. PRIVATIZATION OF EDGAR.

10 Not later than 180 days after the date of enactment

11 of this Act, the Commission shall submit to the Congress

12 a report on the Electronic Data Gathering Analysis and

13 Retrieval System consisting of the Commission’s plan for

14 promoting competition and innovation of the system

15 through privatization of all or any part of the system.

16 Such plan shall include such recommendations for action

17 as may be necessary to implement the plan.

18 SEC. 312. IMPROVING COORDINATION OF SUPERVISION.

19 Section 17 of the Securities Exchange Act of 1934

20 (15 U.S.C. 78q) is amended by adding at the end the fol21 lowing new subsection:

22 ‘‘(i) COORDINATION OF EXAMINING AUTHORITIES.—

23 ‘‘(1) OBJECTIVE.—The Commission and the ex24 amining authorities shall promote effective and effi25 cient oversight of the activities of brokers and deal-
43

•S 1815 IS

1 ers, avoiding redundancy, while maintaining the

2 highest level of examination and oversight quality.

3 ‘‘(2) ELIMINATION OF DUPLICATION.—The

4 Commission and the examining authorities, through

5 cooperation and coordination of examination and

6 oversight activities, shall eliminate any unnecessary

7 and burdensome duplication in the examination

8 process.

9 ‘‘(3) COORDINATION OF EXAMINATIONS.—The

10 Commission and the examining authorities shall

11 share such information, including reports of exami12 nations, customer complaint information, and other

13 nonpublic regulatory information, as appropriate to

14 foster a coordinated approach to regulatory over15 sight of brokers and dealers that are subject to ex16 amination by more than one examining authority.

17 ‘‘(4) EXAMINATIONS FOR CAUSE.—At any time,

18 any examining authority may conduct an examina19 tion for cause of any broker or dealer subject to its

20 jurisdiction.

21 ‘‘(5) CONFIDENTIALITY.—

22 ‘‘(A) IN GENERAL.—The provisions of sec23 tion 24 shall apply to the sharing of informa24 tion in accordance with this subsection. The

25 Commission shall take appropriate action under
44

•S 1815 IS

1 section 24(c) to assure that such information

2 is not inappropriately disclosed.

3 ‘‘(B) APPROPRIATE DISCLOSURE NOT PRO4 HIBITED.—Nothing in this paragraph shall au5 thorize the Commission or any examining au6 thority to withhold information from the Con7 gress, or prevent the Commission or any exam8 ining authority from complying with a request

9 for information from any other Federal depart10 ment or agency requesting the information for

11 purposes within the scope of its jurisdiction, or

12 complying with an order of a court of the Unit13 ed States in an action brought by the United

14 States or the Commission.

15 ‘‘(6) DEFINITION.—For purposes of this sub16 section, the term ‘examining authority’ means the

17 self-regulatory organizations registered with the

18 Commission under this title (other than registered

19 clearing agencies) with the authority to examine, in20 spect, and otherwise oversee the activities of a reg21 istered broker or dealer.’’.
45

•S 1815 IS

1 SEC. 313. INCREASED ACCESS TO FOREIGN BUSINESS IN2 FORMATION.

3 (a) THE SECURITIES ACT OF 1993.—Section 2(3) of

4 the Securities Act of 1933 (15 U.S.C. 77b(3)) is amended

5 in the third sentence—

6 (1) by striking ‘‘not include preliminary’’ and

7 inserting ‘‘not include the following: (A) prelimi8 nary’’; and

9 (2) by inserting before the period ‘‘or (B) solely

10 for purposes of section 5, press conferences held out11 side of the United States, public meetings with is12 suer representatives conducted outside of the United

13 States, or press related materials released outside of

14 the United States in which an offshore offering is

15 discussed, irrespective of whether journalists from

16 the United States or journalists for publications (in17 cluding on-line services) with circulation in the Unit18 ed States attend such press conferences or meetings

19 or receive such press related materials.’’.

