II

Calendar No. 712

106TH CONGRESS

2D SESSION S. 2107

[Report No. 106–360]

To amend the Securities Act of 1933 and the Securities Exchange Act

of 1934 to reduce securities fees in excess of those required to fund

the operations of the Securities and Exchange Commission, to adjust

compensation provisions for employees of the Commission, and for other

purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 28, 2000

Mr. GRAMM (for himself, Mr. GRAMS, Mr. SCHUMER, Mr. MACK, Mr. HAGEL,

Mr. BUNNING, Mr. ALLARD, Mr. BENNETT, Mr. BAYH, Mr. TORRICELLI,

Mr. CRAPO, Mr. ENZI, Mr. BOND, and Mr. REID) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

JULY 25, 2000

Reported by Mr. GRAMM, with amendments

[Omit the part struck through and insert the part printed in italic]

A BILL

To amend the Securities Act of 1933 and the Securities

Exchange Act of 1934 to reduce securities fees in excess

of those required to fund the operations of the Securities

and Exchange Commission, to adjust compensation provisions for employees of the Commission, and for other

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Competitive Market Supervision Act’’.

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. Reduction in registration fee rates; elimination of general revenue component.

Sec. 3. Reduction in merger and tender fee rates; reclassification as offsetting

collections.

Sec. 4. Reduction in transaction fees; elimination of general revenue component.

Sec. 5. Adjustments to fees.

Sec. 6. Comparability Provisions.

Sec. 7. Effective date.

Sec. 1. Short title; table of contents.

TITLE I—FEES AND COMPARABILITY

Sec. 101. Reduction in registration fee rates; elimination of general revenue component.

Sec. 102. Reduction in merger and tender fee rates; reclassification as offsetting

collections.

Sec. 103. Reduction in transaction fees; elimination of general revenue component.

Sec. 104. Adjustments to fee rates.

Sec. 105. Comparability provisions.

Sec. 106. Authorization of appropriations.

Sec. 107. Effective date.

TITLE II—SECURITIES MARKETS ENHANCEMENT

Sec. 201. Short title.

Subtitle A—Reducing the Cost of Capital Formation

Sec. 211. Exempted securities and organizations.

Sec. 212. National market treatment for certain securities.

Subtitle B—Enhancement of Disclosure and Investment Adviser Regulation

Sec. 221. Ensuring adequate recordkeeping.

Sec. 222. Elimination of barriers to providing services.

Sec. 223. Reducing financial reporting burdens.

Sec. 224. Enhancing transparency of records.
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1 TITLE I—FEES AND

2 COMPARABILITY

3 SEC. 2. 101. REDUCTION IN REGISTRATION FEE RATES;

4 ELIMINATION OF GENERAL REVENUE COM5 PONENT.

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

7 77f(b)) is amended—

8 (1) by striking paragraph (2) and inserting the

9 following:

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

11 filing a registration statement, the applicant shall

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

13 the amount determined under the rate established by

14 paragraph (3). The Commission shall publish in the

15 Federal Register notices of the fee rate applicable

16 under this section for each fiscal year.’’;

17 (2) by striking paragraph (3);

18 (3) by redesignating paragraphs (4) and (5) as

19 paragraphs (3) and (4), respectively;

20 (4) in paragraph (3), as redesignated—

21 (A) by striking subparagraph (A) and in22 serting the following:

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

24 subparagraphs (B) and (C), the rate deter25 mined under this paragraph is a rate equal to
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1 the following amount per $1,000,000 of the

2 maximum aggregate price at which the securi3 ties are proposed to be offered:

4 ‘‘(i) $67 for each of fiscal years 2001

5 through 2006.

6 ‘‘(ii) $33 for fiscal year 2007 and

7 each fiscal year thereafter.’’; and

8 (B) in subparagraph (B), by striking ‘‘this

9 paragraph (4)’’ and inserting ‘‘this paragraph’’;

10 and

11 (5) by striking paragraph (4), as redesignated,

12 and inserting the following:

13 ‘‘(4) PRO RATA APPLICATION OF RATE.—The

14 rate required by this subsection shall be applied pro

15 rata to amounts and balances equal to or less than

16 $1,000,000.’’.

17 SEC. 3. 102. REDUCTION IN MERGER AND TENDER FEE

18 RATES; RECLASSIFICATION AS OFFSETTING

19 COLLECTIONS.

20 (a) SECTION 13.—Section 13(e)(3) of the Securities

21 Exchange Act of 1934 (15 U.S.C. 78m(e)(3)) is amended

22 to read as follows:

23 ‘‘(3) FEES.—

24 ‘‘(A) IN GENERAL.—At the time of the fil25 ing of any statement that the Commission may
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1 require by rule pursuant to paragraph (1), the

2 person making the filing shall pay to the Com3 mission a fee equal to—

4 ‘‘(i) $67 for each $1,000,000 of the

5 value of the securities proposed to be pur6 chased, for each of fiscal years 2001

7 through 2006; and

8 ‘‘(ii) $33 for each $1,000,000 of the

9 value of securities proposed to be pur10 chased, for fiscal year 2007 and each fiscal

11 year thereafter.

