Union Calendar No. 145
103D CONGRESS
1ST SESSION
H. R. 618
[Report No. 103–255]
A BILL
To extend and revise rulemaking authority with re-
spect to government securities under the Federal
securities laws, and for other purposes.
SEPTEMBER 23, 1993
Reported with an amendment, committed to the Commit-
tee of the Whole House on the State of the Union, and
ordered to be printed
IB
Union Calendar No. 145
103D CONGRESS
1ST SESSION
H. R. 618
[Report No. 103–255]
To extend and revise rulemaking authority with respect to government
securities under the Federal securities laws, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 26, 1993
Mr. MARKEY (for himself, Mr. FIELDS of Texas, Mr. DINGELL, Mr. WYDEN,
Mr. SYNAR, and Mr. COOPER) introduced the following bill; which was
referred to the Committee on Energy and Commerce
SEPTEMBER 23, 1993
Additional sponsor: Mr. MOORHEAD.
SEPTEMBER 23, 1993
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 January 26, 1993]
A BILL
To extend and revise rulemaking authority with respect to
government securities under the Federal securities laws,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
may obtain from the Federal Reserve Bank of New
York.
‘‘(C) PROCEDURES
FOR
REQUIRING
INFORMA-
TION.—At the time the Commission requests any in-
formation pursuant to subparagraph (A) with respect
to any government securities broker or government se-
curities dealer for which the Commission is not the
appropriate regulatory agency, the Commission shall
notify the appropriate regulatory agency for such gov-
ernment securities broker or government securities
dealer and, upon request, furnish to the appropriate
regulatory agency any information supplied to the
Commission.
‘‘(D) CONSULTATION.—Within 90 days after the
date of the enactment of this paragraph, and annu-
ally thereafter, or upon the request of any other ap-
propriate regulatory agency, the Commission shall
consult with the other appropriate regulatory agencies
to determine the availability of records that may be
required to be furnished under this paragraph and,
for those records available directly from the other ap-
propriate regulatory agencies, to develop a procedure
for furnishing such records expeditiously upon the
Commission’s request.
‘‘(E) EXCLUSION FOR EXAMINATION REPORTS.—
Nothing in this paragraph shall be construed so as to
permit the Commission to require any government se-
curities broker or government securities dealer to ob-
tain, maintain, or furnish any examination report of
any appropriate regulatory agency other than the
Commission or any supervisory recommendations or
analysis contained in any such examination report.
‘‘(F) AUTHORITY TO LIMIT DISCLOSURE OF IN-
FORMATION.—Notwithstanding any other provision of
law, the Commission and the appropriate regulatory
agencies shall not be compelled to disclose any infor-
mation required or obtained under this paragraph.
Nothing in this paragraph shall authorize the Com-
mission or any appropriate regulatory agency to
withhold information from Congress, or prevent the
Commission or any appropriate regulatory agency
from complying with a request for information from
any other Federal department or agency requesting
information for purposes within the scope of its juris-
diction, or from complying with an order of a court
of the United States in an action brought by the
United States, the Commission, or the appropriate
regulatory agency. For purposes of section 552 of title
5, United States Code, this subparagraph shall be
considered a statute described in subsection (b)(3)(B)
of such section 552.’’.
(b) 
CONFORMING
AMENDMENTS.—(1) 
Section
15C(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C.
78o–5(a)(4)) is amended by inserting ‘‘, other than sub-
section (d)(3),’’ after ‘‘subsection (a), (b), or (d) of this sec-
tion’’.
(2) Section 15C(f)(2) of such Act is amended—
(A) in the first sentence, by inserting ‘‘, other
than subsection (d)(3)’’, after ‘‘threatened violation of
the provisions of this section’’; and
(B) in the second sentence, by inserting ‘‘(except
subsection (d)(3))’’ after ‘‘other than this section’’.
SEC. 4. LARGE POSITION REPORTING.
Section 15C of the Securities Exchange Act of 1934
(15 U.S.C. 78o–5) is amended—
(1) by redesignating subsection (f) as subsection
(h); and
(2) by inserting after subsection (e) the following
new subsection:
‘‘(f) LARGE POSITION REPORTING.—
‘‘(1) REPORTING
REQUIREMENTS.—The Sec-
retary may adopt rules to require specified persons
holding, maintaining, or controlling large positions
in to-be-issued or recently issued Treasury securities
to file such reports regarding such positions as the
Secretary determines to be necessary or appropriate
for the purpose of monitoring the impact in the
Treasury securities market of concentrations of posi-
tions in Treasury securities and for the purpose of
otherwise assisting the Commission in the enforcement
of this title. Reports required under this subsection
shall be filed with the Federal Reserve Bank of New
York, acting as agent for the Secretary, and shall be
provided by that Federal Reserve Bank to the Com-
mission on a timely basis.
