IB
Union Calendar No. 310
104TH CONGRESS
2D SESSION
H. R. 3005
[Report No. 104–622]
To amend the Federal securities laws in order to promote efficiency and
capital formation in the financial markets, and to amend the Investment
Company Act of 1940 to promote more efficient management of mutual
funds, protect investors, and provide more effective and less burdensome
regulation.
IN THE HOUSE OF REPRESENTATIVES
MARCH 5, 1996
Mr. FIELDS of Texas introduced the following bill; which was referred to the
Committee on Commerce
JUNE 17, 1996
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on March 5, 1996]
A BILL
To amend the Federal securities laws in order to promote
efficiency and capital formation in the financial markets,
and to amend the Investment Company Act of 1940
to promote more efficient management of mutual funds,
protect investors, and provide more effective and less
burdensome regulation.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Se-
curities Amendments of 1996’’.
(b) TABLE OF CONTENTS.—The table of contents of this
Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—CAPITAL MARKETS DEREGULATION AND LIBERALIZATION
Sec. 101. Short title.
Sec. 102. Creation of national securities markets.
Sec. 103. Margin requirements.
Sec. 104. Prospectus delivery.
Sec. 105. Exemptive authority.
Sec. 106. Promotion of efficiency, competition, and capital formation.
Sec. 107. Privatization of EDGAR.
Sec. 108. Coordination of Examining Authorities.
Sec. 109. Foreign press conferences.
Sec. 110. Report on Trust Indenture Act of 1939.
TITLE II—INVESTMENT COMPANY ACT AMENDMENTS
Sec. 201. Short title.
Sec. 202. Funds of funds.
Sec. 203. Registration of securities.
Sec. 204. Investment company advertising prospectus.
Sec. 205. Variable insurance contracts.
Sec. 206. Reports to the Commission and shareholders.
Sec. 207. Books, records and inspections.
Sec. 208. Investment company names.
Sec. 209. Exceptions from definition of investment company.
TITLE I—CAPITAL MARKETS DE-
REGULATION AND LIBERAL-
IZATION
SEC. 101. SHORT TITLE.
This title may be cited as the ‘‘Capital Markets De-
regulation and Liberalization Act of 1996’’.
SEC. 102. CREATION OF NATIONAL SECURITIES MARKETS.
(a) SECURITIES ACT OF 1933.—
(1) AMENDMENT.—Section 18 of the Securities
Act of 1933 (15 U.S.C. 77r) is amended to read as
follows:
‘‘SEC. 18. EXEMPTION FROM STATE REGULATION OF SECU-
RITIES OFFERINGS.
‘‘(a) SCOPE OF EXEMPTION.—Except as otherwise pro-
vided in this section, no law, rule, regulation, or order, or
other administrative action of any State or Territory of the
United States, or the District of Columbia, or any political
subdivision thereof—
‘‘(1) requiring, or with respect to, registration or
qualification of securities, or registration or qualifica-
tion of securities transactions, shall directly or indi-
rectly apply to a security that—
‘‘(A) is a covered security; or
‘‘(B) will be a covered security upon com-
pletion of the transaction;
‘‘(2) shall directly or indirectly prohibit, limit,
or impose conditions upon the use of—
‘‘(A) with respect to a covered security de-
scribed in subsection (b)(1) or (c)(1)—
‘‘(i) any offering document that is pre-
pared by the issuer; or
‘‘(ii) any offering document that is not
prepared by the issuer if such offering docu-
ment is required to be and is filed with the
Commission or any national securities or-
ganization registered under section 15A of
the Securities Exchange Act of 1934 (15
U.S.C. 78o-3);
‘‘(B) with respect to a covered security de-
scribed in paragraph (2), (3), or (4) of sub-
section (b), any offering document; or
‘‘(C) any proxy statement, report to share-
holders, or other disclosure document relating to
a covered security or the issuer thereof that is re-
quired to be and is filed with the Commission or
any national securities organization registered
under section 15A of the Securities Exchange Act
of 1934 (15 U.S.C. 78o-3); or
‘‘(3) shall directly or indirectly prohibit, limit,
or impose conditions, based on the merits of such of-
fering or issuer, upon the offer or sale of any security
described in paragraph (1).
‘‘(b) COVERED SECURITIES.—For purposes of this sec-
tion, the following are covered securities:
‘‘(1) EXCLUSIVE FEDERAL REGISTRATION OF NA-
TIONALLY TRADED SECURITIES.—A security is a cov-
ered security if such security is—
‘‘(A) listed, or authorized for listing, on the
New York Stock Exchange or the American Stock
Exchange, or included or qualified for inclusion
in the National Market System of the National
Association of Securities Dealers Automated
Quotation System (or any successor to such enti-
ties);
‘‘(B) listed, or authorized for listing, on a
national securities exchange (or tier or segment
thereof) that has listing standards that the Com-
mission determines by rule (on its own initiative
or on the basis of a petition) are substantially
similar to the listing standards applicable to se-
curities described in subparagraph (A); or
‘‘(C) is a security of the same issuer that is
equal in seniority or senior to a security de-
scribed in subparagraph (A) or (B).