12 ‘‘(B) REDUCTION.—The fee required by

13 this paragraph shall be reduced with respect to

14 securities in an amount equal to any fee paid

15 with respect to any securities issued in connec16 tion with the proposed transaction under sec17 tion 6(b) of the Securities Act of 1933, or the

18 fee paid under that section shall be reduced in

19 an amount equal to the fee paid to the Commis20 sion in connection with such transaction under

21 this paragraph.

22 ‘‘(C) LIMITATION; DEPOSIT OF FEES.—

23 ‘‘(i) LIMITATION.—Except as provided

24 in subparagraph (D), no amounts shall be

25 collected pursuant to this paragraph for
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1 any fiscal year, except to the extent pro2 vided in advance in appropriations Acts.

3 ‘‘(ii) DEPOSIT OF FEES.—Fees col4 lected during any fiscal year pursuant to

5 this paragraph shall be deposited and cred6 ited as offsetting collections in accordance

7 with appropriations Acts.

8 ‘‘(D) LAPSE OF APPROPRIATIONS.—If, on

9 the first day of a fiscal year, a regular appro10 priation to the Commission has not been en11 acted for that fiscal year, the Commission shall

12 continue to collect fees (as offsetting collec13 tions) under this paragraph at the rate in effect

14 during the preceding fiscal year, until such a

15 regular appropriation is enacted.

16 ‘‘(E) PRO RATA APPLICATION OF RATE.—

17 The rate required by this paragraph shall be

18 applied pro rata to amounts and balances equal

19 to or less than $1,000,000.’’.

20 (b) SECTION 14.—

21 (1) PRELIMINARY PROXY SOLICITATIONS.—Sec22 tion 14(g)(1) of the Securities Exchange Act of

23 1934 (15 U.S.C. 78n(g)(1)) is amended—

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

25 ‘‘Commission the following fees’’ and all that
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1 follows through the end of the subparagraph

2 and inserting ‘‘Commission—

3 ‘‘(i) for preliminary proxy solicitation

4 material involving an acquisition, merger,

5 or consolidation, if there is a proposed pay6 ment of each or transfer of securities or

7 property to shareholders, a fee equal to—

8 ‘‘(I) $67 for each $1,000,000 of

9 such proposed payment, or of the

10 value of such securities or other prop11 erty proposed to be transferred, for

12 each of fiscal years 2001 through

13 2006; and

14 ‘‘(II) $33 for each $1,000,000 of

15 such proposed payment, or of the

16 value of such securities or other prop17 erty proposed to be transferred, for

18 fiscal year 2007 and each fiscal year

19 thereafter; and

20 ‘‘(ii) for preliminary proxy solicitation

21 material involving a proposed sale or other

22 disposition of substantially all of the assets

23 of a company, a fee equal to—

24 ‘‘(I) $67 for each $1,000,000 of

25 the cash or of the value of any securi-
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1 ties or other property proposed to be

2 received upon such sale or disposition,

3 for each of fiscal years 2001 through

4 2006; and

5 ‘‘(II) $33 for each $1,000,000 of

6 the cash or of the value of any securi7 ties or other property proposed to be

8 received upon such sale or disposition,

9 for fiscal year 2007 and each fiscal

10 year thereafter.’’;

11 (B) in subparagraph (B), by inserting

12 ‘‘REDUCTION.—’’ before ‘‘The fee’’; and

13 (C) by adding at the end the following:

14 ‘‘(C) LIMITATION; DEPOSIT OF FEES.—

15 ‘‘(i) LIMITATION.—Except as provided

16 in subparagraph (D), no amounts shall be

17 collected pursuant to this paragraph for

18 any fiscal year, except to the extent pro19 vided in advance in appropriations Acts.

20 ‘‘(ii) DEPOSIT OF FEES.—Fees col21 lected during any fiscal year pursuant to

22 this paragraph shall be deposited and cred23 ited as offsetting collections in accordance

24 with appropriations Acts.
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1 ‘‘(D) LAPSE OF APPROPRIATIONS.—If, on

2 the first day of a fiscal year, a regular appro3 priation to the Commission has not been en4 acted for that fiscal year, the Commission shall

5 continue to collect fees (as offsetting collec6 tions) under this paragraph at the rate in effect

7 during the preceding fiscal year, until such a

8 regular appropriation is enacted.

9 ‘‘(E) PRO RATA APPLICATION OF RATE.—

10 The rate required by this paragraph shall be

11 applied pro rata to amounts and balances equal

12 to or less than $1,000,000.’’.

13 (2) OTHER FILINGS.—Section 14(g)(3) of the

14 Securities Exchange Act of 1934 (15 U.S.C.

15 78n(g)(3)) is amended—

16 (A) by striking ‘‘At the time’’ and insert17 ing the following: ‘‘OTHER FILINGS.—

18 ‘‘(A) FEE RATE.—At the time’’;

19 (B) by striking ‘‘the Commission a fee of’’

20 and all that follows through ‘‘The fee’’ and in21 serting the following: ‘‘the Commission a fee

22 equal to—

23 ‘‘(i) $67 for each $1,000,000 of the

24 aggregate amount of cash or of the value

25 of securities or other property proposed to
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1 be offered, for each of fiscal years 2001

2 through 2006; and

3 ‘‘(ii) $33 for each $1,000,000 of the

4 aggregate amount of cash or of the value

5 of securities or other property proposed to

6 be offered, for fiscal year 2007 and each

7 fiscal year thereafter.

