In the Senate of the United States,
June 27, 1996.
Resolved, That the bill from the House of Representa-
tives (H.R. 3005) entitled ‘‘An Act to amend the Federal se-
curities laws in order to promote efficiency and capital forma-
tion 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.’’, do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Se-
curities Investment Promotion Act of 1996’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Severability.
TITLE I—INVESTMENT ADVISERS SUPERVISION COORDINATION ACT
Sec. 101. Short title.
Sec. 102. Funding for enhanced enforcement priority.
Sec. 103. Improved supervision through State and Federal cooperation.
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Sec. 104. Interstate cooperation.
Sec. 105. Disqualification of convicted felons.
Sec. 106. Continued State authority.
Sec. 107. Effective date.
TITLE II—FACILITATING INVESTMENT IN MUTUAL FUNDS
Sec. 201. Short title.
Sec. 202. Funds of funds.
Sec. 203. Flexible registration of securities.
Sec. 204. Facilitating use of current information in advertising.
Sec. 205. Variable insurance contracts.
Sec. 206. Prohibition on deceptive investment company names.
Sec. 207. Excepted investment companies.
Sec. 208. Performance fees exemptions.
Sec. 209. Reports to the Commission and shareholders.
Sec. 210. Books, records, and inspections.
TITLE III—REDUCING THE COST OF SAVING AND INVESTMENT
Sec. 301. Exemption for economic, business, and industrial development compa-
nies.
Sec. 302. Intrastate closed-end investment company exemption.
Sec. 303. Definition of eligible portfolio company.
Sec. 304. Definition of business development company.
Sec. 305. Acquisition of assets by business development companies.
Sec. 306. Capital structure amendments.
Sec. 307. Filing of written statements.
Sec. 308. Facilitating national securities markets.
Sec. 309. Regulatory flexibility.
Sec. 310. Analysis of economic effects of regulation.
Sec. 311. Privatization of EDGAR.
Sec. 312. Improving coordination of supervision.
Sec. 313. Increased access to foreign business information.
Sec. 314. Short-form registration.
Sec. 315. Church employee pension plans.
Sec. 316. Promoting global preeminence of American securities markets.
Sec. 317. Broker-dealer exemption from State law for certain de minimis trans-
actions.
Sec. 318. Studies and reports.
SEC. 2. SEVERABILITY.
If any provision of this Act, an amendment made by
this Act, or the application of such provision or amendment
to any person or circumstance is held to be unconstitu-
tional, the remainder of this Act, the amendments made by
this Act, and the application of the provisions of such to
any person or circumstance shall not be affected thereby.
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TITLE I—INVESTMENT ADVISERS
SUPERVISION COORDINATION
ACT
SEC. 101. SHORT TITLE.
This title may be cited as the ‘‘Investment Advisers
Supervision Coordination Act’’.
SEC. 
102. 
FUNDING 
FOR 
ENHANCED 
ENFORCEMENT
PRIORITY.
There are authorized to be appropriated to the Securi-
ties and Exchange Commission, for the enforcement of the
Investment Advisers Act of 1940, not more than
$16,000,000 in each of fiscal years 1997 and 1998.
SEC. 103. IMPROVED SUPERVISION THROUGH STATE AND
FEDERAL COOPERATION.
(a) STATE
AND FEDERAL RESPONSIBILITIES.—The
Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.)
is amended by inserting after section 203 the following new
section:
‘‘SEC. 203A. STATE AND FEDERAL RESPONSIBILITIES.
‘‘(a) ADVISERS SUBJECT TO STATE AUTHORITIES.—
‘‘(1) IN GENERAL.—No investment adviser that
is regulated or required to be regulated as an invest-
ment adviser in the State in which it maintains its
principal office and place of business shall register
under section 203, unless the investment adviser—
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‘‘(A) has assets under management of not
less than $25,000,000, or such higher amount as
the Commission may, by rule, deem appropriate
in accordance with the purposes of this title; or
‘‘(B) is an adviser to an investment com-
pany registered under title I of this Act, or a
company that has elected to be a business devel-
opment company pursuant to section 54 of title
I of this Act.
‘‘(2) DEFINITION.—For purposes of this sub-
section, the term ‘assets under management’ means
the securities portfolios with respect to which an in-
vestment adviser provides continuous and regular su-
pervisory or management services.
‘‘(b) 
ADVISERS
SUBJECT
TO
COMMISSION
AUTHORITY.—
‘‘(1) IN GENERAL.—No law of any State or po-
litical subdivision thereof requiring the registration,
licensing, or qualification as an investment adviser or
supervised person of an investment adviser shall
apply to any person—
‘‘(A) that is registered under section 203 as
an investment adviser, or that is a supervised
person of such a person; or
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‘‘(B) that is not registered under section
203 because that person is excepted from the defi-
nition of an investment adviser under section
202(a)(11).
‘‘(2) LIMITATION.—Nothing in this subsection
shall prohibit the securities commission (or any agen-
cy or office performing like functions) of any State
from—
‘‘(A) requiring the filing with such commis-
sion, agency, or office of any document filed with
the Commission by an investment adviser, to-
gether with a consent to service of process and
requisite fees; or
‘‘(B) investigating and bringing enforce-
ment actions with respect to fraud or deceit
against an investment adviser or person associ-
ated with an investment adviser.
‘‘(c) EXEMPTIONS.—Notwithstanding subsection (a),
the Commission, by rule or regulation upon its own motion,
or by order upon application, may permit the registration
with the Commission of any person or class of persons to
which the application of subsection (a) would be unfair, a
burden on interstate commerce, or otherwise inconsistent
with the purposes of this section.
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‘‘(d) FILING DEPOSITORIES.—The Commission may,
by rule, require an investment adviser—
‘‘(1) to file with the Commission any fee, appli-
cation, report, or notice required by this title or by
the rules issued under this title through any entity
designated by the Commission for that purpose; and
‘‘(2) to pay the reasonable costs associated with
such filing.
‘‘(e) STATE ASSISTANCE.—Upon request of the securi-
ties commissioner (or any agency or officer performing like
functions) of any State, the Commission may provide such
training, technical assistance, or other reasonable assistance
in connection with the regulation of investment advisers by
the State.’’.
(b) ADVISERS NOT ELIGIBLE TO REGISTER.—Section
203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–
3) is amended—
(1) in subsection (c), in the matter immediately
following paragraph (2), by inserting ‘‘and that the
applicant is not prohibited from registering as an in-
vestment adviser under section 203A’’ after ‘‘satis-
fied’’; and
(2) in subsection (h), in the second sentence—
(A) by striking ‘‘existence or’’ and inserting
‘‘existence,’’; and
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(B) by inserting ‘‘or is prohibited from reg-
istering as an investment adviser under section
203A,’’ after ‘‘adviser,’’.
(c) DEFINITION OF ‘‘SUPERVISED PERSON’’.—Section
202(a) of the Investment Advisers Act of 1940 (15 U.S.C.