‘‘(2) EXCLUSIVE FEDERAL REGISTRATION OF IN-
VESTMENT COMPANIES.—A security is a covered secu-
rity if such security is a security issued by an invest-
ment company that is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a et seq.).
‘‘(3) SALES TO QUALIFIED PURCHASERS.—A se-
curity is a covered security with respect to the offer
or sale of the security to qualified purchasers, as de-
fined by the Commission by rule. In prescribing such
rule, the Commission may define qualified purchaser
differently with respect to different categories of secu-
rities, consistent with the public interest and the pro-
tection of investors.
‘‘(4) EXEMPTION IN CONNECTION WITH CERTAIN
EXEMPT OFFERINGS.—A security is a covered security
if—
‘‘(A) the offer or sale of such security is ex-
empt from registration under this title pursuant
to section 4(1) or 4(3), and—
‘‘(i) the issuer of such security files re-
ports with the Commission pursuant to sec-
tion 13 or 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m, 78o(d)); or
‘‘(ii) the issuer is exempt from filing
such reports;
‘‘(B) such security is exempt from registra-
tion under this title pursuant to section 4(4);
‘‘(C) the offer or sale of such security is ex-
empt from registration under this title pursuant
to section 3(a), other than the offer or sale of a
security that is exempt from such registration
pursuant to paragraph (4) or (11) of such sec-
tion, except that a municipal security that is ex-
empt from such registration pursuant to para-
graph (2) of such section is not a covered secu-
rity with respect to the offer or sale of such secu-
rity in the State in which such security is is-
sued; or
‘‘(D) the offer or sale of such security is ex-
empt from registration under this title pursuant
to Commission rule or regulation under section
4(2) of this title.
‘‘(c) CONDITIONALLY COVERED SECURITIES.—
‘‘(1) FEDERALLY
REGISTERED
OFFERINGS.—
Subject to the limitations contained in paragraphs
(2) and (3), a security is a covered security if—
‘‘(A) the issuer of such security has (or will
have upon conclusion of the transaction) total
assets exceeding $10,000,000;
‘‘(B) such security is the subject of a reg-
istration statement that is filed with the Com-
mission pursuant to this title; and
‘‘(C) the issuer files with such registration
statement audited financial statements for each
of the two most recent fiscal years of its oper-
ations ending before the filing of the registration
statement.
‘‘(2) LIMITATIONS FOR CERTAIN OFFERINGS.—
Notwithstanding paragraph (1), a security is not a
covered security if such security is—
‘‘(A) a security of an issuer which is a
blank check company (as defined in section 7(b)
of this title), a partnership, a limited liability
company, or a direct participation investment
program;
‘‘(B) a penny stock (as such term is defined
in section 3(a)(51) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)(51)); or
‘‘(C) a security issued in an offering relat-
ing to a rollup transaction (as such term is de-
fined in paragraphs (4) and (5) of section 14(h)
of such Act (15 U.S.C. 78n(h)(4), (5)).
‘‘(3) LIMITATIONS BASED ON MISCONDUCT.—Not-
withstanding paragraph (1), a security is not a cov-
ered security—
‘‘(A) with respect to any State, if the issuer,
or a principal officer or principal shareholder
thereof—
‘‘(i) is subject to a statutory disquali-
fication, as defined in subparagraph (A),
(B), (C), or (D) of section 3(a)(39) of the
Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(39));
‘‘(ii) has been convicted within 5 years
prior to the offering of any felony under
Federal or State law in connection with the
offer, purchase, or sale of any security, or
any felony under Federal or State law in-
volving fraud or deceit; or
‘‘(iii) is currently named in and sub-
ject to any order, judgment, or decree of any
court of competent jurisdiction acting pur-
suant to Federal or State law temporarily
or permanently restraining or enjoining
such issuer, officer, or shareholder from en-
gaging in or continuing any conduct or
practice in connection with a security; or
‘‘(B) with respect to a particular State, if
the issuer, or a principal officer or principal
shareholder thereof—
‘‘(i) has filed a registration statement
which is the subject of a currently effective
stop order entered pursuant to that State’s
securities laws within 5 years prior to the
offering;
‘‘(ii) is currently named in and subject
to any administrative enforcement order or
judgment of that State’s securities commis-
sion (or any agency or office performing
like functions) entered within 5 years prior
to the offering, or is currently named in
and subject to any other administrative en-
forcement order or judgment of that State
entered within 5 years prior to the offering
that finds fraud or deceit; or
‘‘(iii) is currently named in and sub-
ject to any administrative enforcement
order or judgment of that State which pro-
hibits or denies registration, or revokes the
use of any exemption from registration, in
connection with the offer, purchase, or sale
of securities.