8 ‘‘(B) REDUCTION.—The fee required under

9 subparagraph (A)’’; and

10 (C) by adding at the end the following:

11 ‘‘(C) LIMITATION; DEPOSIT OF FEES.—

12 ‘‘(i) LIMITATION.—Except as provided

13 in subparagraph (D), no amounts shall be

14 collected pursuant to this paragraph for

15 any fiscal year, except to the extent pro16 vided in advance in appropriations Acts.

17 ‘‘(ii) DEPOSIT OF FEES.—Fees col18 lected during any fiscal year pursuant to

19 this paragraph shall be deposited and cred20 ited as offsetting collections in accordance

21 with appropriations Acts.

22 ‘‘(D) LAPSE OF APPROPRIATIONS.—If, on

23 the first day of a fiscal year, a regular appro24 priation to the Commission has not been en25 acted for that fiscal year, the Commission shall
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1 continue to collect fees (as offsetting collec2 tions) under this paragraph at the rate in effect

3 during the preceding fiscal year, until such a

4 regular appropriations is enacted.

5 ‘‘(E) PRO RATA APPLICATION OF RATE.—

6 The rate required by this paragraph shall be

7 applied pro rata to amounts and balances equal

8 to or less than $1,000,000.’’.

9 SEC. 4. 103. REDUCTION IN TRANSACTION FEES; ELIMI10 NATION OF GENERAL REVENUE COMPONENT.

11 Section 31 of the Securities Exchange Act of 1934

12 (15 U.S.C. 78ee) is amended—

13 (1) by striking subsections (b) through (d) and

14 inserting the following:

15 ‘‘(b) TRANSACTION FEES.—

16 ‘‘(1) IN GENERAL.—Each national securities ex17 change and national securities association shall pay

18 to the Commission a fee at a rate equal to the trans19 action offsetting collection rate described in para20 graph (2) of the aggregate dollar amount of sales of

21 securities (other than bonds, debentures, and other

22 evidences of indebtedness)—

23 ‘‘(A) transacted on such national securities

24 exchange;
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1 ‘‘(B) transacted by or through any member

2 of such association otherwise than on a national

3 securities exchange of securities registered on

4 such an exchange; and

5 ‘‘(C) transacted by or through any member

6 of such association otherwise than on a national

7 securities exchange of securities that are subject

8 to prompt last sale reporting pursuant to the

9 rules of the Commission or a registered national

10 securities association, excluding any sales for

11 which a fee is paid under subparagraph (B).

12 ‘‘(2) FEE RATE.—

13 ‘‘(A) TRANSACTION OFFSETTING COLLEC14 TION RATE.—For purposes of this subsection,

15 the ‘transaction offsetting collection rate’ for a

16 fiscal year is the uniform rate required to reach

17 the transaction fee cap for that fiscal year.

18 ‘‘(B) TRANSACTION FEE CAP.—For pur19 poses of this paragraph, the ‘transaction fee

20 cap’ shall be equal to—

21 ‘‘(i) $413,000,000 for fiscal year

22 2001;

23 ‘‘(ii) $497,000,000 for fiscal year

24 2002;
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1 ‘‘(iii) $607,000,000 for fiscal year

2 2003;

3 ‘‘(iv) $706,000,000 for fiscal year

4 2004;

5 ‘‘(v) $896,000,000 for fiscal year

6 2005;

7 ‘‘(vi) $1,094,000,000 for fiscal year

8 2006;

9 ‘‘(vii) $554,000,000 for fiscal year

10 2007;

11 ‘‘(viii) $580,000,000 for fiscal year

12 2008;

13 ‘‘(ix) $719,000,000 for fiscal year

14 2009; and

15 ‘‘(x) $884,000,000 for fiscal year

16 2010 and each fiscal year thereafter.

17 ‘‘(c) LIMITATION; DEPOSIT OF FEES.—

18 ‘‘(1) LIMITATION.—Except as provided in sub19 section (d), no amount may be collected pursuant to

20 subsection (b) for any fiscal year, except to the ex21 tent provided in advance in appropriation Acts.

22 ‘‘(2) DEPOSIT OF FEES.—Fees collected during

23 any fiscal year pursuant to this section shall be de24 posited and credited as offsetting collections in ac25 cordance with appropriations Acts.
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1 ‘‘(d) LAPSE OF APPROPRIATIONS.—If, on the first

2 day of a fiscal year, a regular appropriation to the Com3 mission has not been enacted for that fiscal year, the Com4 mission shall continue to collect fees (as offsetting collec5 tions) under this section at the rate in effect during the

6 preceding fiscal year (prior to adjustments, if any, under

7 subsections (b) and (c) of section 5 104 of the Competitive

8 Market Supervision Act), until such a regular appropria9 tions is enacted.’’;

10 (2) in subsection (e), by striking ‘‘subsections

11 (b), (c), and (d)’’ and inserting ‘‘subsection (b)’’;

12 and

13 (3) in subsection (g), by striking ‘‘rates’’ and

14 inserting ‘‘rate’’.