‘‘(2) RECORDKEEPING
REQUIREMENTS.—Rules
under this subsection may require persons holding,
maintaining, or controlling large positions in Treas-
ury securities to make and keep for prescribed periods
such records as the Secretary determines are necessary
or appropriate to ensure that such persons can com-
ply with reporting requirements under this sub-
section.
‘‘(3) AGGREGATION
RULES.—Rules under this
subsection—
‘‘(A) may prescribe the manner in which
positions and accounts shall be aggregated for
the purpose of this subsection, including aggrega-
tion on the basis of common ownership or con-
trol; and
‘‘(B) may define which persons (individ-
ually or as a group) hold, maintain, or control
large positions.
‘‘(4) DEFINITIONAL AUTHORITY; DETERMINATION
OF REPORTING THRESHOLD.—
‘‘(A) In prescribing rules under this sub-
section, the Secretary may, consistent with the
purpose of this subsection, define terms used in
this subsection that are not otherwise defined in
section 3 of this title.
‘‘(B) Rules under this subsection shall speci-
fy—
‘‘(i) the minimum size of positions sub-
ject to reporting under this subsection, tak-
ing into account the purposes of this sub-
section and the potential for price distor-
tions or other anomalies resulting from
large positions;
‘‘(ii) the types of positions (which may
include financing arrangements) to be re-
ported;
‘‘(iii) the securities to be covered; and
‘‘(iv) the form and manner in which
reports shall be transmitted, which may in-
clude transmission in machine readable
form.
‘‘(5) LIMITATION ON DISCLOSURE OF INFORMA-
TION.—Notwithstanding any other provision of law,
the Secretary and the Commission shall not be com-
pelled to disclose any information required to be kept
or reported under this subsection. Nothing in this sub-
section shall authorize the Secretary or the Commis-
sion to withhold information from Congress, or pre-
vent the Secretary or the Commission from complying
with a request for information from any other Fed-
eral department or agency requesting information for
purposes within the scope of its jurisdiction, or from
complying with an order of a court of the United
States in an action brought by the United States, the
Secretary, or the Commission. For purposes of section
552 of title 5, United States Code, this subsection
shall be considered a statute described in subsection
(b)(3)(B) of such section 552.’’.
SEC. 5. AUTHORITY OF THE COMMISSION TO REGULATE
TRANSACTIONS IN EXEMPTED SECURITIES.
(a) PREVENTION OF FRAUDULENT AND MANIPULATIVE
ACTS AND PRACTICES.—Section 15(c)(2) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(c)(2)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(2)’’;
(2) by striking ‘‘fictitious quotation, and no mu-
nicipal securities dealer’’ and inserting the following:
‘‘fictitious quotation.
‘‘(B) No municipal securities dealer’’;
(3) by striking ‘‘fictitious quotation. The Com-
mission shall’’ and inserting the following:
‘‘fictitious quotation.
‘‘(C) No government securities broker or government
securities dealer shall make use of the mails or any means
or instrumentality of interstate commerce to effect any
transaction in, or induce or attempt to induce the purchase
or sale of, any government security in connection with
which such government securities broker or government se-
curities dealer engages in any fraudulent, deceptive, or ma-
nipulative act or practice, or makes any fictitious
quotation.
‘‘(D) The Commission shall’’; and
(4) by inserting at the end thereof the following:
‘‘(E) The Commission shall, prior to adopting any rule
or regulation under subparagraph (C), consult with and
consider the views of the Secretary of the Treasury and each
appropriate regulatory agency. If the Secretary of the
Treasury or any appropriate regulatory agency comments
in writing on a proposed rule or regulation of the Commis-
sion under such subparagraph (C) that has been published
for comment, the Commission shall respond in writing to
such written comment before adopting the proposed rule.’’.
(b) FRAUDULENT AND MANIPULATIVE DEVICES AND
CONTRIVANCES.—Section 15(c)(1) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o(c)(1)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(c)(1)’’;
(2) by striking ‘‘contrivance, and no municipal
securities dealer’’ and inserting the following:
‘‘contrivance.