‘‘(4) EXCEPTIONS TO LIMITATIONS.—
‘‘(A) EXEMPTIONS.—The limitations in
paragraph (3)(A) shall not apply if the Commis-
sion has exempted the subject person from the
application of such paragraph by rule or order,
and the limitations in paragraph (3)(B) shall
not apply if the securities commission (or any
agency or office performing like functions) of the
ment of a security that qualifies as a covered security
under subsection (b).
‘‘(d) PRESERVATION OF AUTHORITY.—
‘‘(1) FRAUD AUTHORITY.—Consistent with this
section, the securities commission (or any agency or
office performing like functions) of any State or Ter-
ritory of the United States, or the District of Colum-
bia, shall retain jurisdiction under the laws of such
State, Territory, or District to investigate and bring
enforcement actions with respect to fraud or deceit in
connection with securities or securities transactions.
‘‘(2) 
PRESERVATION
OF
FILING
REQUIRE-
MENTS.—
‘‘(A) NOTICE
FILINGS
PERMITTED.—Noth-
ing contained in this section shall prohibit the
securities commission (or any agency or office
performing like functions) of any State or Terri-
tory of the United States, or the District of Co-
lumbia, from requiring the filing of any docu-
ments filed with the Commission pursuant to
this title solely for notice purposes, together with
any required fee.
‘‘(B) PRESERVATION OF FEES.—Until oth-
erwise provided by State law enacted after the
date of enactment of the Securities Amendments
of 1996, filing or registration fees with respect to
securities or securities transactions may continue
to be collected in amounts determined pursuant
to State law as in effect on the day before such
date.
‘‘(C) FEES NOT PERMITTED ON LISTED SE-
CURITIES.—Notwithstanding subparagraphs (A)
and (B), no filing or fee may be required with
respect to any security that is a covered security
pursuant to subsection (b)(1) of this section, or
will be such a covered security upon completion
of the transaction, or is a security of the same
issuer that is equal in seniority or senior to a
security that is a covered security pursuant to
such subsection.
‘‘(3) ENFORCEMENT OF REQUIREMENTS.—Noth-
ing in this section shall prohibit the securities com-
mission (or any agency or office performing like func-
tions) of any State or Territory of the United States,
or the District of Columbia, from suspending the offer
or sale of securities within such State, Territory, or
District as a result of the failure to submit any filing
or fee required under law and permitted under this
section.
‘‘(e) DEFINITIONS.—For purposes of this section:
‘‘(1) PRINCIPAL OFFICER.—The term ‘principal
officer’ means a director, chief executive officer, or
chief financial officer of an issuer, or any other officer
performing like functions.
‘‘(2) 
PRINCIPAL
SHAREHOLDER.—The 
term
‘principal shareholder’ means any person who is di-
rectly or indirectly the beneficial owner of more than
20 percent of any class of equity security of an issuer.
When two or more persons act as a partnership, lim-
ited partnership, syndicate, or other group for the
purpose of acquiring, holding, or disposing of securi-
ties of an issuer, such syndicate or group shall be
deemed a ‘person’ for purposes of this paragraph. In
determining, for purposes of this paragraph, any per-
centage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding se-
curities of such class, exclusive of any securities of
such class held by or for the account of the issuer or
a subsidiary of the issuer.
‘‘(3) OFFERING DOCUMENT.—The term ‘offering
document’ has the meaning given the term ‘prospec-
tus’ by section 2(10), but without regard to the provi-
sions of clauses (a) and (b) of such section, except
that, with respect to a security described in subsection
(b)(2) of this section, such term also includes a com-
munication that is not deemed to offer such a security
pursuant to a rule of the Commission.
‘‘(4) PREPARED
BY
THE
ISSUER.—Within 6
months after the date of enactment of the Securities
Amendments of 1996, the Commission shall, by rule,
define the term ‘prepared by the issuer’ for purposes
of this section.’’.
(2) STUDY OF UNIFORMITY.—The Securities Ex-
change Commission shall conduct a study after con-
sultation with States, issuers, brokers, and dealers on
the extent to which uniformity of State regulatory re-
quirements for securities or securities transactions has
been achieved for securities that are not covered secu-
rities (within the meaning of section 18 of the Securi-
ties Act of 1933 as amended by paragraph (1) of this
subsection). Such study shall specifically focus on the
impact of such uniformity or lack thereof on the cost
of capital, innovation and technological development
in securities markets, and duplicative regulation with
respect to securities issuers (including small business),
brokers, and dealers and the effect on investor protec-
tion. The Commission shall submit to the Congress a
report on the results of such study within one year
after the date of enactment of this Act.