20 (b) THE SECURITIES EXCHANGE ACT OF 1934.—

21 Section 14 of the Securities Exchange Act of 1934 (15

22 U.S.C. 78n) is amended by adding at the end the following

23 new subsection:

24 ‘‘(i) TREATMENT OF PRESS RELATED MATERIALS.—

25 ‘‘(1) IN GENERAL.—Any person making a ten26 der offer for, or a request or invitation for tenders
46

•S 1815 IS

1 of, the securities of a foreign issuer may grant jour2 nalists from the United States or journalists for

3 publications (including on-line services) with circula4 tion in the United States access to press conferences

5 outside of the United States, meetings with its rep6 resentatives conducted outside of the United States,

7 or press related materials released outside of the

8 United States in which an offshore tender offer is

9 discussed, without being deemed to have used the ju10 risdictional means specified in subsection (d)(1) or

11 becoming subject to any regulations promulgated by

12 the Commission, pursuant to subsection (e) of this

13 section or 13(e), or otherwise, that relate to tender

14 offers or requests or invitations for tenders.

15 ‘‘(2) DEFINITION.—For purposes of this sub16 section, the term ‘foreign issuer’ means any corpora17 tion or other organization—

18 ‘‘(A) that is incorporated or organized

19 under the laws of any foreign country; or

20 ‘‘(B) the principal place of business of

21 which is located in a foreign country.’’.

22 SEC. 314. SHORT-FORM REGISTRATION.

23 (a) IN GENERAL.—Not later than 180 days after the

24 date of enactment of this Act, the Commission shall

25 amend Form S–3 (17 C.F.R. 239.13, relating to registra-
47

•S 1815 IS

1 tion under the Securities Act of 1933, of securities of cer2 tain issuers offered pursuant to certain types of trans3 actions) to allow such form, or its equivalent, to be used

4 for primary offerings by a registrant if—

5 (1) the outstanding stock of the registrant held

6 by nonaffiliates of the registrant has an adequate

7 aggregate market value as determined by the Com8 mission; and

9 (2) such registrant otherwise meets the eligi10 bility requirements for registration using such form,

11 or its equivalent.

12 (b) ADJUSTMENTS.—Any adjustment to the adequate

13 aggregate market value threshold referred to in subsection

14 (a)(1)(B) by the Commission following the date of enact15 ment of this Act shall apply equally to voting and nonvot16 ing common shares and such other securities as the Com17 mission shall establish.

18 (c) DEFINITION.—For purposes of this section, the

19 term ‘‘stock’’ includes voting and nonvoting common

20 shares, and such other securities as the Commission shall

21 establish.

22 SEC. 315. CHURCH EMPLOYEE PENSION PLANS.

23 (a) AMENDMENT TO THE INVESTMENT COMPANY

24 ACT OF 1940.—Section 3(c) of the Investment Company
48

•S 1815 IS

1 Act of 1940 (15 U.S.C. 80a–3(c)) is amended by adding

2 at the end the following new paragraph:

3 ‘‘(14) Any church plan described in section

4 414(e) of the Internal Revenue Code of 1986, if,

5 under any such plan, no part of the assets may be

6 used for, or diverted to, purposes other than the ex7 clusive benefit of plan participants or beneficiaries,

8 or any company or account that is—

9 ‘‘(A) established by a person that is eligible

10 to establish and maintain such a plan under

11 section 414(e) of the Internal Revenue Code of

12 1986; and

13 ‘‘(B) substantially all of the activities of

14 which consist of—

15 ‘‘(i) managing or holding assets con16 tributed to such church plans or other as17 sets which are permitted to be commingled

18 with the assets of church plans under the

19 Internal Revenue Code of 1986; or

20 ‘‘(ii) administering or providing bene21 fits pursuant to church plans.

22 (b) AMENDMENT TO THE SECURITIES ACT OF

23 1933.—Section 3(a) of the Securities Act of 1933 (15

24 U.S.C. 77(a)) is amended by adding at the end the follow25 ing new paragraph:
49

•S 1815 IS

1 ‘‘(13) Any security issued by or any interest or

2 participation in any church plan, company or ac3 count that is excluded from the definition of an in4 vestment company under section 3(c)(14) of the In5 vestment Company Act of 1940.’’.