15 SEC. 5. 104. ADJUSTMENTS TO FEE RATES.

16 (a) ESTIMATES OF COLLECTIONS.—

17 (1) The Securities and Exchange Commission

18 (hereafter in this Act referred to as the ‘‘Commis19 sion’’) shall, 1 month after submission of its initial

20 report under subsection (e)(1) and on a monthly

21 basis thereafter, project the aggregate amount of

22 fees from all sources likely to be collected by the

23 Commission during the current fiscal year.

24 (2) Each national securities exchange and na25 tional securities association shall file with the Com-
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1 mission within 10 days after the end of each month

2 an estimate of the fee required to be paid pursuant

3 to section 31 of the Securities Exchange Act of 1934

4 by such national securities exchange or national se5 curities association for transactions and sales occur6 ring during such month and such other information

7 and documents as the Commission may require as

8 necessary or appropriate to project the aggregate

9 amount of fees pursuant to paragraph (1).

10 (b) FLOOR FOR TOTAL FEE COLLECTIONS.—If, at

11 any time after the end of the first half of the fiscal year,

12 the Commission projects under subsection (a) that the ag13 gregate amount of fees collected by the Commission will,

14 during that fiscal year, fall below an amount equal to the

15 floor for total fee collections, the Commission may by

16 order, subject to subsection (e), increase the fee rate es17 tablished under section 31 of the Securities Exchange Act

18 of 1934 to the extent necessary to bring estimated collec19 tions to an amount equal to the floor for total fee collec20 tions. Such increase shall apply only to transactions and

21 sales occurring on or after the effective date specified in

22 such order through August 31 of that fiscal year. Such

23 increase shall not affect the obligation of each national

24 securities exchange and national securities association to

25 pay the Commission the fee required by section 31 of the
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1 Securities Exchange Act of 1934 at the fee rate in effect

2 prior to the effective date of such order for transactions

3 and sales occurring prior to the effective date of such

4 order. In exercising its authority under this subsection, the

5 Commission shall not be required to comply with the provi6 sions of section 553 of title 5, United States Code.

7 (c) CAP ON TOTAL FEE COLLECTIONS.—If, at any

8 time after the end of the first half of the fiscal year, the

9 Commission projects under subsection (a) that the aggre10 gate amount of fees collected by the Commission will ex11 ceed the cap on total fee collections by more than five 5

12 percent during any fiscal year, the Commission shall by

13 order, subject to subsection (e), decrease the fee rate or

14 suspend collection of fees under section 31 of the Securi15 ties Exchange Act of 1934 to the extent necessary to bring

16 estimated collections to an amount equal to the cap on

17 total fee collections. Such decrease or suspension shall

18 apply only to transactions and sales occurring on or after

19 the effective date specified in such order through August

20 31 of that fiscal year. Such decrease or suspension shall

21 not affect the obligation of each national securities ex22 change and national securities association to pay the Com23 mission the fee required by section 31 of the Securities

24 Exchange Act of 1934 at the fee rate in effect prior to

25 the effective date of such order for transactions and sales
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1 occurring prior to the effective date of such order. In exer2 cising its authority under this subsection, the Commission

3 shall not be required to comply with the provisions of sec4 tion 553 of title 5, United States Code.

5 (d) DEFINITIONS.—

6 (1) For purposes of this section, the term ‘‘floor

7 for total fee collections’’ means the greater of—

8 (A) the total amount appropriated to the

9 Commission for fiscal year 2001 (adjusted an10 nually, based on the annual percentage change,

11 if any, in the Consumer Price Index for all

12 urban consumers, as published by the Depart13 ment of Labor); or

14 (B) the amount authorized for the Com15 mission pursuant to section 35 of the Securities

16 Exchange Act of 1934 (15 U.S.C. 78kk), if ap17 plicable.

18 (2) For purposes of this section, the term ‘‘cap

19 on total fee collections’’ means—

20 (A) for fiscal years 2001 through 2010,

21 the baseline amount for aggregate offsetting

22 collections for such fiscal year under section

23 6(b) of the Securities Act of 1933 and section

24 31 of the Securities Exchange Act of 1934, as

25 projected for such fiscal year by the Congres-
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1 sional Budget Office pursuant to section 257 of

2 the Balanced Budget and Emergency Deficit

3 Control Act of 1985 in its most recently pub4 lished report of its baseline projection before

5 the date of enactment of this Act; and

6 (B) for fiscal years 2011 and thereafter,

7 the amount authorized for the Commission pur8 suant to section 35 of the Securities Exchange

9 Act of 1934 (15 U.S.C. 78kk).

10 (e) REPORTS TO CONGRESS; JUDICIAL REVIEW; NO11 TICE.—

12 (1) INITIAL REPORT.—Not later than 90 days

13 after the date of enactment of this Act, the Commis14 sion shall report to the Committee on Banking,

15 Housing, and Urban Affairs of the Senate and the

16 Committee on Commerce of the House of Represent17 atives to explain the methodology used by the Com18 mission to make projections under subsection (a).

19 Within 30 days after the beginning of each fiscal

20 year, the Commission may report to the Committee

21 on Banking, Housing, and Urban Affairs of the Sen22 ate and the Committee on Commerce of the House

23 of Representatives on revisions to the methodology

24 used by the Commission to make projections under
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1 subsection (a) for such fiscal year and subsequent

2 fiscal years.