‘‘(B) No municipal securities dealer’’;
(3) by striking ‘‘contrivance. The Commission
shall’’ and inserting the following:
‘‘contrivance.
‘‘(C) No government securities broker or government
securities dealer shall make use of the mails or any means
or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the pur-
chase or sale of, any government security by means of any
manipulative, deceptive, or other fraudulent device or con-
trivance.
‘‘(D) The Commission shall’’; and
(4) by inserting at the end thereof the following:
‘‘(E) The Commission shall, prior to adopting any rule
or regulation under subparagraph (C), consult with and
consider the views of the Secretary of the Treasury and each
appropriate regulatory agency. If the Secretary of the
Treasury or any appropriate regulatory agency comments
in writing on a proposed rule or regulation of the Commis-
sion under such subparagraph (C) that has been published
for comment, the Commission shall respond in writing to
such written comment before adopting the proposed rule.’’.
SEC. 6. BROKER/DEALER SUPERVISION RESPONSIBILITIES.
Section 15C of the Securities Exchange Act of 1934
(15 U.S.C. 78o–5) is amended by inserting after subsection
(f) (as added by section 4 of this Act) the following new
subsection:
‘‘(g) POLICIES AND PROCEDURES TO PREVENT AND
DETECT VIOLATIONS.—Every government securities broker
and government securities dealer shall establish, maintain,
and enforce written policies and procedures reasonably de-
signed, taking into consideration the nature of such person’s
business, to prevent and detect in connection with the pur-
chase or sale of government securities, insofar as prac-
ticable, fraud and manipulation in violation of this title
and the rules and regulations thereunder and violations of
such other provisions of this title and the rules and regula-
tions thereunder as the appropriate regulatory agency for
such government securities broker or government securities
dealer shall designate by rule.’’.
SEC. 7. SALES PRACTICE RULEMAKING AUTHORITY.
(a) RULES FOR FINANCIAL INSTITUTIONS.—Section
15C(b) of the Securities Exchange Act of 1934 (15 U.S.C.
78o–5(b)) is amended—
(1) by redesignating paragraphs (3), (4), (5),
and (6) as paragraphs (4), (5), (6), and (7), respec-
tively; and
(2) by inserting after paragraph (2) the follow-
ing new paragraph:
‘‘(3) SALES PRACTICE RULES.—(A) With respect to
any financial institution that has filed notice as a govern-
ment securities broker or government securities dealer or
that is required to file notice under subsection (a)(1)(B) of
this section, the appropriate regulatory agency for such gov-
ernment securities broker or government securities dealer
may issue such rules with respect to transactions in govern-
ment securities as may be necessary to prevent fraudulent
and manipulative acts and practices and to promote just
and equitable principles of trade.
‘‘(B) Each appropriate regulatory agency shall consult
with the other appropriate regulatory agencies for the pur-
pose of ensuring the consistency of the rules prescribed by
such agencies under this paragraph. The appropriate regu-
latory agencies shall consult with and consider the views
of the Secretary and the Commission with respect to the
impact of such rules on the operations of the market for
government securities, consistency with analogous rules of
self-regulatory organizations, and the enforcement and ad-
ministration of such rules. The consultation required by
this paragraph shall be conducted prior to the appropriate
regulatory agency adopting a rule under this paragraph,
unless the appropriate regulatory agency determines that
an emergency exists requiring expeditious and summary ac-
tion and publishes its reasons therefor. If the Secretary or
the Commission comments in writing to the appropriate
regulatory agency on a proposed rule that has been pub-
lished for comment, the appropriate regulatory agency shall
respond in writing to such written comment before adopting
the rule.’’.
(b) RULES
BY REGISTERED SECURITIES ASSOCIA-
TIONS.—
(1) REMOVAL OF LIMITATIONS ON AUTHORITY.—
(A) Section 15A of the Securities Exchange Act of
1934 (15 U.S.C. 78o–3) is amended—
(i) by striking subsections (f)(1) and (f)(2);
and
(ii) by redesignating subsection (f)(3) as
subsection (f).
(B) Section 15A(g) of such Act is amended—
(i) by striking ‘‘exempted securities’’ in
paragraph (3)(D) and inserting ‘‘municipal se-
curities’’;
(ii) by striking paragraph (4); and
(iii) by redesignating paragraph (5) as
paragraph (4).