(b) BROKER/DEALER REGULATION.—
(1) AMENDMENT.—Section 15 of the Securities
Exchange Act of 1934 (15 U.S.C. 78o) is amended by
adding at the end the following new subsection:
‘‘(h) LIMITATIONS ON STATE LAW.—
‘‘(1) CAPITAL, MARGIN, BOOKS
AND
RECORDS,
BONDING, AND REPORTS.—No law, rule, regulation, or
order, or other administrative action of any State or
political subdivision thereof shall establish capital,
custody, margin, financial responsibility, making and
keeping records, bonding, or financial or operational
reporting requirements for brokers, dealers, municipal
securities dealers, government securities brokers, or
government securities dealers that differ from, or are
in addition to, the requirements in those areas estab-
lished under this title. The Commission shall consult
periodically the securities commissions (or any agen-
cy or office performing like functions) of the States
concerning the adequacy of such requirements as es-
tablished under this title.
‘‘(2) EXEMPTION TO PERMIT SERVICE TO CUS-
TOMERS.—No law, rule, regulation, or order, or other
administrative action of any State or political sub-
division thereof shall prohibit an associated person
from effecting a transaction described in paragraph
(3) for a customer in such State if—
‘‘(A) such associated person is not ineligible
to register with such State for any reason other
than such a transaction;
‘‘(B) such associated person is registered
with a registered securities association and at
least one State; and
‘‘(C) the broker or dealer with which such
person is associated is registered with such State.
‘‘(3) DESCRIBED TRANSACTIONS.—A transaction
is described in this paragraph if—
‘‘(A) such transaction is effected—
‘‘(i) on behalf of a customer that, for
30 days prior to the day of the transaction,
maintains an account with the broker or
dealer; and
‘‘(ii) by an associated person (I) to
which the customer was assigned for 14
days prior to the day of the transaction,
and (II) who is registered with a State in
which the customer was a resident or was
present for at least 30 consecutive days dur-
ing the one-year period prior to the trans-
action;
except that, if the customer is present in another
State for 30 or more consecutive days or has per-
manently changed his or her residence to another
State, such transaction is not described in this
subparagraph unless the associated person files
with such State an application for registration
within 10 business days of the later of the date
of the transaction or the date of the discovery of
the presence of the customer in the State for 30
or more consecutive days or the change in the
customer’s residence;
‘‘(B) the transaction is effected—
‘‘(i) on behalf of a customer that, for
30 days prior to the day of the transaction,
maintains an account with the broker or
dealer; and
‘‘(ii) within the period beginning on
the date on which such associated person
files with the State in which the transaction
is effected an application for registration
and ending on the earlier of (I) 60 days
after the date the application is filed, or
(II) the time at which such State notifies
the associated person that it has denied the
application for registration or has stayed
the pendency of the application for cause; or
‘‘(C) the transaction is one of 10 or fewer
transactions in a calendar year (excluding any
transactions described in subparagraph (A) or
(B)) which the associated person effects in the
States in which the associated person is not reg-
istered.
‘‘(4) ALTERNATE
ASSOCIATED
PERSONS.—For
purposes of paragraph (3)(A)(ii), each of up to 3 as-
sociated persons who are designated to effect trans-
actions during the absence or unavailability of the
principal associated person for a customer may be
treated as an associated person to which such cus-
tomer is assigned for purposes of such paragraph.’’.
(2) STUDY.—Within 6 months after the date of
enactment of this Act, the Commission, after consulta-
tion with registered securities associations, national
securities exchanges, and States, shall conduct a study
of—
(A) the impact of disparate State licensing
requirements on associated persons of registered
brokers or dealers; and
(B) methods for States to attain uniform li-
censing requirements for such persons.
(3) REPORT.—Within one year after the date of
enactment of this Act, the Commission shall submit to
the Congress a report on the study conducted under
paragraph (2). Such report shall include rec-
ommendations concerning appropriate methods de-
scribed in paragraph (2)(B), including any necessary
legislative changes to implement such recommenda-
tions.
(4) TECHNICAL AMENDMENT.—Section 28(a) of
the Securities Exchange Act of 1934 (15 U.S.C.
78bb(a)) is amended by striking ‘‘Nothing’’ and in-
serting ‘‘Except as otherwise specifically provided
elsewhere in this title, nothing’’.
SEC. 103. MARGIN REQUIREMENTS.