3 (2) JUDICIAL REVIEW; REPORTS OF INTENT TO

4 ACT.—The determinations made and the actions

5 taken by the Commission under this subsection shall

6 not be subject to judicial review. Not later than 45

7 days before taking action under subsection (b) or

8 (c), the Commission shall report to the Committee

9 on Banking, Housing, and Urban Affairs of the Sen10 ate and the Committee on Commerce of the House

11 of Representatives on its intent to take such action.

12 (3) NOTICE.—Not later than 30 days before

13 taking action under subsection (b) or (c), the Com14 mission shall notify each national securities ex15 change and national securities association of its in16 tent to take such action.

17 SEC. 6. 105. COMPARABILITY PROVISIONS.

18 (a) SECURITIES AND EXCHANGE COMMISSION EM19 PLOYEES.—

20 (1) IN GENERAL.—Section 4(b) of the Securi21 ties Exchange Act of 1934 (15 U.S.C. 78d(b)) is

22 amended by redesignating paragraph (3) as para23 graph (2), and by striking paragraphs (1) and (2)

24 and inserting the following:

25 ‘‘(1) APPOINTMENT AND COMPENSATION.—
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1 ‘‘(A) IN GENERAL.—The Commission may

2 appoint and fix the compensation of such offi3 cers, attorneys, economists, examiners, and

4 other employees as may be necessary for car5 rying out its functions under this Act.

6 ‘‘(B) RATES OF PAY.—Rates of basic pay

7 for all employees of the Commission may be set

8 and adjusted by the Commission without regard

9 to the provisions of chapter 51 or subchapter

10 III of chapter 53 of title 5, United States Code.

11 ‘‘(C) COMPARABILITY.—The Commission

12 may provide additional compensation and bene13 fits to employees of the Commission if the same

14 type of compensation or benefits are then being

15 provided by any agency referred to under sec16 tion 1206(a) of the Financial Institutions Re17 form, Recovery, and Enforcement Act of 1989

18 (12 U.S.C. 1833b) or, if not then being pro19 vided, could be provided by such an agency

20 under applicable provisions of law, rule, or reg21 ulation. In setting and adjusting the total

22 amount of compensation and benefits for em23 ployees, the Commission shall consult with, and

24 seek to maintain comparability with, the agen25 cies referred to under section 1206(a) of the Fi-
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1 nancial Institutions Reform, Recovery, and En2 forcement Act of 1989 (12 U.S.C. 1833b).’’.

3 (2) EMPLOYEES REPRESENTED BY LABOR OR4 GANIZATIONS.—To the extent that any employee of

5 the Commission is represented by a labor organiza6 tion with exclusive recognition in accordance with

7 chapter 71 of title 5, United States Code, no reduc8 tion in base pay of such employee shall be made by

9 reason of enactment of this subsection.

10 (b) REPORTING ON INFORMATION BY THE COMMIS11 SION.—Section 1206 of the Financial Institutions Reform,

12 Recovery, and Enforcement Act of 1989 (12 U.S.C.

13 1833b) is amended—

14 (1) by inserting ‘‘(a) IN GENERAL.—’’ before

15 ‘‘The Federal Deposit’’;

16 (2) by striking ‘‘the Thrift Depositor Protection

17 Oversight Board of the Resolution Trust Corpora18 tion’’; and

19 (3) by adding at the end the following:

20 ‘‘(b) In establishing and adjusting schedules of com21 pensation and benefits for employees of the Securities and

22 Exchange Commission under applicable provisions of law,

23 the Commission shall inform the heads of the agencies re24 ferred to under subsection (a) and Congress of such com25 pensation and benefits and shall seek to maintain com-
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1 parability with such agencies regarding compensation and

2 benefits.’’.

3 (c) TECHNICAL AMENDMENTS.—

4 (1) Section 3132(a)(1) of title 5, United States

5 Code, is amended—

6 (A) in subparagraph (C), by striking ‘‘or’’

7 after the semicolon;

8 (B) in subparagraph (D), by inserting

9 ‘‘or’’ after the semicolon; and

10 (C) by adding at the end the following:

11 ‘‘(E) the Securities and Exchange Commis12 sion.’’.

13 (2) Section 5373(a) of title 5, United States

14 Code, is amended—

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

16 after the semicolon;

17 (B) in paragraph (3), by striking the pe18 riod and inserting ‘‘; or’’; and

19 (C) by adding at the end the following:

20 ‘‘(4) section 4(b) of the Securities Exchange

21 Act of 1934.’’.

22 SEC. 106. AUTHORIZATION OF APPROPRIATIONS.

23 Section 35(a) of the Securities Exchange Act of 1934

24 (15 U.S.C. 78kk(a)) is amended by striking ‘‘$351,280,000’’
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1 and all that follows through ‘‘1999’’ and inserting

2 ‘‘$422,800,000 for fiscal year 2001’’.

3 SEC. 7. 107. EFFECTIVE DATE.

4 (a) IN GENERAL.—Subject to subsection (b), this Act

5 title and the amendments made by this Act title shall be6 come effective on October 1, 2000.

7 (b) EXCEPTIONS.—The authorities provided by sec8 tion 13(e)(3)(D), section 14(g)(1)(D), section

9 14(g)(3)(D), and section 31(d) of the Securities Exchange

10 Act of 1934, as so designated by this Act title, shall not

11 apply until October 1, 2001.

