I
103D CONGRESS
1ST SESSION
H. R. 3447
To amend the Federal securities laws to equalize the regulatory treatment
of participants in the securities industry, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 4, 1993
Mr. DINGELL (for himself, Mr. MOORHEAD, Mr. MARKEY, and Mr. FIELDS
of Texas) introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce
A BILL
To amend the Federal securities laws to equalize the regu-
latory treatment of participants in the securities indus-
try, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Securities Regulatory
Equality Act of 1993’’.
TITLE I—REGULATION OF SECU-
RITIES ACTIVITIES OF DEPOS-
ITORY INSTITUTIONS
PART A—BROKER-DEALER PROVISIONS
SEC. 101. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4)(A) The term ‘broker’ means any person
engaged in the business of effecting transactions in
securities for the account of others.
‘‘(B) A bank shall not be deemed to be a
‘broker’ because it engages in one or more of the fol-
lowing activities:
‘‘(i) Engages in fiduciary activities (includ-
ing effecting transactions in the course of such
fiduciary activities) permissible for national
banks under the first section of the Act of Sep-
tember 28, 1962 (12 U.S.C. 92a), or for State
banks under relevant State trust law, except
that a bank shall be deemed a broker if, in the
conduct of such fiduciary activities, it—
‘‘(I) publicly solicits brokerage busi-
ness; or
‘‘(II) is compensated for such business
by the payment of commissions or similar
remuneration based on effecting trans-
actions in securities (excluding fees cal-
culated as percentage of assets under man-
agement).
‘‘(ii) Effects transactions in exempted se-
curities, other than municipal securities, or in
commercial paper, bankers’ acceptances, or
commercial bills.’’.
SEC. 102. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:
‘‘(5)(A) The term ‘dealer’ means any person en-
gaged in the business of buying and selling securities
for his own account through a broker or otherwise.
‘‘(B) Such term does not include—
‘‘(i) any person insofar as he buys or sells
securities for his own account, either individ-
ually or in some fiduciary capacity, but not as
part of a regular business; or
‘‘(ii) any bank insofar as the bank (I) buys
and sells commercial paper, bankers’ accept-
ances, or commercial bills, or exempted securi-
ties other than municipal securities; or (II)
buys and sells securities for investment pur-
poses for the bank or for accounts in which the
bank, acting as trustee, is authorized to deter-
mine the securities to be purchased or sold.’’.
SEC. 103. POWER TO EXEMPT FROM THE DEFINITIONS OF
BROKER AND DEALER.
Section 3 of the Securities Exchange Act of 1934 (15
U.S.C. 78c) is amended by adding at the end the follow-
ing:
‘‘(e) The Commission, by rule, regulation, or order,
upon its own motion or upon application, may condi-
tionally or unconditionally exempt any person or class of
persons from the definitions of ‘broker’ or ‘dealer,’ if the
Commission finds that such exemption is consistent with
the public interest, the protection of investors, and the
purposes of this title.’’.
SEC. 104. REQUIREMENT THAT BANKS FALLING WITHIN
THE DEFINITIONS OF BROKER OR DEALER
PLACE THEIR SECURITIES ACTIVITIES IN A
SEPARATE CORPORATE ENTITY.
Section 15(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78o(a)) is amended to read as follows:
‘‘SEC. 15. (a)(1) It shall be unlawful for any broker
or dealer that is either a person other than a natural per-
son or a natural person not associated with a broker or
dealer that is a person other than a natural person (other
than such a broker or dealer whose business is exclusively
intrastate and who does not make use of any facility of
a national securities exchange) to make use of the mails
or any means or instrumentality of interstate commerce
to effect any transactions in, or to induce or attempt to
induce the purchase or sale of, any security (other than
an exempted security or commercial paper, bankers’ ac-
ceptances, or commercial bills) unless such broker or deal-
er is registered in accordance with subsection (b) of this
section.
‘‘(2) It shall be unlawful for any bank to act as a
broker or dealer, except in the course of an exclusively
intrastate business.
‘‘(3) The Commission, by rule or order, as it deems
consistent with the public interest and the protection of
investors, may conditionally or unconditionally exempt
from paragraphs (1) and (2) of this subsection any broker
or dealer or class of brokers or dealers specified in such
rule or order.’’.
PART B—BANK-INVESTMENT COMPANY
ACTIVITIES
SEC. 111. CUSTODY OF INVESTMENT COMPANY ASSETS BY
AFFILIATED BANKS.