80b–2(a)) is amended—
(1) by striking ‘‘requires—’’ and inserting ‘‘re-
quires, the following definitions shall apply:’’; and
(2) by adding at the end the following new para-
graph:
‘‘(25) ‘Supervised person’ means any partner, of-
ficer, director (or other person occupying a similar
status or performing similar functions), or employee
of an investment adviser, or other person who pro-
vides investment advice on behalf of the investment
adviser and is subject to the supervision and control
of the investment adviser.’’.
(d) CONFORMING AMENDMENT.—Section 203(a) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b–3(a)) is
amended by striking ‘‘subsection (b) of this section’’ and
inserting ‘‘subsection (b) and section 203A’’.
SEC. 104. INTERSTATE COOPERATION.
Section 222 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–18a) is amended to read as follows:
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‘‘SEC. 222. STATE REGULATION OF INVESTMENT ADVISERS.
‘‘(a) JURISDICTION OF STATE REGULATORS.—Nothing
in this title shall affect the jurisdiction of the securities com-
missioner (or any agency or officer performing like func-
tions) of any State over any security or any person insofar
as it does not conflict with the provisions of this title or
the rules and regulations thereunder.
‘‘(b) DUAL COMPLIANCE PURPOSES.—No State may
enforce any law or regulation that would require an invest-
ment adviser to maintain any books or records in addition
to those required under the laws of the State in which it
maintains its principal place of business, if the investment
adviser—
‘‘(1) is registered or licensed as such in the State
in which it maintains its principal place of business;
and
‘‘(2) is in compliance with the applicable books
and records requirements of the State in which it
maintains its principle place of business.
‘‘(c) LIMITATION ON CAPITAL AND BOND REQUIRE-
MENTS.—No State may enforce any law or regulation that
would require an investment adviser to maintain a higher
minimum net capital or to post any bond in addition to
any that is required under the laws of the State in which
it maintains its principal place of business, if the invest-
ment adviser—
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‘‘(1) is registered or licensed as such in the State
in which it maintains its principal place of business;
and
‘‘(2) is in compliance with the applicable net
capital or bonding requirements of the State in which
it maintains its principal place of business.’’.
SEC. 105. DISQUALIFICATION OF CONVICTED FELONS.
(a) AMENDMENT.—Section 203(e) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b–3(e)) is amended—
(1) by redesignating paragraphs (3) through (7)
as paragraphs (4) through (8), respectively; and
(2) by inserting after paragraph (2) the follow-
ing new paragraph:
‘‘(3) has been convicted during the 10-year pe-
riod preceding the date of filing of any application
for registration, or at any time thereafter, of—
‘‘(A) any crime that is punishable by im-
prisonment for 1 or more years, and that is not
described in paragraph (2); or
‘‘(B) a substantially equivalent crime by a
foreign court of competent jurisdiction.’’.
(b) CONFORMING AMENDMENTS.—Section 203 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b–3) is
amended—
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(1) in subsection (e)(6) (as redesignated by sub-
section (a) of this section), by striking ‘‘this para-
graph (5)’’ and inserting ‘‘this paragraph’’;
(2) in subsection (f)—
(A) by striking ‘‘paragraph (1), (4), (5), or
(7) of subsection (e) of this section’’ and insert-
ing ‘‘paragraph (1), (5), (6), or (8) of subsection
(e)’’;
(B) by striking ‘‘paragraph (3)’’ and insert-
ing ‘‘paragraph (4)’’; and
(C) by striking ‘‘said subsection’’ each place
that term appears and inserting ‘‘subsection’’;
and
(3) in subsection (i)(1)(D), by striking ‘‘section
203(e)(5) of this title’’ and inserting ‘‘subsection
(e)(6)’’.
SEC. 106. CONTINUED STATE AUTHORITY.
Notwithstanding any other provision of this title, or
any amendment made by this title, a State or Territory
of the United States, or the District of Columbia may con-
tinue to collect filing, registration, or licensing fees in
amounts determined pursuant to State law as in effect on
the day before the date of enactment of this Act, until other-
wise specifically provided under a State law enacted on or
after that date of enactment.
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SEC. 107. EFFECTIVE DATE.
This title and the amendments made by this title shall
take effect 180 days after the date of enactment of this Act.
TITLE II—FACILITATING
INVESTMENT IN MUTUAL FUNDS
SEC. 201. SHORT TITLE.
This title may be cited as the ‘‘Investment Company
Amendments Act 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 that such in-
vestment company is not a registered investment
company,’’ after ‘‘(bb)’’;
(2) by redesignating subparagraphs (G) and (H)
as subparagraphs (H) and (I), respectively;
(3) by striking ‘‘this paragraph (1)’’ each place
that term appears and inserting ‘‘this paragraph’’;
(4) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) This paragraph does not apply to securities
of a registered open-end investment company or a registered
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fund, are not excessive under rules adopted pursuant
to section 22(b) or section 22(c) by a securities asso-
ciation registered under section 15A of the Securities
Exchange Act of 1934 or the Commission;
‘‘(IV) the acquired company has a policy that
prohibits it from acquiring any securities of reg-
istered open-end investment companies or registered
unit investment trusts in reliance on this subpara-
graph or subparagraph (F); 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.
‘‘(ii) For purposes of this subparagraph, the term
‘group of investment companies’ means any 2 or more reg-
istered investment companies that hold themselves out to in-
vestors as related companies for purposes of investment and
investor services.’’; and
(5) by adding at the end the following new sub-
paragraph:
‘‘(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,
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or transactions from any provision of this subsection, if and
to the extent that such exemption is consistent with the pub-
lic interest and the protection of investors.’’.
SEC. 203. FLEXIBLE 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 striking ‘‘(3) For’’ and inserting ‘‘For’’;
and
(3) 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) REGISTRATION OF SECURITIES.—Upon the
effective date of its registration statement, as provided
by section 8 of the Securities Act of 1933, a face-
amount certificate company, open-end management
company, or unit investment trust, shall be deemed to
have registered an indefinite amount of securities.
‘‘(2) PAYMENT
OF
REGISTRATION
FEES.—Not
later than 90 days after the end of the fiscal year of
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an entity referred to in paragraph (1), the entity
shall pay a registration fee to the Commission, cal-
culated in the manner specified in section 6(b) of the
Securities Act of 1933, based on the aggregate sales
price for which its securities (including, for purposes
of this paragraph, all securities issued pursuant to a
dividend reinvestment plan) were sold pursuant to a
registration of an indefinite amount of securities
under this subsection during the previous fiscal year
of the entity, reduced by—
‘‘(A) the aggregate redemption or repur-
chase price of the securities of the entity during
that year; and
‘‘(B) the aggregate redemption or repur-
chase price of the securities of the entity during
any prior fiscal year ending not more than 1
year before the date of enactment of the Invest-
ment Company Amendments Act of 1996, that
were not used previously by the entity to reduce
fees payable under this section.