12 TITLE II—SECURITIES MARKETS

13 ENHANCEMENT

14 SEC. 201. SHORT TITLE.

15 This title may be cited as the ‘‘Securities Markets En16 hancement Act of 2000’’.

17 Subtitle A—Reducing the Cost of

18 Capital Formation

19 SEC. 211. EXEMPTED SECURITIES AND ORGANIZATIONS.

20 (a) SECURITIES EXEMPTION THRESHOLD.—Section

21 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) is

22 amended by striking ‘‘$5,000,000’’ and inserting

23 ‘‘$12,000,000 (adjusted annually, based on the annual per24 centage change, if any, in the Consumer Price Index for
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1 all urban consumers, as published by the Department of

2 Labor)’’.

3 (b) CHARITABLE GIFT ANNUITIES.—Section 3(e)(2)

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

5 78c(e)(2)) is amended—

6 (1) by striking ‘‘The exemption’’ and inserting

7 the following:

8 ‘‘(A) IN GENERAL.—The exemption’’; and

9 (2) by adding at the end the following:

10 ‘‘(B) EXCEPTION.—The limitation on com11 pensation provided under subparagraph (A)

12 does not apply to compensation paid to any per13 son for any service rendered in connection with

14 the issuance by a charitable organization of a

15 charitable gift annuity or other exempted secu16 rity described in subsection (a)(12)(A)(v), if—

17 ‘‘(i) the charitable organization has

18 been in continuous operation for not less

19 than 10 years and has total net assets of

20 not less than $10,000,000; and

21 ‘‘(ii) the person receiving

22 compensation—

23 ‘‘(I) is registered, licensed, or

24 certified by a Federal or State agency,

25 self-regulatory organization, or profes-
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1 sional licensing authority as an attor2 ney, financial planner, insurance

3 agent, insurance broker, investment

4 adviser, or public accountant;

5 ‘‘(II) is not subject to any sus6 pension order or other disciplinary ac7 tion from the Commission;

8 ‘‘(III) before completion of the

9 exempted security transaction, clearly

10 and conspicuously discloses in writing

11 to the purchaser of the exempted se12 curity the fact that such person is re13 ceiving compensation in connection

14 with the transaction; and

15 ‘‘(IV) obtains from the purchaser

16 at the time of the purchase of the ex17 empted security a signed statement

18 acknowledging that the purchaser has

19 received and understands the disclo20 sure required under this clause.’’.

21 SEC. 212. NATIONAL MARKET TREATMENT FOR CERTAIN

22 SECURITIES.

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

24 77r) is amended—

25 (1) in subsection (b)—
26

•S 2107 RS

1 (A) in paragraph (1)—

2 (i) in subparagraph (B), by striking

3 ‘‘or’’ at the end;

4 (ii) in subparagraph (C), by striking

5 the period at the end and inserting a semi6 colon; and

7 (iii) by adding at the end the fol8 lowing:

9 ‘‘(D) a warrant or right to purchase or

10 subscribe to any security described in subpara11 graph (A), (B), or (C);

12 ‘‘(E) a security issued by a foreign govern13 ment, or a political subdivision thereof, for

14 which Schedule B has been filed with the Com15 mission pursuant to section 7; or

16 ‘‘(F) an interest in an employee benefit

17 plan and the security underlying the employee

18 benefit plan, if the underlying security is—

19 ‘‘(i) a security described in subpara20 graph (A), (B), or (C); or

21 ‘‘(ii) a foreign equity security that is

22 a ‘margin security’, as that term (or any

23 successor term) is defined in rules and reg24 ulations prescribed by the Board of Gov-
27

•S 2107 RS

1 ernors of the Federal Reserve System.’’;

2 and

3 (B) in paragraph (4)—

4 (i) by striking subparagraph (A) and

5 inserting the following:

6 ‘‘(A) paragraph (1) or (3) of section 4,

7 if—

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

9 reports with the Commission pursuant to

10 section 13 or 15(d) of the Securities Ex11 change Act of 1934; or

12 ‘‘(ii) the transaction involves a foreign

13 equity security that is a ‘margin security’,

14 as that term (or any successor term) is de15 fined in rules or regulations prescribed by

16 the Board of Governors of the Federal Re17 serve System;’’; and

18 (ii) in subparagraph (D), by inserting

19 before the period at the end the following:

20 ‘‘, including any form prescribed by rule or

21 regulation of the Commission that includes

22 a listing of the States in which the securi23 ties are intended to be sold’’;

24 (2) in subsection (c)(2), by striking subpara25 graphs (C) and (D) and inserting the following:
28

•S 2107 RS

1 ‘‘(C) ELIMINATION OF PAPERWORK AND

2 FEES ON CERTAIN COVERED SECURITIES.—Not3 withstanding subparagraphs (A) and (B), no

4 State securities commission (or agency or office

5 performing like functions) may require a notice

6 filing or fee with respect to any security that is

7 a covered security pursuant to—

8 ‘‘(i) subsection (b)(1), or will be such

9 a covered security upon completion of the

10 transaction; or

11 ‘‘(ii) subparagraph (A), (B), or (C) of

12 subsection (b)(4).’’; and

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

14 ‘‘(e) ISSUER AGENTS.—No law of any State, or polit15 ical subdivision thereof, that requires the registration, li16 censing, or qualification of any individual who represents

17 an issuer in effecting or attempting to effect the purchase

18 or sale of securities of the issuer shall apply to any indi19 vidual who represents an issuer in a transaction involving