(a) MANAGEMENT COMPANIES.—Section 17(f) of the
Investment Company Act of 1940 (15 U.S.C. 80a–17(f))
is amended—
(1) by redesignating clauses (1), (2), and (3) of
the first sentence as clauses (A), (B), and (C), re-
spectively;
(2) by designating the five sentences of such
section as paragraphs (1) through (5), respectively;
and
(3) by adding at the end thereof the following
new paragraph:
‘‘(6) Notwithstanding paragraph (1)(A) of this sub-
section, if a bank described in such paragraph, or affili-
ated person thereof, is an affiliated person of the reg-
istered management company, such bank may not serve
as custodian under this subsection unless permitted by
such rules, regulations, or orders as the Commission pre-
scribes consistent with the protection of investors.’’.
(b) UNIT INVESTMENT TRUSTS.—Section 26(a)(1) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
26(a)(1)) is amended by inserting after ‘‘bank’’ the follow-
ing: ‘‘that is not an affiliated person of such principal un-
derwriter or depositor and is not an affiliated person of
an affiliated person of such principal underwriter or de-
positor, unless permitted by such rules, regulations, or or-
ders as the Commission prescribes consistent with the pro-
tection of investors’’.
SEC. 112. AFFILIATED PERSONS AND TRANSACTIONS.
(a) AFFILIATED PERSONS.—Section 2(a)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a–
2(a)(3)) is amended by—
(1) striking ‘‘thereof; and’’ and inserting in lieu
thereof ‘‘thereof;’’; and
(2) by inserting before the period at the end of
clause (F) the following: ‘‘; and (G) if such other
person is an investment company, any person or
class of persons which the Commission by rule, regu-
lation, or order shall have determined to be affiliated
persons by reason of having had, at any time since
the beginning of the last two completed fiscal years
of such company, a material business or professional
relationship with such company or with any person
that is a principal underwriter for, or promoter or
sponsor of, such company or any affiliated person
(as described in clauses (A) through (F) of this
paragraph) of such company’’.
(b) PURCHASES OR ACQUISITIONS DURING UNDER-
WRITING.—Section 10(f) of the Investment Company Act
of 1940 (15 U.S.C. 80a–10(f)) is amended by—
(1) inserting ‘‘(1)’’ immediately before ‘‘a prin-
cipal underwriter’’ the first place it appears; and
(2) inserting after ‘‘for the issuer’’ the follow-
ing: ‘‘; or (2) the proceeds of which will be used to
retire any part of an indebtedness owed to a bank
where the bank or an affiliated person thereof is an
affiliated person of such registered company’’.
SEC. 113. PROHIBITION OF CONTROLLING INTEREST IN IN-
VESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940
(15 U.S.C. 80a–15) is amended by adding at the end the
following new subsection:
‘‘(g) PROHIBITION OF CONTROLLING INTEREST IN
INVESTMENT COMPANY.—If any investment adviser to a
registered investment company, or an affiliated person of
such investment adviser, also holds shares of the invest-
ment company in a fiduciary capacity, that investment ad-
viser or affiliated person may own, directly or indirectly,
a controlling interest in such registered investment com-
pany only—
‘‘(1) if it passes through to the beneficial own-
ers of the shares, including any person acting in a
fiduciary capacity who is not an affiliated person of
that investment adviser or any affiliated person
thereof, the power to vote the shares of the invest-
ment company;
‘‘(2) if it votes the shares of the investment
company held by it in the same proportion as shares
cuted any portfolio transactions for, engaged in any
principal transactions with, or loaned money to, the
investment company or any other investment com-
pany having the same investment adviser, principal
underwriter, sponsor, or promoter, or any affiliated
person of such a broker, dealer, or person,’’;
(2) by redesignating clause (vi) as clause (vii);
and
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) any employee of a bank that acts
as custodian or transfer agent for such
company, and’’.
(b) BANK HOLDING COMPANIES.—Section 10(c) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
10(c)) is amended by striking ‘‘bank, except’’ and insert-
ing in lieu thereof: ‘‘bank (together with its subsidiaries)
or any one bank holding company (together with its affili-
ates and subsidiaries), as those terms are defined in the
Bank Holding Company Act of 1956, except’’.
(c) EFFECTIVE DATE.—The provisions of subsection
(a) of this section shall become effective one year after
the date of enactment of this Act.
SEC. 116. PROHIBITION AGAINST USE OF A BANK’S NAME
BY AN AFFILIATED INVESTMENT COMPANY.
Section 35(d) of the Investment Company Act of
1940 (15 U.S.C. 80a–35(d)) is amended by inserting after
the first sentence thereof the following: ‘‘It shall be decep-
tive and misleading for any registered investment company
which has as an investment adviser or distributor a bank
or affiliated person thereof, to adopt, as part of the name,
title, or logo of such company, or of any security of which
it is the issuer, any word or design which is the same as
or similar to, or a variation of, the name, title, or logo
of such bank.’’.