‘‘(3) INTEREST DUE ON LATE PAYMENT.—An en-
tity paying the fee required by this subsection or any
portion thereof more than 90 days after the end of the
fiscal year of the entity shall pay to the Commission
interest on unpaid amounts, compounded daily, at
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the underpayment rate established by the Secretary of
the Treasury pursuant to section 3717 of title 31,
United States Code. The payment of interest pursuant
to this paragraph shall not preclude the Commission
from bringing an action to enforce the requirements
of paragraph (2).
‘‘(4) RULEMAKING
AUTHORITY.—The Commis-
sion may adopt rules and regulations to implement
this subsection.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall become effective on the earlier of—
(1) 1 year after the date of enactment of this Act;
or
(2) the effective date of final rules or regulations
issued in accordance with section 24(f) of the Invest-
ment Company Act of 1940, as amended by this sec-
tion.
SEC. 204. FACILITATING USE OF CURRENT INFORMATION
IN ADVERTISING.
Section 24 of the Investment Company Act of 1940 (15
U.S.C. 80a–24) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) ADDITIONAL PROSPECTUSES.—In addition to
any prospectus permitted or required by section 10(a) of
the Securities Act of 1933, the Commission shall permit,
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by rules or regulations deemed necessary or appropriate in
the public interest or for the protection of investors, the use
of a prospectus for the purposes of section 5(b)(1) of that
Act with respect to securities issued by a registered invest-
ment company. Such a prospectus, which may include in-
formation the substance of which is not included in the pro-
spectus specified in section 10(a) of the Securities Act of
1933, shall be deemed to be permitted by section 10(b) of
that Act.’’.
SEC. 205. VARIABLE INSURANCE CONTRACTS.
(a) UNIT INVESTMENT TRUST TREATMENT.—Section
26 of the Investment Company Act of 1940 (15 U.S.C. 80a–
26) is amended by adding at the end the following new sub-
section:
‘‘(e) EXEMPTION.—
‘‘(1) IN
GENERAL.—Subsection (a) does not
apply to any registered separate account funding
variable insurance contracts, or to the sponsoring in-
surance company and principal underwriter of such
account.
‘‘(2) LIMITATION ON SALES.—It shall be unlaw-
ful for any registered separate account funding vari-
able insurance contracts, or for the sponsoring insur-
ance company of such account, to sell any such con-
tract, unless—
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‘‘(A) the fees and charges deducted under
the contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses ex-
pected to be incurred, and the risks assumed by
the insurance company, and the insurance com-
pany so represents in the registration statement
for the contract; and
‘‘(B) the insurance company—
‘‘(i) complies with all other applicable
provisions of this section, as if it were a
trustee or custodian of the registered sepa-
rate account;
‘‘(ii) files with the insurance regu-
latory authority of the State or territory of
the United States or of the District of Co-
lumbia in which is located the principal
place of business of the insurance company,
an annual statement of its financial condi-
tion, which most recent statement indicates
that the insurance company has a combined
capital and surplus, if a stock company, or
an unassigned surplus, if a mutual com-
pany, of not less than $1,000,000, or such
other amount as the Commission may from
time to time prescribe by rule, as necessary
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or appropriate in the public interest or for
the protection of investors; and
‘‘(iii) together with its registered sepa-
rate accounts, is supervised and examined
periodically by the insurance authority of
such State, territory, or the District of Co-
lumbia.
‘‘(3) FEES
AND
CHARGES.—For purposes of
paragraph (2), the fees and charges deducted under
the contract shall include all fees and charges imposed
for any purpose and in any manner.
‘‘(4) REGULATORY
AUTHORITY.—The Commis-
sion may issue such rules and regulations to carry
out paragraph (2)(A) as it determines are necessary
or appropriate in the public interest or for the protec-
tion of investors.’’.
(b) PERIODIC PAYMENT PLAN TREATMENT.—Section
27 of the Investment Company Act of 1940 (15 U.S.C. 80a–
27) is amended by adding at the end the following new sub-
section:
‘‘(i)(1) This section does not apply to any registered
separate account funding variable insurance contracts, or
to the sponsoring insurance company and principal under-
writer of such account, except as provided in paragraph
(2).
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‘‘(2) It shall be unlawful for any registered separate
account funding variable insurance contracts, or for the
sponsoring insurance company of such account, to sell any
such contract unless—
‘‘(A) such contract is a redeemable security; and
‘‘(B) the insurance company complies with sec-
tion 26(e) and any rules or regulations issued by the
Commission under section 26(e).’’.
SEC. 206. PROHIBITION ON DECEPTIVE INVESTMENT COM-
PANY NAMES.
Section 35(d) of the Investment Company Act of 1940
(15 U.S.C. 80a–34(d)) is amended to read as follows:
‘‘(d) It shall be unlawful for any registered investment
company to adopt as a part of the name or title of such
company, or of any securities of which it is the issuer, any
word or words that the Commission finds are materially
deceptive or misleading. The Commission is authorized, by
rule, regulation, or order, to define such names or titles as
are materially deceptive or misleading.’’.
SEC. 207. EXCEPTED INVESTMENT COMPANIES.
(a) AMENDMENTS.—Section 3(c) of the Investment
Company Act of 1940 (15 U.S.C. 80a–3(c)) is amended—
(1) in paragraph (1), by inserting after the first
sentence the following: ‘‘Such issuer shall be deemed
to be an investment company for purposes of the limi-
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tations set forth in subparagraphs (A)(i) and (B)(i)
of section 12(d)(1) governing the purchase or other ac-
quisition by such issuer of any security issued by any
registered investment company and the sale of any se-
curity issued by any registered open-end investment
company to any such issuer.’’;
(2) in subparagraph (A) of paragraph (1)—
(A) by inserting after ‘‘issuer,’’ the first
place that term appears, the following: ‘‘and is
or, but for the exception provided for in this
paragraph or paragraph (7), would be an invest-
ment company,’’; and
(B) by striking ‘‘unless, as of’’ and all that
follows through the end of the subparagraph and
inserting a period;
(3) in paragraph (2)—
(A) by striking ‘‘and acting as broker,’’ and
inserting ‘‘acting as broker, and acting as mar-
ket intermediary,’’;
(B) by inserting ‘‘(A)’’ after ‘‘(2)’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(B) For purposes of this paragraph—
‘‘(i) the term ‘market intermediary’ means
any person that regularly holds itself out as
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being willing contemporaneously to engage in,
and that is regularly engaged in, the business of
entering into transactions on both sides of the
market for a financial contract or one or more
such financial contracts; and
‘‘(ii) the term ‘financial contract’ means
any arrangement that—
‘‘(I) takes the form of an individually
negotiated contract, agreement, or option to
buy, sell, lend, swap, or repurchase, or other
similar individually negotiated transaction
commonly entered into by participants in
the financial markets;
‘‘(II) is in respect of securities, com-
modities, currencies, interest or other rates,
other measures of value, or any other finan-
cial or economic interest similar in purpose
or function to any of the foregoing; and
‘‘(III) is entered into in response to a
request from a counter party for a
quotation, or is otherwise entered into and
structured to accommodate the objectives of
the counter party to such arrangement.’’;
and
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(4) by striking paragraph (7) and inserting the
following:
‘‘(7)(A) Any issuer, the outstanding securities of
which are owned exclusively by persons who, at the
time of acquisition of such securities, are qualified
purchasers, and which is not making and does not at
that time propose to make a public offering of such
securities. Securities that are owned by persons who
received the securities from a qualified purchaser as
a gift or bequest, or in a case in which the transfer
was caused by legal separation, divorce, death, or
other involuntary event, shall be deemed to be owned
by a qualified purchaser, subject to such rules, regula-
tions, and orders as the Commission may prescribe as
necessary or appropriate in the public interest or for
the protection of investors.