20 a covered security, as described in subsection (b)(4)(D),

21 if the individual receives no compensation, directly or indi22 rectly, in connection with the offer, sale, or purchase of

23 the security.’’.
29

•S 2107 RS

1 Subtitle B—Enhancement of Dis2 closure and Investment Adviser

3 Regulation

4 SEC. 221. ENSURING ADEQUATE RECORDKEEPING.

5 Section 203A of the Investment Advisers Act of 1940

6 (15 U.S.C. 80b–3a) is amended—

7 (1) by striking subsection (d);

8 (2) by redesignating subsection (e) as sub9 section (d); and

10 (3) in subsection (b)(2)—

11 (A) by striking ‘‘this subsection’’ and in12 serting ‘‘this title’’;

13 (B) by striking ‘‘from investigating’’ and

14 inserting ‘‘from—

15 ‘‘(A) investigating’’;

16 (C) by striking the period at the end and

17 inserting ‘‘; or’’; and

18 (D) by adding at the end the following:

19 ‘‘(B) except as provided in subsection (e),

20 requiring an investment adviser registered

21 under section 203 to file any document filed

22 with the Commission under this title solely for

23 notice purposes, together with a consent to

24 service of process and any required fee.’’.
30

•S 2107 RS

1 SEC. 222. ELIMINATION OF BARRIERS TO PROVIDING SERV2 ICES.

3 Section 203A of the Investment Advisers Act of 1940

4 (15 U.S.C. 80b–3a) is amended by adding at the end the

5 following:

6 ‘‘(e) CERTAIN STATE FILINGS AND FEES PROHIB7 ITED; NATIONAL DE MINIMIS STANDARD FOR ALL IN8 VESTMENT ADVISERS.—Notwithstanding subsection

9 (b)(2)(B), no law of any State or political subdivision

10 thereof requiring the registration, licensing, or qualifica11 tion of an investment adviser shall require—

12 ‘‘(1) the filing of any document with respect to,

13 or any payment of any fee for, a supervised person

14 of an investment adviser registered under section

15 203, if the supervised person does not have a place

16 of business located in the State;

17 ‘‘(2) an investment adviser registered under

18 section 203 to file any document or pay any fee, un19 less the investment adviser—

20 ‘‘(A) has a place of business located within

21 the State; or

22 ‘‘(B) during the 12-month period pre23 ceding the date on which such filing or payment

24 is required under the State law, had more than

25 5 clients who are residents of that State; or
31

•S 2107 RS

1 ‘‘(3) an investment adviser to register, license,

2 qualify, or otherwise comply with such law (other

3 than any provision thereof prohibiting fraudulent

4 conduct), or to file any document or pay any fee, un5 less the investment adviser—

6 ‘‘(A) has a place of business located within

7 the State; or

8 ‘‘(B) during the 12-month period pre9 ceding the date on which such compliance, fil10 ing, or payment is required under the State

11 law, had more than 5 clients who are residents

12 of that State.

13 ‘‘(f) PRESERVATION OF STATE FILING FEES.—Sub14 ject to the limitations provided in this title, a State or

15 political subdivision thereof may require an investment ad16 viser registered under section 203 to pay filing fees.’’.

17 SEC. 223. REDUCING FINANCIAL REPORTING BURDENS.

18 Section 222 of the Investment Advisers Act of 1940

19 (15 U.S.C. 80b–18a) is amended by striking subsection

20 (d) and inserting the following:

21 ‘‘(d) LIMITATION ON FINANCIAL REPORTING RE22 QUIREMENTS.—No State may enforce any law or regula23 tion that would require an investment adviser to maintain

24 or file with that State any financial report, in addition

25 to those required under the laws of the State in which
32

•S 2107 RS

1 the investment adviser maintains its principal place of

2 business, if the investment adviser—

3 ‘‘(1) is registered or licensed as an investment

4 adviser in the State in which it maintains its prin5 cipal place of business;

6 ‘‘(2) is in compliance with the applicable finan7 cial reporting requirements of the State in which it

8 maintains its principal place of business; and

9 ‘‘(3) has not taken custody of the assets of any

10 client residing in that State at any time during the

11 12-month period preceding the date on which the fi12 nancial report otherwise would be required to be

13 filed with that State.

14 ‘‘(e) LIMITATION ON STATE FEES AND FILINGS.—

15 ‘‘(1) IN GENERAL.—Beginning 90 days after

16 the date of enactment of this subsection, no law of

17 any State or political subdivision thereof requiring

18 the registration, licensing, or qualification of an in19 vestment adviser may require an investment adviser

20 registered under section 203, an investment adviser

21 having its principal place of business in another

22 State, or an investment adviser representative of ei23 ther such adviser to pay any fee to or file any docu24 ment with the securities commission (or any agency

25 or office performing like functions) of that State,
33

•S 2107 RS

1 unless the State or the securities commission accepts

2 registration and renewal materials, documents filed

3 solely for notice purposes, and related fees through

4 an entity designated under section 204(b), except as

5 provided in paragraph (2).