6 (c) AMENDMENTS TO THE SECURITIES EXCHANGE

7 ACT OF 1934.—

8 (1) EXEMPTED SECURITIES.—Section

9 3(a)(12)(A) of the Securities Exchange Act of 1934

10 (15 U.S.C. 78(c)(12)(A)) is amended—

11 (A) in clause (v), by striking ‘‘and’’ at the

12 end;

13 (B) by redesignating clause (vi) as clause

14 (vii); and

15 (C) by inserting after clause (v) the follow16 ing new clause:

17 ‘‘(vi) any security issued by or any in18 terest or participation in any church plan,

19 company, or account that is excluded from

20 the definition of an investment company

21 under section 3(c)(14) of the Investment

22 Company Act of 1940; and’’.

23 (2) EXEMPTION FROM BROKER-DEALER PROVI24 SIONS.—Section 3 of the Securities Exchange Act of
50

•S 1815 IS

1 1934 (15 U.S.C. 78(c)) is amended by adding at the

2 end the following new subsection:

3 ‘‘(f) CHURCH PLANS.—No church plan described in

4 section 414(e) of the Internal Revenue Code of 1986, no

5 person or entity eligible to establish and maintain such

6 a plan under the Internal Revenue Code of 1986, no com7 pany or account that is excluded from the definition of

8 an investment company under section 3(c)(14) of the In9 vestment Company Act of 1940, and no trustee, director,

10 officer or employee of or volunteer for such plan, company,

11 account person, or entity, shall be deemed to be a ‘broker’,

12 ‘dealer’, ‘municipal securities broker’, ‘municipal securities

13 dealer’, ‘government securities broker’, ‘government secu14 rities dealer’, ‘clearing agency’, or ‘transfer agent’ for pur15 poses of this title—

16 ‘‘(1) solely because such plan, company, person,

17 or entity buys, holds, sells, trades in, or transfers se18 curities or acts as an intermediary in making pay19 ments in connection with transactions in securities

20 for its own account in its capacity as trustee or ad21 ministrator of, or otherwise on behalf of, or for the

22 account of, any church plan, company, or account

23 that is excluded from the definition of an investment

24 company under section 3(c)(14) of the Investment

25 Company Act of 1940; and
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•S 1815 IS

1 ‘‘(2) if no such person or entity receives a com2 mission or other transaction-related sales compensa3 tion in connection with any activities conducted in

4 reliance on the exemption provided by this sub5 section.’’.

6 (d) AMENDMENT TO THE INVESTMENT ADVISERS

7 ACT OF 1940.—Section 203(b) of the Investment Advisers

8 Act of 1940 (15 U.S.C. 80b–3(b)) is amended—

9 (1) in paragraph (2), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (3), by striking the period at

12 the end and inserting ‘‘; or’’; and

13 (3) by adding at the end the following new

14 paragraph:

15 ‘‘(4) any plan described in section 414(d) of the

16 Internal Revenue Code of 1986, any person or entity

17 eligible to establish and maintain such a plan under

18 the Internal Revenue Code of 1986, or any trustee,

19 director, officer, or employee of or volunteer for any

20 such plan or person, if such person or entity pro21 vides investment advice exclusively to any plan, per22 son, or entity or any company, account, or fund that

23 is excluded from the definition of an investment

24 company under section 3(c)(14) of the Investment

25 Company Act of 1940.’’.
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1 (e) AMENDMENT TO THE TRUST INDENTURE ACT OF

2 1939.—Section 304(a)(4)(A) of the Trust Indenture Act

3 of 1939 (15 U.S.C. 77ddd(4)(A)) is amended by striking

4 ‘‘or (11)’’ and inserting ‘‘(11), or (14)’’.