‘‘(B) Notwithstanding subparagraph (A), an is-
suer is within the exception provided by this para-
graph if—
‘‘(i) in addition to qualified purchasers,
outstanding securities of that issuer are bene-
ficially owned by not more than 100 persons who
are not qualified purchasers, if—
‘‘(I) such persons acquired such securi-
ties on or before April 30, 1996; and
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‘‘(II) at the time such securities were
acquired by such persons, the issuer was ex-
cepted by paragraph (1); and
‘‘(ii) prior to availing itself of the exception
provided by this paragraph—
‘‘(I) such issuer has disclosed to each
beneficial owner that future investors will
be limited to qualified purchasers, and that
ownership in such issuer is no longer lim-
ited to not more than 100 persons; and
‘‘(II) concurrently with or after such
disclosure, such issuer has provided each
beneficial owner with a reasonable oppor-
tunity to redeem any part or all of their in-
terests in the issuer, notwithstanding any
agreement to the contrary between the issuer
and such persons, for that person’s propor-
tionate share of the issuer’s net assets.
‘‘(C) Each person that elects to redeem under
subparagraph (B)(ii)(II) shall receive an amount in
cash equal to that person’s proportionate share of the
issuer’s net assets, unless the issuer elects to provide
such person with the option of receiving, and such
person agrees to receive, all or a portion of such per-
son’s share in assets of the issuer. If the issuer elects
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to provide such persons with such an opportunity,
disclosure concerning such opportunity shall be made
in the disclosure required by subparagraph (B)(ii)(I).
‘‘(D) An issuer that is excepted under this para-
graph shall nonetheless be deemed to be an investment
company for purposes of the limitations set forth in
subparagraphs (A)(i) and (B)(i) of section 12(d)(1)
relating to the purchase or other acquisition by such
issuer of any security issued by any registered invest-
ment company and the sale of any security issued by
any registered open-end investment company to any
such issuer.
‘‘(E) For purposes of determining compliance
with this paragraph and paragraph (1), an issuer
that is otherwise excepted under this paragraph and
an issuer that is otherwise excepted under paragraph
(1) shall not be treated by the Commission as being
a single issuer for purposes of determining whether
the outstanding securities of the issuer excepted under
paragraph (1) are beneficially owned by not more
than 100 persons or whether the outstanding securi-
ties of the issuer excepted under this paragraph are
owned by persons that are not qualified purchasers.
Nothing in this subparagraph shall be construed to es-
tablish that a person is a bona fide qualified pur-
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chaser for purposes of this paragraph or a bona fide
beneficial owner for purposes of paragraph (1).’’.
(b) DEFINITION OF QUALIFIED PURCHASER.—Section
2(a) of the Investment Company Act of 1940 (15 U.S.C.
80a–2(a)) is amended by adding at the end the following
new paragraph:
‘‘(51)(A) ‘Qualified purchaser’ means—
‘‘(i) any natural person (including any per-
son who holds a joint, community property, or
other similar shared ownership interest in an is-
suer that is excepted under section 3(c)(7) with
that person’s qualified purchaser spouse) who
owns not less than $5,000,000 in investments, as
defined by the Commission;
‘‘(ii) any company that owns not less than
$5,000,000 in investments and that is owned di-
rectly or indirectly by or for 2 or more natural
persons who are related as siblings or spouse (in-
cluding former spouses), or direct lineal descend-
ants by birth or adoption, spouses of such per-
sons, the estates of such persons, or foundations,
charitable organizations, or trusts established by
or for the benefit of such persons;
‘‘(iii) any trust that is not covered by sub-
paragraph (B) and that was not formed for the
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specific purpose of acquiring the securities of-
fered, as to which the trustee or other person au-
thorized to make decisions with respect to the
trust, and each settlor or other person who has
contributed assets to the trust, is a person de-
scribed in clause (i), (ii), or (iv);
‘‘(iv) any person, acting for its own account
or the accounts of other qualified purchasers,
who in the aggregate owns and invests on a dis-
cretionary basis, not less than $25,000,000 in in-
vestments; or
‘‘(v) any person that the Commission, by
rule or regulation, has determined does not need
the protections of this title, after consideration of
factors such as—
‘‘(I) a high degree of financial sophis-
tication, including extensive knowledge of
and experience in financial matters;
‘‘(II) a substantial amount of assets
owned or under management;
‘‘(III) relationship with an issuer; and
‘‘(IV) such other factors as the Com-
mission may determine to be consistent
with the purposes of this paragraph.
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‘‘(B) The Commission may adopt such rules and
regulations applicable to the persons and trusts speci-
fied in clauses (i) through (v) of subparagraph (A) as
it determines are necessary or appropriate in the
public interest or for the protection of investors.
‘‘(C) The term ‘qualified purchaser’ does not in-
clude a company that, but for the exceptions provided
for in paragraph (1) or (7) of section 3(c), would be
an investment company (hereafter in this paragraph
referred to as an ‘excepted investment company’), un-
less all beneficial owners of its outstanding securities
(other than short-term paper), determined in accord-
ance with section 3(c)(1)(A), that acquired such secu-
rities on or before April 30, 1996 (hereafter in this
paragraph referred to as ‘pre-amendment beneficial
owners’), and all pre-amendment beneficial owners of
the outstanding securities (other than short-term
paper) of any excepted investment company that, di-
rectly or indirectly, owns any outstanding securities
of such excepted investment company, have consented
to its treatment as a qualified purchaser. Unanimous
consent of all trustees, directors, or general partners
of a company or trust referred to in clause (ii) or
(iii) of subparagraph (A) shall constitute consent for
purposes of this subparagraph.’’.
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(c) CONFORMING AMENDMENTS.—Section 3(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a–3(a)) is
amended—
(1) by striking ‘‘(1)’’ and inserting ‘‘(A)’’;
(2) by striking ‘‘(2)’’ and inserting ‘‘(B)’’;
(3) by striking ‘‘(3)’’ and inserting ‘‘(C)’’;
(4) by inserting ‘‘(1)’’ after ‘‘(a)’’;
(5) by striking ‘‘As used’’ and inserting ‘‘(2) As
used’’; and
(6) in paragraph (2)(C), as designated by para-
graph (5) of this subsection—
(A) by striking ‘‘which are’’ and inserting
the following: ‘‘which (i) are’’; and
(B) by inserting before the period at the
end, the following: ‘‘, and (ii) are not relying on
the exception from the definition of investment
company in paragraph (1) or (7) of subsection
(c)’’.