(a) MARGIN REQUIREMENTS.—
(1) EXTENSIONS OF CREDIT BY BROKER-DEAL-
ERS.—Section 7(c) of the Securities Exchange Act of
1934 (15 U.S.C. 78g(c)) is amended to read as fol-
lows:
‘‘(c) 
UNLAWFUL
CREDIT
EXTENSION
TO
CUS-
TOMERS.—
‘‘(1) PROHIBITION.—It shall be unlawful for any
member of a national securities exchange or any
broker or dealer, directly or indirectly, to extend or
maintain credit or arrange for the extension or main-
tenance of credit to or for any customer—
‘‘(A) on any security (other than an ex-
empted security), in contravention of the rules
and regulations which the Board of Governors of
the Federal Reserve System shall prescribe under
subsections (a) and (b) of this section;
‘‘(B) without collateral or on any collateral
other than securities, except in accordance with
such rules and regulations as the Board of Gov-
ernors of the Federal Reserve System may pre-
scribe—
‘‘(i) to permit under specified condi-
tions and for a limited period any such
member, broker, or dealer to maintain a
credit initially extended in conformity with
the rules and regulations of the Board of
governors of the Federal Reserve System;
and
‘‘(ii) to permit the extension or main-
tenance of credit in cases where the exten-
sion or maintenance of credit is not for the
purpose of purchasing or carrying securities
or of evading or circumventing the provi-
sions of subparagraph (A) of this para-
graph.
‘‘(2) EXCEPTION.—This subsection and the rules
and regulations thereunder shall not apply to any
credit extended, maintained, or arranged by a mem-
ber of a national securities exchange or a broker or
dealer to or for a member of a national securities ex-
change or a registered broker or dealer—
‘‘(A) a substantial portion of whose business
consists of transactions with persons other than
brokers or dealers; or
‘‘(B) to finance its activities as a market
maker or an underwriter;
except that the Board of Governors of the Federal Re-
serve System may impose such rules and regulations,
in whole or in part, on any credit otherwise exempted
by this paragraph if it determines that such action is
necessary or appropriate in the public interest or for
the protection of investors.’’.
(2) EXTENSIONS OF CREDIT BY OTHER LEND-
ERS.—Section 7(d) of the Securities Exchange Act of
1934 (78 U.S.C. 78g(d)) is amended to read as fol-
lows:
‘‘(d) UNLAWFUL CREDIT EXTENSION IN VIOLATION OF
RULES AND REGULATIONS; EXCEPTION TO APPLICATION OF
RULES, ETC.—
‘‘(1) PROHIBITION.—It shall be unlawful for any
person not subject to subsection (c) of this section to
extend or maintain credit or to arrange for the exten-
sion or maintenance of credit for the purpose of pur-
chasing or carrying any security, in contravention of
such rules and regulations as the Board of Governors
of the Federal Reserve System shall prescribe to pre-
vent the excessive use of credit for the purchasing or
carrying of or trading in securities in circumvention
of the other provisions of this section. Such rules and
regulations may impose upon all loans made for the
purpose of purchasing or carrying securities limita-
tions similar to those imposed upon members, brokers,
or dealers by subsection (c) of this section and the
rules and regulations thereunder.
‘‘(2) EXCEPTIONS.—This subsection and the
rules and regulations thereunder shall not apply to
any credit extended, maintained, or arranged—
‘‘(A) by a person not in the ordinary course
of business;
‘‘(B) on an exempted security;
‘‘(C) to or for a member of a national secu-
rities exchange or a registered broker or dealer—
‘‘(i) a substantial portion of whose
business consists of transactions with per-
sons other than brokers or dealers; or
‘‘(ii) to finance its activities as a mar-
ket maker or an underwriter;
‘‘(D) by a bank on a security other than an
equity security; or
‘‘(E) as the Board of Governors of the Fed-
eral Reserve System shall, by such rules, regula-
tions, or orders as it may deem necessary or ap-
propriate in the public interest or for the protec-
tion of investors, exempt, either unconditionally
or upon specified terms and conditions or for
stated periods, from the operation of this sub-
section and the rules and regulations thereunder;
except that the Board of Governors of the Federal Re-
serve System may impose such rules and regulations,
in whole or in part, on any credit otherwise exempted
by subparagraph (C) of this paragraph if it deter-
mines that such action is necessary or appropriate in
the public interest or for the protection of investors.’’.
(b) BORROWING BY MEMBERS, BROKERS, AND DEAL-
ERS.—Section 8 of the Securities Exchange Act of 1934 (15
U.S.C. 78h) is amended—
(1) by striking subsection (a), and
(2) by redesignating subsections (b) and (c) as
subsections (a) and (b), respectively.
SEC. 104. PROSPECTUS DELIVERY.
(a) REPORT ON ELECTRONIC DELIVERY.—Within six
months after the date of enactment of this Act, the Commis-
sion shall report to Congress on the steps the Commission
has taken, or anticipates taking, to facilitate the electronic
delivery of prospectuses to institutional and other investors.
(b) REPORT ON ADVISORY COMMITTEE RECOMMENDA-
TIONS.—Within one year after the date of enactment of this
Act, the Commission shall report to Congress on the Com-
mission’s views on the recommendations of the Advisory
Committee on Capital Formation, including any actions
taken to implement the recommendations of the Advisory
Committee.