SEC. 117. DEFINITION OF BROKER.
Section 2(a)(6) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol-
lows:
‘‘(6) ‘Broker’ has the same meaning as in the
Securities Exchange Act of 1934, but does not in-
clude any person solely by reason of the fact that
such person is an underwriter for one or more in-
vestment companies.’’.
SEC. 118. DEFINITION OF DEALER.
Section 2(a)(11) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol-
lows:
‘‘(11) ‘Dealer’ has the same meaning as in the
Securities Exchange Act of 1934, but does not in-
clude an insurance company or investment com-
pany.’’.
SEC. 119. TREATMENT OF PUBLICLY ADVERTISED COMMON
TRUST FUNDS.
(a) SECURITIES ACT OF 1933.—Section 3(a)(2) of
the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is
amended—
(1) by inserting ‘‘that is’’ after ‘‘common trust
fund or similar fund’’; and
(2) by inserting after ‘‘administrator, or guard-
ian’’ the following: ‘‘, and that is not offered to the
general public’’.
(b) SECURITIES EXCHANGE ACT OF 1934.—Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(12)(A)(iii)) is amended—
(1) by inserting ‘‘that is’’ after ‘‘common trust
fund or similar fund’’; and
(2) by inserting after ‘‘administrator, or guard-
ian’’ the following: ‘‘, and that is not offered to the
general public’’.
(c) INVESTMENT COMPANY ACT OF 1940.—Section
3(c)(3) of the Investment Company Act of 1940 (15
U.S.C. 80a–3(c)(3)) is amended—
(1) by inserting ‘‘that is’’ after ‘‘common trust
fund or similar fund’’; and
(2) by inserting after ‘‘administrator, or guard-
ian’’ the following: ‘‘, and that is not offered to the
general public’’.
SEC. 120. REMOVAL OF THE EXCLUSION FROM THE DEFINI-
TION OF INVESTMENT ADVISER FOR BANKS
THAT ADVISE INVESTMENT COMPANIES.
Section 202(a)(11)(A) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b–2(a)(11)(A)) is amended by
striking out ‘‘investment company’’ and inserting in lieu
thereof ‘‘investment company, except that the term ‘in-
vestment adviser’ includes any bank or bank holding com-
pany to the extent that such bank or bank holding com-
pany acts as an investment adviser to a registered invest-
ment company’’.
SEC. 121. DEFINITION OF BROKER.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol-
lows:
‘‘(3) ‘Broker’ has the same meaning as in the
Securities Exchange Act of 1934.’’.
SEC. 122. DEFINITION OF DEALER.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol-
lows:
‘‘(7) ‘Dealer’ has the same meaning as in the
Securities Exchange Act of 1934, but does not in-
clude an insurance company or investment com-
pany.’’.
TITLE II—ADMINISTRATION OF
SECURITIES LAWS WITH RE-
SPECT TO SECURITIES OF DE-
POSITORY INSTITUTIONS
PART A—AMENDMENTS TO THE SECURITIES ACT
OF 1933
SEC. 201. BANK-ISSUED SECURITIES.
Section 3(a)(2) of the Securities Act of 1933 (15
U.S.C. 77c(a)(2)) is amended—
(1) by striking ‘‘or any security issued or guar-
anteed by any bank’’, and
(2) by striking ‘‘For purposes of this para-
graph, a security issued or guaranteed by a bank
shall not include any interest or participation in any
collective trust fund maintained by a bank; and’’,
and inserting in lieu thereof ‘‘For purposes of this
title,’’.
SEC. 202. SAVINGS ASSOCIATION-ISSUED SECURITIES.
Section 3(a)(5) of the Securities Act of 1933 (15
U.S.C. 77c(a)(5)) is amended to read as follows:
‘‘(5) Any security issued by—
‘‘(A) a farmer’s cooperative organization
exempt from tax under section 521 of the Inter-
nal Revenue Code of 1986,
‘‘(B) a corporation described in section
501(c)(16) of such Code and exempt from tax
under section 501(a) of such Code, or
‘‘(C) a corporation described in section
501(c)(2) of such Code which is exempt for tax
under section 501(a) of such Code and is orga-
nized for the exclusive purpose of holding title
to property, collecting income therefrom, and
turning over the entire amount thereof, less ex-
penses, to an organization or corporation de-
scribed in subparagraph (A) or (C).’’.
SEC. 203. EXEMPTION TO PERMIT TRANSITION TO HOLD-
ING COMPANY STRUCTURES.