(2) OVERSIGHT OF REGISTERED SECURITIES AS-
SOCIATIONS.—Section 19 of the Securities Exchange
Act of 1934 (15 U.S.C. 78s) is amended—
(A) in subsection (b), by adding at the end
thereof the following new paragraph:
‘‘(5) The Commission shall consult with and consider
the views of the Secretary of the Treasury prior to approv-
ing a proposed rule change filed by a registered securities
association that primarily concerns conduct related to
transactions in government securities, except where the
Commission determines that an emergency exists requiring
expeditious or summary action and publishes its reasons
therefor. If the Secretary comments in writing to the Com-
mission on such proposed rule change that has been pub-
lished for comment, the Commission shall respond in writ-
ing to such written comment before approving the proposed
rule change.’’;
(B) in subsection (c), by adding at the end
thereof the following new paragraph:
‘‘(5) Before adopting a rule to amend a rule of
a registered securities association that primarily con-
cerns conduct related to transactions in government
securities, the Commission shall consult with and con-
sider the views of the Secretary, except where the
Commission determines that an emergency exists re-
quiring expeditious or summary action and publishes
its reasons therefor. If the Secretary comments in
writing to the Commission on such proposed rule
change that has been published for comment, the Com-
mission shall respond in writing to such written com-
ment before approving the proposed rule change.’’.
(3) CONFORMING AMENDMENT.—
(A) Section 3(a)(12)(B)(ii) of such Act (15
U.S.C. 78b(a)(12)(B)(ii)) is amended by striking
‘‘15, 15A (other than subsection (g)(3)), and
17A’’ and inserting ‘‘15 and 17A’’.
(B) Section 15(b)(7) of such Act (15 U.S.C.
78o(b)(7)) is amended by inserting ‘‘or govern-
ment securities broker or government securities
dealer registered (or required to register) under
section 15C(a)(1)(A)’’ after ‘‘No registered broker
or dealer’’.
SEC. 8. MARKET INFORMATION.
Section 23(b)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78w) is amended—
(1) by striking subparagraphs (C), (D), and (H);
(2) by redesignating subparagraphs (E), (F),
and (G) as subparagraphs (C), (D), and (E), respec-
tively;
(3) by redesignating subparagraphs (I), (J), and
(K) as subparagraphs (F), (G), and (H), respectively;
(4) by striking ‘‘and’’ at the end of such redesig-
nated subparagraph (G);
(5) by striking the period at the end of such re-
designated subparagraph (H) and inserting ‘‘; and’’;
and
(6) by inserting after such redesignated subpara-
graph (H) the following new subparagraph:
‘‘(I) the steps that have been taken and the
progress that has been made in promoting the timely
public dissemination and availability for analytical
purposes (on a fair, reasonable, and nondiscrim-
inatory basis) of information concerning government
securities transactions and quotations, and its rec-
ommendations, if any, for legislation to assure timely
dissemination of (i) information on transactions in
regularly traded government securities sufficient to
permit the determination of the prevailing market
price for such securities, and (ii) reports of the high-
est published bids and lowest published offers for gov-
ernment securities (including the size at which per-
sons are willing to trade with respect to such bids and
offers).’’.
SEC. 9. STUDY OF REGULATORY SYSTEM FOR GOVERNMENT
SECURITIES.
(a) JOINT STUDY.—The Secretary of the Treasury, the
Securities and Exchange Commission, and the Board of
Governors of the Federal Reserve System shall—
(1) evaluate the effectiveness of any rules pro-
mulgated or amended after October 1, 1991, pursuant
to section 15C of the Securities Exchange Act of 1934
or any amendment made by this title, and any na-
tional securities association rule changes applicable
principally to government securities transactions ap-
proved after October 1, 1991, in carrying out the pur-
poses of such Act;
(2) evaluate the effectiveness of surveillance and
enforcement with respect to government securities,
and the impact on such surveillance and enforcement
of defects in any available audit trails with respect
to transactions in such securities; and
(3) submit to the Congress, not later than March
31, 1998, any recommendations they may consider
appropriate concerning—
(A) the regulation of government securities
brokers and government securities dealers,
(B) the dissemination of information con-
cerning quotations for and transactions in gov-
ernment securities,
(C) the prevention of sales practice abuses
in connection with transactions in government
securities, and
(D) such other matters as they consider ap-
propriate.