(d) RULEMAKING REQUIRED.—
(1) IMPLEMENTATION
OF
SECTION
3(c)(1)(B).—
Not later than 1 year after the date of enactment of
this Act, the Commission shall prescribe rules to im-
plement the requirements of section 3(c)(1)(B) of the
Investment Company Act of 1940 (15 U.S.C. 80a–
3(c)(1)(B)).
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(2) IDENTIFICATION
OF
INVESTMENTS.—Not
later than 180 days after the date of enactment of this
Act, the Commission shall prescribe rules defining the
term, or otherwise identifying, ‘‘investments’’ for pur-
poses of section 2(a)(51) of the Investment Company
Act of 1940, as added by this Act.
(3) EMPLOYEE
EXCEPTION.—Not later than 1
year after the date of enactment of this Act, the Com-
mission shall prescribe rules pursuant to its authority
under section 6 of the Investment Company Act of
1940 to permit the ownership of securities by knowl-
edgeable employees of the issuer of the securities or an
affiliated person without loss of the exception of the
issuer under paragraph (1) or (7) of section 3(c) of
that Act from treatment as an investment company
under that Act.
(e) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the earlier of—
(1) 180 days after the date of enactment of this
Act; or
(2) the date on which the rulemaking required
under subsection (d)(2) is completed.
SEC. 208. PERFORMANCE FEES EXEMPTIONS.
Section 205 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–5) is amended—
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(1) in subsection (b)—
(A) in paragraph (2), by striking ‘‘or’’ at
the end;
(B) in paragraph (3), by striking the period
at the end and inserting a semicolon; and
(C) by adding at the end the following new
paragraphs:
‘‘(4) apply to an investment advisory contract
with a company excepted from the definition of an
investment company under section 3(c)(7) of title I of
this Act; or
‘‘(5) apply to an investment advisory contract
with a person who is not a resident of the United
States.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(e) The Commission, by rule or regulation, upon its
own motion, or by order upon application, may condi-
tionally or unconditionally exempt any person or trans-
action, or any class or classes of persons or transactions,
from subsection (a)(1), if and to the extent that the exemp-
tion relates to an investment advisory contract with any
person that the Commission determines does not need the
protections of subsection (a)(1), on the basis of such factors
as financial sophistication, net worth, knowledge of and ex-
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perience in financial matters, amount of assets under man-
agement, relationship with a registered investment adviser,
and such other factors as the Commission determines are
consistent with this section.’’.
SEC. 209. REPORTS TO THE COMMISSION AND SHAREHOLD-
ERS.
Section 30 of the Investment Company Act of 1940 (15
U.S.C. 80a–29) is amended—
(1) in subsection (b), by striking paragraph (1)
and inserting the following:
‘‘(1) such information, documents, and reports
(other than financial statements), as the Commission
may require to keep reasonably current the informa-
tion and documents contained in the registration
statement of such company filed under this title;’’;
(2) by redesignating subsections (c), (d), (e), and
(f) as subsections (d), (e), (g), and (h), respectively;
(3) by inserting after subsection (b) the following
new subsection:
‘‘(c)(1) The Commission shall take such action as it
deems necessary or appropriate, consistent with the public
interest and the protection of investors, to avoid unneces-
sary reporting by, and minimize the compliance burdens
on, registered investment companies and their affiliated
persons in exercising its authority—
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‘‘(A) under subsection (f); and
‘‘(B) under subsection (b)(1), if the Commission
requires the filing of information, documents, and re-
ports under that subsection on a basis more frequently
than semiannually.
‘‘(2) Action taken by the Commission under paragraph
(1) shall include considering, and requesting public com-
ment on—
‘‘(A) feasible alternatives that minimize the re-
porting burdens on registered investment companies;
and
‘‘(B) the utility of such information, documents,
and reports to the Commission in relation to the costs
to registered investment companies and their affili-
ated persons of providing such information, docu-
ments, and reports.’’;
(4) by inserting after subsection (e) (as redesig-
nated by paragraph (2) of this section), the following
new subsection:
‘‘(f) The Commission may, by rule, require that semi-
annual reports containing the information set forth in sub-
section (e) include such other information as the Commis-
sion deems necessary or appropriate in the public interest
or for the protection of investors.’’; and
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(5) in subsection (g) (as redesignated by para-
graph (2) of this section), by striking ‘‘subsections (a)
and (d)’’ and inserting ‘‘subsections (a) and (e)’’.
SEC. 210. BOOKS, RECORDS, AND INSPECTIONS.
Section 31 of the Investment Company Act of 1940 (15
U.S.C. 80a–30) is amended—
(1) by striking subsections (a) and (b) and in-
serting the following:
‘‘(a)(1) Each registered investment company, and each
underwriter, broker, dealer, or investment adviser that is
a majority-owned subsidiary of such a company, shall
maintain and preserve such records (as defined in section
3(a)(37) of the Securities Exchange Act of 1934) for such
period or periods as the Commission, by rules and regula-
tions, may prescribe as necessary or appropriate in the
public interest or for the protection of investors. Each in-
vestment adviser that is not a majority-owned subsidiary
of, and each depositor of any registered investment com-
pany, and each principal underwriter for any registered
investment company other than a closed-end company, shall
maintain and preserve for such period or periods as the
Commission shall prescribe by rules and regulations, such
records as are necessary or appropriate to record such per-
son’s transactions with such registered company.
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‘‘(2) In exercising its authority under this subsection,
the Commission shall take such steps as it deems necessary
or appropriate, consistent with the public interest and for
the protection of investors, to avoid unnecessary record-
keeping by, and minimize the compliance burden on, per-
sons required to maintain records under this subsection
(hereafter in this section referred to as ‘subject persons’).
Such steps shall include considering, and requesting public
comment on—
‘‘(A) feasible alternatives that minimize the rec-
ordkeeping burdens on subject persons;
‘‘(B) the necessity of such records in view of the
public benefits derived from the independent scrutiny
of such records through Commission examination;
‘‘(C) the costs associated with maintaining the
information that would be required to be reflected in
such records; and
‘‘(D) the effects that a proposed recordkeeping re-
quirement would have on internal compliance policies
and procedures.
‘‘(b) All records required to be maintained and pre-
served in accordance with subsection (a) shall be subject at
any time and from time to time to such reasonable periodic,
special, and other examinations by the Commission, or any
member or representative thereof, as the Commission may
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prescribe. For purposes of such examinations, any subject
person shall make available to the Commission or its rep-
resentatives any copies or extracts from such records as may
be prepared without undue effort, expense, or delay as the
Commission or its representatives may reasonably request.
The Commission shall exercise its authority under this sub-
section with due regard for the benefits of internal compli-
ance policies and procedures and the effective implementa-
tion and operation thereof.’’;
(2) by redesignating subsections (c) and (d) as
subsections (e) and (f), respectively; and
(3) by inserting after subsection (b) the following
new subsections:
‘‘(c) Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any internal
compliance or audit records, or information contained
therein, provided to the Commission under this section.