6 ‘‘(2) EXCEPTION FOR DIRECT PAYMENTS AND

7 FILINGS.—A State may require the direct payment

8 of any fees to and the paper filing of any registra9 tion materials or documents with the State, filed

10 solely for notice purposes, if—

11 ‘‘(A) the entity designated under section

12 204(b) is not capable of electronically transmit13 ting such fees, filings, and documents to the

14 State;

15 ‘‘(B) the investment adviser having its

16 principal place of business in another State

17 does not file through the entity designated

18 under section 204(b); or

19 ‘‘(C) the investment adviser has otherwise

20 been granted regulatory relief from filing or

21 payment in accordance with paragraph (1) for

22 hardship reasons.’’.

23 SEC. 224. ENHANCING TRANSPARENCY OF RECORDS.

24 (a) DISCIPLINARY AND OTHER RECORDS OF BRO25 KERS, DEALERS, AND ASSOCIATED PERSONS.—Section
34

•S 2107 RS

1 15A(i) of the Securities Exchange Act of 1934 (15 U.S.C.

2 78o–3(i)) is amended—

3 (1) by striking ‘‘(i) A registered’’ and inserting

4 the following:

5 ‘‘(i) ACCESS TO DISCIPLINARY AND OTHER INFOR6 MATION.—

7 ‘‘(1) TELEPHONE ACCESS.—A registered’’;

8 (2) by striking ‘‘section, (1) establish’’ and in9 serting the following: ‘‘section—

10 ‘‘(A) establish’’;

11 (3) by striking ‘‘, and (2) promptly’’ and all

12 that follows through the end and inserting the fol13 lowing: ‘‘and the members and associated persons of

14 any registered national securities exchange; and

15 ‘‘(B) promptly respond to such inquiries in

16 writing.’’; and

17 (4) by adding at the end the following:

18 ‘‘(2) ELECTRONIC ACCESS.—A registered secu19 rities association shall—

20 ‘‘(A) establish and maintain a readily ac21 cessible electronic process to receive inquiries

22 about its members and their associated persons,

23 and the members and associated persons of any

24 registered national securities exchange,

25 regarding—
35

•S 2107 RS

1 ‘‘(i) disciplinary actions, proceedings,

2 and arbitrations involving members and

3 their associated persons, including those

4 that have been reported to the Central

5 Registration Depository; and

6 ‘‘(ii) the employment history, registra7 tion status, and licensing status of such

8 members and their associated persons; and

9 ‘‘(B) promptly respond to such inquiries.

10 ‘‘(3) RECOVERY OF COSTS.—A registered secu11 rities association may charge persons, other than in12 dividual investors, reasonable fees for responses to

13 inquiries referred to in paragraphs (1) and (2).

14 ‘‘(4) LIMITATION ON LIABILITY.—A registered

15 securities association or registered national securities

16 exchange shall not have any liability to any person

17 for any action taken or omitted in good faith under

18 this subsection.’’.

19 (b) DISCIPLINARY AND OTHER RECORDS OF INVEST20 MENT ADVISERS AND ASSOCIATED PERSONS.—Section

21 204 of the Investment Advisers Act of 1940 (15 U.S.C.

22 80b–4) is amended—

23 (1) by inserting ‘‘(a) IN GENERAL.—’’ after

24 ‘‘SEC. 204.’’; and

25 (2) by adding at the end the following:
36

•S 2107 RS

1 ‘‘(b) FILING DEPOSITORIES.—The Commission, by

2 rule, may require an investment adviser—

3 ‘‘(1) to file with the Commission any applica4 tion, report, or notice required to be filed by this

5 title or the rules issued under this title through an

6 entity designated by the Commission for that pur7 pose; and

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

9 such filing and the establishment and maintenance

10 of the systems required by subsection (c).

11 ‘‘(c) ACCESS TO DISCIPLINARY AND OTHER INFOR12 MATION.—

13 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND

14 TO INQUIRIES.—The Commission shall require an

15 entity designated by the Commission under sub16 section (b)(1)—

17 ‘‘(A) to establish and maintain a toll-free

18 telephone listing or other readily accessible elec19 tronic process to receive inquiries about invest20 ment advisers and persons associated with in21 vestment advisers concerning—

22 ‘‘(i) disciplinary actions, proceedings,

23 and arbitrations involving such investment

24 advisers and associated persons; and
37

•S 2107 RS

1 ‘‘(ii) the registration status of such

2 investment advisers and associated per3 sons; and

4 ‘‘(B) to respond promptly to such inquir5 ies.

6 ‘‘(2) RECOVERY OF COSTS.—An entity des7 ignated by the Commission under subsection (b)(1)

8 may charge persons, other than individual investors,

9 reasonable fees for responses to inquiries made

10 under paragraph (1).

11 ‘‘(3) LIMITATION ON LIABILITY.—An entity

12 designated by the Commission under subsection

13 (b)(1) shall not have any liability to any person for

14 any action taken or omitted in good faith under this

15 subsection.’’.

16 (c) CONFORMING AMENDMENT TO NSMIA OF

17 1996.—Sections 306 and 307 of the National Securities

18 Markets Improvement Act of 1996 (Public Law 104–290;

19 110 Stat. 3438) are repealed.
Calendar No. 712

106TH CONGRESS

2D SESSION S. 2107

[Report No. 106–360]

A BILL

To amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to reduce securities

fees in excess of those required to fund the operations of the Securities and Exchange Commission, to adjust compensation provisions for employees of the Commission, and for other purposes.

JULY 25, 2000

Reported with amendments