(b) GAO STUDY.—The Comptroller General shall—
(1) conduct a study of the effectiveness of regula-
tion of government securities brokers and government
securities dealers pursuant to section 15C of the Secu-
rities Exchange Act of 1934 and the effectiveness of
the amendments made by this title; and
(2) submit to the Congress, not later than March
31, 1997, the Comptroller General’s recommendations
for change, if any, or such other recommendations as
the Comptroller General considers appropriate.
(c) TREASURY STUDY.—The Secretary of the Treasury,
in consultation with the Securities and Exchange Commis-
sion, shall—
(1) conduct a study of—
(A) the identity and nature of the business
of government securities brokers and government
securities dealers that are registered with the Se-
curities and Exchange Commission under section
15C of the Securities Exchange Act of 1934; and
(B) the continuing need for, and regulatory
and financial consequences of, a separate regu-
latory system for such government securities bro-
kers and government securities dealers; and
(2) submit to the Congress, not later than 18
months after the date of enactment of this Act, the
Secretary’s recommendations for change, if any, or
such other recommendations as the Secretary consid-
ers appropriate.
SEC. 10. TECHNICAL AMENDMENTS.
(a) AMENDMENTS TO DEFINITIONS.—Section 3(a) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is
amended—
(1) in paragraph (34)(G) (relating to the defini-
tion of appropriate regulatory agency), by amending
clauses (ii), (iii), and (iv) to read as follows:
‘‘(ii) the Board of Governors of the
Federal Reserve System, in the case of a
State member bank of the Federal Reserve
System, a foreign bank, an uninsured State
branch or State agency of a foreign bank, a
commercial lending company owned or con-
trolled by a foreign bank (as such terms are
used in the International Banking Act of
1978), or a corporation organized or having
an agreement with the Board of Governors
of the Federal Reserve System pursuant to
section 25 or section 25A of the Federal Re-
serve Act;
‘‘(iii) the Federal Deposit Insurance
Corporation, in the case of a bank insured
by the Federal Deposit Insurance Corpora-
tion (other than a member of the Federal
Reserve System or a Federal savings bank)
or an insured State branch of a foreign
bank (as such terms are used in the Inter-
national Banking Act of 1978);
‘‘(iv) the Director of the Office of
Thrift Supervision, in the case of a savings
association (as defined in section 3(b) of the
Federal Deposit Insurance Act) the deposits
of which are insured by the Federal Deposit
Insurance Corporation;’’;
(2) by amending paragraph (46) (relating to the
definition of financial institution) to read as follows:
‘‘(46) The term ‘financial institution’ means—
‘‘(A) a bank (as defined in paragraph (6)
of this subsection);
‘‘(B) a foreign bank (as such term is used
in the International Banking Act of 1978); and
‘‘(C) a savings association (as defined in
section 3(b) of the Federal Deposit Insurance
Act) the deposits of which are insured by the
Federal Deposit Insurance Corporation.’’; and
(3) by redesignating paragraph (51) (as added
by section 204 of the International Securities Enforce-
ment Cooperation Act of 1990) as paragraph (52).
(b) EFFECTIVE DATE OF BROKER/DEALER REGISTRA-
TION.—
(1) GOVERNMENT
SECURITIES
BROKERS
AND
DEALERS.—Section 15C(a)(2)(ii) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o–5(a)(2)(ii)) is
amended by inserting before ‘‘At the conclusion’’ the
following: ‘‘The order granting registration shall not
be effective until such government securities broker or
government securities dealer has become a member of
a national securities exchange registered under section
6 of this title, or a securities association registered
under section 15A of this title, unless the Commission
has exempted such government securities broker or
government securities dealer, by rule or order, from
such membership.’’.
(2) OTHER
BROKERS
AND
DEALERS.—Section
15(b)(1)(B) of such Act (15 U.S.C. 78o(b)(1)(B)) is
amended by inserting before ‘‘At the conclusion’’ the
following: ‘‘The order granting registration shall not
be effective until such broker or dealer has become a
member of a registered securities association, or until
such broker or dealer has become a member of a na-
tional securities exchange if such broker or dealer ef-
fects transactions solely on that exchange, unless the
Commission has exempted such broker or dealer, by
rule or order, from such membership.’’.
(c) INFORMATION SHARING.—Section 15C(d)(2) of
such Act is amended to read as follows:
‘‘(2) Information received by an appropriate regu-
latory agency, the Secretary, or the Commission from or
with respect to any government securities broker, govern-
ment securities dealer, any person associated with a govern-
ment securities broker or government securities dealer, or
any other person subject to this section or rules promulgated