Nothing in this subsection shall authorize the Commission
to withhold information from the Congress or prevent the
Commission from complying with a request for information
from any other Federal department or agency requesting
the information for purposes within the scope of the juris-
diction of that department or agency, or complying with
an order of a court of the United States in an action
brought by the United States or the Commission. For pur-
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poses of section 552 of title 5, United States Code, this sec-
tion shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
‘‘(d) For purposes of this section—
‘‘(1) the term ‘internal compliance policies and
procedures’ means policies and procedures designed
by subject persons to promote compliance with the
Federal securities laws; and
‘‘(2) the term ‘internal compliance and audit
record’ means any record prepared by a subject per-
son in accordance with internal compliance policies
and procedures.’’.
TITLE III—REDUCING THE COST
OF SAVING AND INVESTMENT
SEC. 301. EXEMPTION FOR ECONOMIC, BUSINESS, AND IN-
DUSTRIAL DEVELOPMENT COMPANIES.
Section 6(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–6(a)) is amended by adding at the end the
following new paragraph:
‘‘(5)(A) Any company that is not engaged in the
business of issuing redeemable securities, the oper-
ations of which are subject to regulation by the State
in which the company is organized under a statute
governing entities that provide financial or manage-
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rial assistance to enterprises doing business, or pro-
posing to do business, in that State if—
‘‘(i) the organizational documents of the
company state that the activities of the company
are limited to the promotion of economic, busi-
ness, or industrial development in the State
through the provision of financial or managerial
assistance to enterprises doing business, or pro-
posing to do business, in that State, and such
other activities that are incidental or necessary
to carry out that purpose;
‘‘(ii) immediately following each sale of the
securities of the company by the company or any
underwriter for the company, not less than 80
percent of the securities of the company being of-
fered in such sale, on a class-by-class basis, are
held by persons who reside or who have a sub-
stantial business presence in that State;
‘‘(iii) the securities of the company are sold,
or proposed to be sold, by the company or by any
underwriter for the company, solely to accredited
investors, as that term is defined in section 2(15)
of the Securities Act of 1933, or to such other
persons that the Commission, as necessary or ap-
propriate in the public interest and consistent
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with the protection of investors, may permit by
rule, regulation, or order; and
‘‘(iv) the company does not purchase any
security issued by an investment company or by
any company that would be an investment com-
pany except for the exclusions from the definition
of the term ‘investment company’ under para-
graph (1) or (7) of section 3(c), other than—
‘‘(I) any debt security that is rated in-
vestment grade by not less than 1 nation-
ally recognized statistical rating organiza-
tion; or
‘‘(II) any security issued by a reg-
istered open-end investment company that
is required by its investment policies to in-
vest not less than 65 percent of its total as-
sets in securities described in subclause (I)
or securities that are determined by such
registered open-end investment company to
be comparable in quality to securities de-
scribed in subclause (I).
‘‘(B) Notwithstanding the exemption provided by
this paragraph, section 9 (and, to the extent necessary
to enforce section 9, sections 38 through 51) shall
apply to a company described in this paragraph as
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if the company were an investment company reg-
istered under this title.
‘‘(C) Any company proposing to rely on the ex-
emption provided by this paragraph shall file with
the Commission a notification stating that the com-
pany intends to do so, in such form and manner as
the Commission may prescribe by rule.
‘‘(D) Any company meeting the requirements of
this paragraph may rely on the exemption provided
by this paragraph upon filing with the Commission
the notification required by subparagraph (C), until
such time as the Commission determines by order that
such reliance is not in the public interest or is not
consistent with the protection of investors.
‘‘(E) The exemption provided by this paragraph
may be subject to such additional terms and condi-
tions as the Commission may by rule, regulation, or
order determine are necessary or appropriate in the
public interest or for the protection of investors.’’.
SEC. 302. INTRASTATE CLOSED-END INVESTMENT COM-
PANY EXEMPTION.
Section 6(d)(1) of the Investment Company Act of
1940 (15 U.S.C. 80a–6(d)(1)) is amended by striking
‘‘$100,000’’ and inserting ‘‘$10,000,000, or such other
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amount as the Commission may set by rule, regulation, or
order’’.
SEC. 303. DEFINITION OF ELIGIBLE PORTFOLIO COMPANY.
Section 2(a)(46)(C) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(46)(C)) is amended—
(1) in clause (ii), by striking ‘‘or’’ at the end;
(2) by redesignating clause (iii) as clause (iv);
and
(3) by inserting after clause (ii) the following:
‘‘(iii) it has total assets of not more
than $4,000,000, and capital and surplus
(shareholders’ equity less retained earnings)
of not less than $2,000,000, except that the
Commission may adjust such amounts by
rule, regulation, or order to reflect changes
in 1 or more generally accepted indices or
other indicators for small businesses; or’’.
SEC. 304. DEFINITION OF BUSINESS DEVELOPMENT COM-
PANY.
Section 2(a)(48)(B) of the Investment Company Act
of 1940 (15 U.S.C. 80a–2(a)(48)(B)) is amended by adding
at the end the following: ‘‘provided further that a business
development company need not make available significant
managerial assistance with respect to any company de-
scribed in paragraph (46)(C)(iii), or with respect to any
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other company that meets such criteria as the Commission
may by rule, regulation, or order permit, as consistent with
the public interest, the protection of investors, and the pur-
poses of this title; and’’.
SEC. 305. ACQUISITION OF ASSETS BY BUSINESS DEVELOP-
MENT COMPANIES.
Section 55(a)(1)(A) of the Investment Company Act
of 1940 (15 U.S.C. 80a–54(a)(1)(A)) is amended—
(1) by striking ‘‘or from any person’’ and insert-
ing ‘‘from any person’’; and
(2) by inserting before the semicolon ‘‘, or from
any other person, subject to such rules and regula-
tions as the Commission may prescribe as necessary
or appropriate in the public interest or for the protec-
tion of investors’’.
SEC. 306. CAPITAL STRUCTURE AMENDMENTS.
Section 61(a) of the Investment Company Act of 1940
(15 U.S.C. 80a–60(a)) is amended—
(1) in paragraph (2), by striking ‘‘if such busi-
ness development company’’ and all that follows
through the end of the paragraph and inserting a pe-
riod;
(2) in paragraph (3)(A)—
(A) by striking ‘‘senior securities represent-
ing indebtedness accompanied by’’;
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(B) by inserting ‘‘accompanied by securi-
ties,’’ after ‘‘of such company,’’; and
(C) in clause (ii), by striking ‘‘senior’’; and
(3) in paragraph (3)—
(A) in subparagraph (A), by striking ‘‘and’’
at the end;
(B) in subparagraph (B), by striking the
period at the end of clause (iv) and inserting ‘‘;
and’’; and
(C) by inserting immediately after subpara-
graph (B) the following new subparagraph:
‘‘(C) a business development company may
issue warrants, options, or rights to subscribe to,
convert to, or purchase voting securities not ac-
companied by securities, if—
‘‘(i) such warrants, options, or rights
satisfy the conditions in clauses (i) and
(iii) of subparagraph (A); and
‘‘(ii) the proposal to issue such war-
rants, options, or rights is authorized by the
shareholders or partners of such business de-
velopment company, and such issuance is
approved by the required majority (as de-
fined in section 57(o)) of the directors of or
general partners in such company on the
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basis that such issuance is in the best inter-
ests of the company and its shareholders or
partners.’’.