SEC. 105. EXEMPTIVE AUTHORITY.
(a) GENERAL EXEMPTIVE AUTHORITY UNDER THE
SECURITIES ACT OF 1933.—Title I of the Securities Act
of 1933 (15 U.S.C. 77a et seq.) is amended by adding at
the end the following new section:
‘‘SEC. 28. GENERAL EXEMPTIVE AUTHORITY.
‘‘The Commission, by rules and regulations, may con-
ditionally or unconditionally exempt any person, security,
or transaction, or any class or classes of persons, securities,
or transactions, from any provision or provisions of this
title or of any rule or regulation thereunder, to the extent
that such exemption is necessary or appropriate in the pub-
lic interest, and is consistent with the protection of inves-
tors.’’.
(b) GENERAL EXEMPTIVE AUTHORITY UNDER THE
SECURITIES EXCHANGE ACT OF 1934.—Title I of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by adding at the end the following new section:
‘‘SEC. 36. GENERAL EXEMPTIVE AUTHORITY.
‘‘Notwithstanding any other provision of this title, the
Commission, by rule, regulation, or order, may condi-
tionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities,
or transactions, from any provision or provisions of this
title or of any rule or regulation thereunder, to the extent
that such exemption is necessary or appropriate in the pub-
lic interest, and is consistent with the protection of inves-
tors. The Commission shall by rules and regulations deter-
mine the procedures under which an exemptive order under
this section shall be granted and may, in its sole discretion,
decline to entertain any application for an order of exemp-
tion under this section.’’.
SEC. 106. PROMOTION OF EFFICIENCY, COMPETITION, AND
CAPITAL FORMATION.
(a) SECURITIES ACT OF 1933.—Section 2 of the Secu-
rities Act of 1933 (15 U.S.C. 77b) is amended—
(1) by inserting ‘‘(a) DEFINITIONS.—’’ after
‘‘SEC. 2.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) CONSIDERATION OF PROMOTION OF EFFICIENCY,
COMPETITION, AND CAPITAL FORMATION.—Whenever pur-
suant to this title the Commission is engaged in rulemaking
and is required to consider or determine whether an action
is necessary or appropriate in the public interest, the Com-
mission shall also consider, in addition to the protection
of investors, whether the action will promote efficiency, com-
petition, and capital formation.’’.
(b) SECURITIES EXCHANGE ACT of 1934.—Section 3
of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is
amended by adding at the end the following new subsection:
‘‘(f) CONSIDERATION OF PROMOTION OF EFFICIENCY,
COMPETITION, AND CAPITAL FORMATION.—Whenever pur-
suant to this title the Commission is engaged in rule-
making, or in the review of a rule of a self-regulatory orga-
nization, and is required to consider or determine whether
an action is necessary or appropriate in the public interest,
the Commission shall also consider, in addition to the pro-
tection of investors, whether the action will promote effi-
ciency, competition, and capital formation.’’.
(c) INVESTMENT COMPANY ACT of 1940.—Section 2 of
the Investment Company Act of 1940 (15 U.S.C. 80a–2)
is amended by adding at the end the following new sub-
section:
‘‘(c) CONSIDERATION OF PROMOTION OF EFFICIENCY,
COMPETITION, AND CAPITAL FORMATION.—Whenever pur-
suant to this title the Commission is engaged in rulemaking
and is required to consider or determine whether an action
is consistent with the public interest, the Commission shall
also consider, in addition to the protection of investors,
whether the action will promote efficiency, competition, and
capital formation.’’.
SEC. 107. PRIVATIZATION OF EDGAR.
(a) EXAMINATION.—The Securities and Exchange
Commission shall examine proposals for the privatization
of the EDGAR system. Such examination shall promote
competition in the automation and rapid collection and
dissemination of information required to be disclosed. Such
examination shall include proposals that maintain free
public access to data filings in the EDGAR system.
(b) REVIEW AND REPORT.—Within 180 days after the
date of enactment of this Act, the Commission shall submit
to the Congress a report on the examination under sub-
section (a). Such report shall include such recommendations
for such legislative action as may be necessary to implement
the proposal that the Commission determines most effec-
tively achieves the objectives described in subsection (a).
SEC. 108. COORDINATION OF EXAMINING AUTHORITIES.
(a) AMENDMENTS.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended by adding
at the end the following new subsection:
‘‘(i) COORDINATION OF EXAMINING AUTHORITIES.—
‘‘(1) ELIMINATION OF DUPLICATION.—The Com-
mission and the examining authorities, through co-
operation and coordination of examination and over-
sight as required by this subsection, shall eliminate
any unnecessary and burdensome duplication in the
examination process.