5 (f) PROTECTION OF CHURCH EMPLOYEE BENEFIT

6 PLANS UNDER STATE LAW.—

7 (1) REGISTRATION REQUIREMENTS.—Any secu8 rity issued by or any interest or participation in any

9 church plan, company, or account that is excluded

10 from the definition of an investment company under

11 section 3(c)(14) of the Investment Company Act of

12 1940, and any offer, sale, or purchase thereof, shall

13 be exempt from any law of a State that requires reg14 istration or qualification of securities.

15 (2) TREATMENT OF CHURCH PLANS.—No

16 church plan described in section 414(e) of the Inter17 nal Revenue Code of 1986, no person or entity eligi18 ble to establish and maintain such a plan under the

19 Internal Revenue Code of 1986, no company or ac20 count that is excluded from the definition of an in21 vestment company under section 3(c)(14) of the In22 vestment Company Act of 1940, and no trustee, di23 rector, officer, or employee of or volunteer for any

24 such plan, person, entity, company, or account shall

25 be required to qualify, register, or be subject to reg-
53

•S 1815 IS

1 ulation as an investment company or as a broker,

2 dealer, investment adviser, or agent under the laws

3 of any State solely because such plan, person, entity,

4 company, or account buys, holds, sells, or trades in

5 securities for its own account or in its capacity as

6 a trustee or administrator of or otherwise on behalf

7 of, or for the account of, or provides investment ad8 vice to, for, or on behalf of, any such plan, person,

9 or entity or any company or account that is excluded

10 from the definition of an investment company under

11 section 3(c)(14) of the Investment Company Act of

12 1940.

13 (g) FURTHER AMENDMENTS TO THE SECURITIES

14 EXCHANGE ACT OF 1934.—Section 3 of the Securities

15 Exchange Act of 1934 (15 U.S.C. 78c) is amended by add16 ing at the end the following new subsection:

17 ‘‘(g) DISCLOSURE TO CHURCH PLAN PARTICI18 PANTS.—A person that maintains a church plan that is

19 excluded from the definition of an investment company

20 solely by reason of section 3(c)(14) of the Investment

21 Company Act of 1940 shall provide disclosure to plan par22 ticipants, in writing, and not less frequently than annu23 ally, and for new participants joining such a plan after

24 May 31, 1996, prior to joining such plan, that—
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1 ‘‘(1) the plan, or any company or account main2 tained to manage or hold plan assets and interests

3 in such plan, company, or account, are not subject

4 to registration, regulation, or reporting under this

5 title, the Securities Act of 1933, the Investment

6 Company Act of 1940 or State securities laws; and

7 ‘‘(2) plan participants and beneficiaries there8 fore will not be afforded the protections of those pro9 visions.’’.

10 SEC. 316. PROMOTING GLOBAL PREEMINENCE OF AMER11 ICAN SECURITIES MARKETS.

12 It is the sense of the Congress that—

13 (1) the United States and foreign securities

14 markets are increasingly becoming international

15 securities markets, as issuers and investors seek the

16 benefits of new capital and secondary market oppor17 tunities without regard to national borders;

18 (2) as issuers seek to raise capital across

19 national borders, they confront differing accounting

20 requirements in the various regulatory jurisdictions;

21 (3) the establishment of a high-quality com22 prehensive set of generally accepted international ac23 counting standards in cross-border securities offer24 ings would greatly facilitate international financing

25 activities and, most significantly, would enhance the
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1 ability of foreign corporations to access and list in

2 United States markets;

3 (4) in addition to the efforts made before the

4 date of enactment of this Act by the Commission to

5 respond to the growing internationalization of secu6 rities markets, the Commission should enhance its

7 vigorous support for the development of high-quality

8 international accounting standards as soon as prac9 ticable; and

10 (5) the Commission, in view of its clear author11 ity under law to facilitate the access of foreign cor12 porations to list their stocks in United States mar13 kets, should report to the Congress, not later than

14 one year after the date of enactment of this Act on

15 progress in the development of international ac16 counting standards and the outlook for successful

17 completion of a set of international standards that

18 would be acceptable to the Commission for offerings

19 and listings by foreign corporations in United States

20 markets.

Æ