SEC. 307. FILING OF WRITTEN STATEMENTS.
Section 64(b)(1) of the Investment Company Act of
1940 (15 U.S.C. 80a–63(b)(1)) is amended by inserting
‘‘and capital structure’’ after ‘‘portfolio’’.
SEC. 308. FACILITATING NATIONAL SECURITIES MARKETS.
Section 18 of the Securities Act of 1933 (15 U.S.C.
77r) is amended to read as follows:
‘‘SEC. 
18. 
EXEMPTION 
FROM 
STATE 
CONTROL 
OF
SECURITIES OFFERINGS.
‘‘(a) EXEMPTION FROM STATE LAW FOR REGISTERED
SECURITIES.—Except with respect to offerings described in
subsection (b) and as otherwise specifically provided in this
section, no law, rule, regulation, order, or other administra-
tive 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 securities transactions
shall directly or indirectly apply to an offering sub-
ject to a registration statement filed pursuant to this
title;
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‘‘(2) shall directly or indirectly prohibit, limit,
or impose conditions upon the use of any offering doc-
ument, including any prospectus contained in a reg-
istration statement that has been filed with the Com-
mission; or
‘‘(3) shall directly or indirectly prohibit, limit,
or impose conditions upon the offer or sale of any se-
curity registered with the Commission under this title
based on the merits of such offering or issuer.
‘‘(b) SPECIAL RULES FOR CERTAIN OFFERINGS.—Ex-
cept with respect to a security of an investment company
that is registered under the Investment Company Act of
1940, the provisions of subsection (a) shall not apply to—
‘‘(1) an offering—
‘‘(A) by an issuer that is a blank check com-
pany, as defined in section 7(b), or a direct par-
ticipation investment program;
‘‘(B) of penny stock; or
‘‘(C) giving effect to a limited partnership
rollup transaction;
‘‘(2) an offering of a security, if a person associ-
ated with the offering is subject to a statutory dis-
qualification, as defined in section 3(a)(39) of the Se-
curities Exchange Act of 1934, or any substantially
equivalent State law; or
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‘‘(3) an offering of a security that—
‘‘(A) is not listed on the New York Stock
Exchange, the American Stock Exchange, or the
National Market Segment of the National Asso-
ciation 
of 
Securities 
Dealers 
Automated
Quotation System Stock Market;
‘‘(B) is not listed, authorized for listing, or
authorized for trading on a national securities
exchange (or tier or segment thereof) that has
standards for listing or for trading authorization
that the Commission determines, by rule (on its
own initiative or on the basis of a petition), are
substantially similar to the standards for listing
or for trading authorization that are applicable
to securities described in subparagraph (A); or
‘‘(C) will not be listed or authorized for
trading as described in subparagraph (A) or (B)
upon completion of the transaction.
‘‘(c) EXEMPTION FROM STATE LAW
FOR TRANS-
ACTIONS IN SECURITIES WITH QUALIFIED PURCHASERS.—
Notwithstanding subsection (b), subsection (a) shall apply
with respect to offers and sales to qualified purchasers, as
defined by the Commission.
‘‘(d) PRESERVATION OF FILING REQUIREMENTS.—
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‘‘(1) IN GENERAL.—Nothing in this section shall
prohibit 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, from requiring the filing of any documents filed
with the Commission pursuant to this title solely for
notice purposes, along with a consent to service of
process and requisite fee, except that no such filing,
consent, or fee may be required with respect to securi-
ties, or transactions relating to securities that are of
the same class, or are senior to such a class, as securi-
ties described in subsection (b)(3).
‘‘(2) CONTINUED STATE AUTHORITY.—Notwith-
standing paragraph (1), a State or Territory of the
United States, or the District of Columbia may con-
tinue to collect filing or registration fees with respect
to securities or securities transactions in amounts de-
termined pursuant to State law as in effect on the
day before the date of enactment of the Securities In-
vestment Promotion Act of 1996, until otherwise spe-
cifically provided under a State law enacted on or
after that date of enactment.
‘‘(e) PRESERVATION OF STATE AUTHORITY.—Nothing
in this section shall affect the jurisdiction of the securities
commission (or any agency or office performing like func-
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tions) of any State or Territory of the United States, or
the District of Columbia pursuant to the laws of such State
or Territory, with respect to any fraud or broker-dealer con-
duct in connection with securities or securities trans-
actions.’’.
SEC. 309. REGULATORY FLEXIBILITY.
(a) 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 rule or regulation, 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 issued under this title,
to the extent that such exemption is necessary or appro-
priate in the public interest, and is consistent with the pro-
tection of investors.’’.
(b) UNDER
THE SECURITIES EXCHANGE ACT
OF
1934.—Title I of the Securities 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.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), the Commission, by rule, regulation, or order, may con-
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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 issued under this title,
to the extent that such exemption is necessary or appro-
priate in the public interest, and is consistent with the pro-
tection of investors. The Commission shall, by rule or regu-
lation, determine 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 exemption under this section.
‘‘(b) LIMITATION.—The Commission may not, under
this section, exempt any person, security, or transaction,
or any class or classes of persons, securities, or transactions
from section 15C or the rules or regulations issued there-
under or (for purposes of section 15C and the rules and
regulations issued thereunder) from the definitions in para-
graphs (42), (43), (44), or (45) of section 3(a).’’.
SEC. 310. ANALYSIS OF ECONOMIC EFFECTS OF REGULA-
TION.
(a) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated to carry out the Economic
Analysis Program, including funding for the Office of Eco-
nomic Analysis of the Securities and Exchange Commis-
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sion, $6,000,000 for fiscal year 1997, and $6,000,000 for
fiscal year 1998.
(b) ANALYSIS OF ECONOMIC EFFECTS OF REGULA-
TION.—
(1) IN GENERAL.—The Chief Economist of the
Commission shall prepare a report on each proposed
regulation of the Commission. Such report shall be
provided to each Commissioner and shall be published
in the Federal Register before any such regulation of
the Commission may become effective.
(2) REPORT CONTENTS.—The report required by
this subsection shall include—
(A) an analysis of the likely effects of the
proposed regulation on the economy of the Unit-
ed States, and particularly upon the securities
markets and the participants in those markets;
and
(B) the estimated impact of the proposed
regulation upon economic and market behavior,
including any impact on market liquidity, the
costs of investment, and the financial risks of in-
vestment.
SEC. 311. PRIVATIZATION OF EDGAR.
Not later than 180 days after the date of enactment
of this Act, the Commission shall submit to the Congress
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a report on the Electronic Data Gathering Analysis and
Retrieval System consisting of the Commission’s plan for
promoting competition and innovation of the system
through privatization of all or any part of the system. Such
plan shall include such recommendations for action as may
be necessary to implement the plan.