‘‘(2) PLANNING CONFERENCES.—
‘‘(A) The Commission and the examining
authorities shall meet at least annually for a na-
tional general planning conference to discuss co-
ordination of examination schedules and prior-
ities and other areas of interest relevant to exam-
ination coordination and cooperation.
‘‘(B) Within each geographic region des-
ignated by the Commission, the Commission and
the relevant examining authorities shall meet at
least annually for a regional planning conference
to discuss examination schedules and priorities
and other areas of related interest, and to en-
courage information-sharing and to avoid unnec-
essary duplication of examinations.
‘‘(3) COORDINATION
TRACKING
SYSTEM
FOR
BROKER-DEALER EXAMINATIONS.—
‘‘(A) The Commission and the examining
authorities shall prepare, on a periodic basis in
a uniform computerized format, information on
registered broker and dealer examinations and
shall submit such information to the Commis-
sion.
‘‘(B) The Commission shall maintain a
computerized database of consolidated examina-
tion information to be used for examination
planning and scheduling and for monitoring co-
ordination of registered broker and dealer exami-
nations under this section.
‘‘(4) COORDINATION OF EXAMINATIONS.—
‘‘(A) The examining authorities shall share
among themselves such information, including
reports of examinations, customer complaint in-
formation, and other non-public regulatory in-
formation, as appropriate to foster a coordinated
approach to regulatory oversight of registered
brokers and dealers subject to examination by
more than one examining authority.
‘‘(B) To the extent practicable, the examin-
ing authorities shall assure that each registered
broker and dealer subject to examination by
more than one examining authority that requests
a coordinated examination shall have all re-
quested aspects of the examination conducted si-
multaneously and without duplication of the
areas covered. The examining authorities shall
also prepare an advance schedule of all such co-
ordinated examinations.
‘‘(5) PROHIBITED NON-COORDINATED EXAMINA-
TIONS.—Any examining authority that does not par-
ticipate in a coordinated examination pursuant to
paragraph (4) of this subsection shall not conduct a
routine examination other than a coordinated exam-
ination of that broker or dealer within 9 months of
the conclusion of a scheduled coordinated examina-
tion.
‘‘(6) EXAMINATIONS FOR CAUSE.—At any time,
any examining authority may conduct an examina-
tion for cause of any broker or dealer subject to its
jurisdiction.
‘‘(7) BROKER-DEALER EXAMINATION EVALUATION
PANEL.—The Commission shall establish an examina-
tion evaluation panel composed of representatives of
registered brokers and dealers that are members of
more than one self-regulatory organization that con-
ducts routine examinations. Prior to each national
general planning conference required by paragraph
(2)(A) of this subsection, the Commission shall con-
vene the examination evaluation panel to review con-
solidated and statistical information on the coordina-
tion of examinations and information on examina-
tions that are not coordinated, including the findings
of Commission examiners on the effectiveness of the
examining authorities in achieving coordinated ex-
aminations. The Commission shall present any find-
ings and recommendations of the examination evalua-
tion panel to the next meeting of the national general
planning conference, and shall report back to the ex-
amination evaluation panel on the actions taken by
the examining authorities regarding those findings
and recommendations. The examination evaluation
panel shall not be subject to the Federal Advisory
Committee Act (5 U.S.C. App.).
‘‘(8) REPORT TO CONGRESS.—Within one year
after the date of enactment of this Act, the Commis-
sion shall report to the Congress on the progress it
and the examining authorities have made in reducing
duplication and improving coordination in registered
broker and dealer examinations, and on the activities
of the examination evaluation panel. Such report
shall also indicate whether the Commission has iden-
tified additional redundancies that have failed to be
addressed in the coordination of examining authori-
ties, or any recommendations of the examination
evaluation panel established under paragraph (7) of
this subsection that have not been addressed by the ex-
amining authorities or the Commission.’’.
(b) DEFINITION.—Section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78e) is amended by adding
at the end the following paragraph:
‘‘(54) The term ‘examining authority’ means any
self-regulatory organization registered with the Com-
mission under this title (other than registered clearing
agencies) with the authority to examine, inspect, and
otherwise oversee the activities of a registered broker
or dealer.’’.
SEC. 109. FOREIGN PRESS CONFERENCES.
No later than one year after the date of enactment of
this Act, the Commission shall adopt rules under the Securi-
ties Act of 1933 concerning the status under the registration
provisions of the Securities Act of 1933 of foreign press con-
ferences and foreign press releases by persons engaged in
the offer and sale of securities.
SEC. 110. REPORT ON TRUST INDENTURE ACT OF 1939.
Within 6 months after the date of enactment of this
Act, the Securities and Exchange Commission shall submit
to the Congress a report on the benefits of, the continuing
need for, and, if necessary, options for the modification or
elimination of, the Trust Indenture Act of 1939 (15 U.S.C.
77aaa et seq.).
TITLE II—INVESTMENT
COMPANY ACT AMENDMENTS
SEC. 201. SHORT TITLE.