Section 3(a)(9) of the Securities Act of 1933 (15
U.S.C. 77c(a)(9)) is amended to read as follows:
‘‘(9) Except with respect to a security ex-
changed in a case under title 11 of the United
States Code—
‘‘(A) any security exchanged by the issuer
with its existing security holders exclusively
where no commission or other remuneration is
paid or given directly or indirectly for soliciting
such exchange; or
‘‘(B) any security issued or exchanged in
connection with a transaction solely involving
exchanges or substitutions of securities as part
of a reorganization of a corporation into a hold-
ing company, if—
‘‘(i) as part of the reorganization, the
security holders exchange their securities
of the corporation for securities of a newly
formed holding company with no signifi-
cant assets other than securities of the cor-
poration and its existing subsidiaries, and
receive securities of the same class evidenc-
ing the same proportional share or debt in-
terests in the holding company as they
held in the corporation prior to the trans-
action, except for changes resulting from
lawful elimination of fractional interests
and the exercise of dissenting shareholder
rights under applicable law;
‘‘(ii) the rights and interests of secu-
rity holders in the holding company are
substantially the same as those in the cor-
poration prior to the transaction other
than as may be required by law; and
‘‘(iii) the holding company has sub-
stantially the same assets and liabilities as
the corporation had prior to the trans-
action.’’.
SEC. 204. TREATMENT OF CERTAIN BANK AND SAVINGS AS-
SOCIATION INSTRUMENTS.
Section 3 of the Securities Act of 1933 (15 U.S.C.
77c) is amended by adding at the end thereof the following
new subsection:
‘‘(d)(1) Except as hereinafter expressly provided, in
those circumstances in which an interest in any of the fol-
lowing is otherwise deemed to be a ‘security’ within the
meaning of section 2, the provisions of this Act shall not
apply to—
‘‘(A) a deposit account, savings account, certifi-
cate of deposit, or other deposit instrument issued
by a bank or savings association;
‘‘(B) a share account issued by a savings asso-
ciation if such account is insured by the Federal De-
posit Insurance Corporation;
‘‘(C) a banker’s acceptance;
‘‘(D) a letter of credit issued by a bank or sav-
ings association; or
‘‘(E) a debit account at a bank or savings asso-
ciation arising from a credit card or other similar
arrangement.
This paragraph shall not exempt from the provisions of
this Act any participation in such an interest, account,
certificate, instrument, acceptance, or letter other than a
participation that is a direct obligation of a bank or sav-
ings association.
‘‘(2) For purposes of this subsection, the term ‘de-
posit’ means the unpaid balance of money or its equivalent
received or held by a bank or savings association in the
usual course of business—
‘‘(A) for which it has given or is obligated to
give credit, either conditionally or unconditionally, to
a commercial, checking, savings, time, or thrift ac-
count;
‘‘(B) which is evidenced by its certificate of de-
posit, a check or draft drawn against a deposit ac-
count and certified by a bank or savings association,
a letter of credit or a traveler’s check, or by any
other similar instrument on which a bank or savings
association is liable;
‘‘(C) which consists of nonpooled assets of indi-
vidual trust funds received or held by bank or sav-
ings association whether held in the trust depart-
ment or deposited in any other department of such
bank or savings association; or
‘‘(D) which is received or held by a bank or sav-
ings 
association 
for 
a 
special 
or 
specific
noninvestment purpose, including, without being lim-
ited to, escrow funds, funds held as security for any
obligation due to the bank or savings association or
others (including funds held as dealers’ reserves) or
for securities loaned by the bank or savings associa-
tion, funds deposited by a debtor to meet maturing
subscriptions to United States Government securi-
ties, funds held to meet its acceptances or letters of
credit, and withheld taxes.
‘‘(3) For purposes of this subsection, the term ‘sav-
ings association’ shall have the meaning given in section
3 of the Federal Deposit Insurance Act, as amended (12
U.S.C. 1813).’’.
SEC. 205. TECHNICAL AMENDMENT.
Section 12(2) of the Securities Act of 1933 (15
U.S.C. 771(2)) is amended by inserting ‘‘or subsection
(d)’’ after ‘‘subsection (a)’’.
PART B—SECURITIES EXCHANGE ACT
ADMINISTRATION TRANSFER
SEC. 211. AMENDMENT TO THE SECURITIES EXCHANGE
ACT OF 1934.
Subsection (i) of section 12 of the Securities Ex-
change Act of 1934 (15 U.S.C. 781(i)) is repealed.
PART C—MISCELLANEOUS PROVISION
SEC. 221. TECHNICAL AMENDMENT.
Section 304(a)(4) of the Trust Indenture Act of 1939
(15 U.S.C. 77ddd(a)(4)) is amended by inserting ‘‘or by
section 3(d)’’ after ‘‘section 3(a)’’.
Æ
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