This title may be cited as the ‘‘Investment Company
Act Amendments of 1996’’.
SEC. 202. FUNDS OF FUNDS.
Section 12(d)(1) of the Investment Company Act of
1940 (15 U.S.C. 80a–12(d)(1)) is amended—
(1) in subparagraph (E)(iii)—
(A) by striking ‘‘in the event such invest-
ment company is not a registered investment
company,’’; and
(B) by inserting ‘‘in the event such invest-
ment company is not a registered investment
company’’ after ‘‘(bb)’’;
(2) by redesignating existing subparagraphs (G)
and (H) as subparagraphs (H) and (I), respectively;
(3) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G) The provisions of this paragraph (1) shall not
apply to securities of a registered open-end company (the
‘acquired company’) purchased or otherwise acquired by a
registered open-end company (the ‘acquiring company’)
if—
‘‘(i) the acquired company and the acquiring
company are part of the same group of investment
companies;
‘‘(ii) the securities of the acquired company, se-
curities of other registered open-end companies that
are part of the same group of investment companies,
Government securities, and short-term paper are the
only investments held by the acquiring company;
‘‘(iii)(I) the acquiring company does not pay
and is not assessed any charges or fees for distribu-
tion-related activities with respect to securities of the
acquired company unless the acquiring company does
not charge a sales load or other fees or charges for dis-
tribution-related activities; or
‘‘(II) any sales loads and other distribution-re-
lated fees charged with respect to securities of the ac-
quiring company, when aggregated with any sales
load and distribution-related fees paid by the acquir-
ing company with respect to securities of the acquired
company, are not excessive under rules adopted pur-
suant to either section 22(b) or section 22(c) of this
title by a securities association registered under sec-
tion 15A of the Securities Exchange Act of 1934 or
the Commission;
‘‘(iv) the acquired company shall have a fun-
damental policy that prohibits it from acquiring any
securities of registered open-end companies in reliance
on this subparagraph or subparagraph (F) of this
subsection; and
‘‘(v) such acquisition is not in contravention of
such rules and regulations as the Commission may
from time to time prescribe with respect to acquisi-
tions in accordance with this subparagraph as nec-
essary and appropriate for the protection of investors.
For purposes of this subparagraph, a ‘group of investment
companies’ shall mean any two or more registered invest-
ment companies that hold themselves out to investors as re-
lated companies for purposes of investment and investor
services.’’; and
(4) adding at the end the following new subpara-
graph:
‘‘(J) The Commission, by rules and regulations upon
its own motion or by order upon application, may condi-
tionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities,
or transactions from any provisions of this subsection, if
and to the extent such exemption is consistent with the pub-
lic interest and the protection of investors.’’.
SEC. 203. REGISTRATION OF SECURITIES.
(a) AMENDMENTS TO REGISTRATION STATEMENTS.—
Section 24(e) of the Investment Company Act of 1940 (15
U.S.C. 80a–24(e)) is amended—
(1) by striking paragraphs (1) and (2);
(2) by redesignating paragraph (3) as subsection
(e); and
(3) in subsection (e) (as so redesignated) by
striking ‘‘pursuant to this subsection or otherwise’’.
(b) REGISTRATION OF INDEFINITE AMOUNT OF SECU-
RITIES.—Section 24(f) of the Investment Company Act of
1940 (15 U.S.C. 80a–24(f)) is amended to read as follows:
‘‘(f) REGISTRATION OF INDEFINITE AMOUNT OF SECU-
RITIES.—
‘‘(1) INDEFINITE
REGISTRATION
OF
SECURI-
TIES.—Upon the effectiveness of its registration state-
ment under the Securities Act of 1933, a face-amount
certificate company, open-end management company,
or unit investment trust shall be deemed to have reg-
istered an indefinite amount of securities.
‘‘(2) PAYMENT OF REGISTRATION FEES.—Within
90 days after the end of the company’s fiscal year, the
company shall pay a registration fee to the Commis-
sion, calculated in the manner specified in section
6(b) of the Securities Act of 1933, based on the aggre-
gate sales price for which its securities (including, for
this purpose, all securities issued pursuant to a divi-
dend reinvestment plan) were sold pursuant to a reg-
istration of an indefinite amount of securities under
this subsection during the company’s previous fiscal
year reduced by—
‘‘(A) the aggregate redemption or repur-
chase price of the securities of the company dur-
ing that year, and
‘‘(B) the aggregate redemption or repur-
chase price of the securities of the company dur-
ing any prior fiscal year ending not more than
1 year before the date of enactment of the Invest-
ment Company Act Amendments of 1996 that
were not used previously by the company to re-
duce fees payable under this section.
‘‘(3) INTEREST DUE ON LATE PAYMENT.—A com-
pany paying the fee or any portion thereof more than