SEC. 312. IMPROVING COORDINATION OF SUPERVISION.
Section 17 of the Securities Exchange 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) OBJECTIVE.—The Commission and the ex-
amining authorities shall promote effective and effi-
cient oversight of the activities of brokers and dealers,
avoiding redundancy, while maintaining the highest
level of examination and oversight quality.
‘‘(2) ELIMINATION OF DUPLICATION.—The Com-
mission and the examining authorities, through co-
operation and coordination of examination and over-
sight activities, shall eliminate any unnecessary and
burdensome duplication in the examination process.
‘‘(3) COORDINATION
OF
EXAMINATIONS.—The
Commission and the examining authorities shall
share such information, including reports of examina-
tions, customer complaint information, and other
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nonpublic regulatory information, as appropriate to
foster a coordinated approach to regulatory oversight
of brokers and dealers that are subject to examination
by more than one examining authority.
‘‘(4) 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.
‘‘(5) CONFIDENTIALITY.—
‘‘(A) IN GENERAL.—The provisions of sec-
tion 24 shall apply to the sharing of information
in accordance with this subsection. The Commis-
sion shall take appropriate action under section
24(c) to assure that such information is not in-
appropriately disclosed.
‘‘(B) APPROPRIATE DISCLOSURE NOT PRO-
HIBITED.—Nothing in this paragraph shall au-
thorize the Commission or any examining au-
thority to withhold information from the Con-
gress, or prevent the Commission or any examin-
ing authority from complying with a request for
information from any other Federal department
or agency requesting the information for pur-
poses within the scope of its jurisdiction, or com-
plying with an order of a court of the United
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States in an action brought by the United States
or the Commission.
‘‘(6) DEFINITION.—For purposes of this sub-
section, the term ‘examining authority’ means the
self-regulatory organizations 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. 313. INCREASED ACCESS TO FOREIGN BUSINESS IN-
FORMATION.
(a) THE SECURITIES ACT OF 1993.—Section 2(3) of
the Securities Act of 1933 (15 U.S.C. 77b(3)) is amended
in the third sentence—
(1) by striking ‘‘not include preliminary’’ and
inserting ‘‘not include (A) preliminary’’; and
(2) by inserting before the period ‘‘; or (B) solely
for purposes of section 5, press conferences held out-
side of the United States, public meetings with issuer
representatives conducted outside of the United States,
or press related materials released outside of the Unit-
ed States in which an offshore offering is discussed,
irrespective of whether journalists from the United
States or journalists for publications (including on-
line services) with circulation in the United States at-
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tend such press conferences or meetings or receive such
press related materials.’’.
(b) THE SECURITIES EXCHANGE ACT OF 1934.—Sec-
tion 14 of the Securities Exchange Act of 1934 (15 U.S.C.
78n) is amended by adding at the end the following new
subsection:
‘‘(i) TREATMENT OF PRESS RELATED MATERIALS.—
‘‘(1) IN GENERAL.—Any person making a tender
offer for, or a request or invitation for tenders of, the
securities of a foreign issuer may grant journalists
from the United States or journalists for publications
(including on-line services) with circulation in the
United States access to press conferences occurring
outside of the United States, meetings with its rep-
resentatives conducted outside of the United States, or
press related materials released outside of the United
States in which an offshore tender offer is discussed,
without being deemed to have used the jurisdictional
means specified in subsection (d)(1) or becoming sub-
ject to any regulations promulgated by the Commis-
sion, pursuant to subsection (e) of this section or sec-
tion 13(e), or otherwise, that relate to tender offers or
requests or invitations for tenders.
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‘‘(2) DEFINITION.—For purposes of this sub-
section, the term ‘foreign issuer’ means any corpora-
tion or other organization—
‘‘(A) that is incorporated or organized
under the laws of any foreign country; or
‘‘(B) the principal place of business of
which is located in a foreign country.’’.
SEC. 314. SHORT-FORM REGISTRATION.
(a) IN GENERAL.—Not later than 180 days after the
date of enactment of this Act, the Commission shall amend
Form S–3 (17 C.F.R. 239.13, relating to registration under
the Securities Act of 1933, of securities of certain issuers
offered pursuant to certain types of transactions) to allow
such form, or its equivalent, to be used for primary offerings
by a registrant if—
(1) the outstanding stock of the registrant held
by nonaffiliates of the registrant has an adequate ag-
gregate market value, as determined by the Commis-
sion; and
(2) such registrant otherwise meets the eligibility
requirements for registration using such form, or its
equivalent.
(b) ADJUSTMENTS.—Any adjustment to the adequate
aggregate market value threshold referred to in subsection
(a)(1) by the Commission following the date of enactment
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of this Act shall apply equally to voting and nonvoting com-
mon shares and such other securities as the Commission
shall establish.
(c) DEFINITION.—For purposes of this section, the
term ‘‘stock’’ includes voting and nonvoting common shares,
and such other securities as the Commission shall establish.
SEC. 315. CHURCH EMPLOYEE PENSION PLANS.
(a) AMENDMENT TO THE INVESTMENT COMPANY ACT
OF 1940.—Section 3(c) of the Investment Company Act of
1940 (15 U.S.C. 80a–3(c)) is amended by adding at the
end the following new paragraph:
‘‘(14) Any church plan described in section
414(e) of the Internal Revenue Code of 1986, if, under
any such plan, no part of the assets may be used for,
or diverted to, purposes other than the exclusive bene-
fit of plan participants or beneficiaries, or any com-
pany or account that is—
‘‘(A) established by a person that is eligible
to establish and maintain such a plan under sec-
tion 414(e) of the Internal Revenue Code of 1986;
and
‘‘(B) substantially all of the activities of
which consist of—
‘‘(i) managing or holding assets con-
tributed to such church plans or other assets
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which are permitted to be commingled with
the assets of church plans under the Inter-
nal Revenue Code of 1986; or
‘‘(ii) administering or providing bene-
fits pursuant to church plans.’’.
(b) AMENDMENT TO THE SECURITIES ACT OF 1933.—
Section 3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a))
is amended by adding at the end the following new para-
graph:
‘‘(13) Any security issued by or any interest or
participation in any church plan, company or ac-
count that is excluded from the definition of an in-
vestment company under section 3(c)(14) of the In-
vestment Company Act of 1940.’’.
(c) AMENDMENTS TO THE SECURITIES EXCHANGE ACT
OF 1934.—
(1) 
EXEMPTED
SECURITIES.—Section
3(a)(12)(A) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(12)(A)) is amended—
(A) in clause (v), by striking ‘‘and’’ at the
end;
(B) by redesignating clause (vi) as clause
(vii); and
(C) by inserting after clause (v) the follow-
ing new clause:
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‘‘(vi) solely for purposes of sections 12,
13, 14, and 16 of this title, any security is-
sued by or any interest or participation in
any church plan, company, or account that
is excluded from the definition of an invest-
ment company under section 3(c)(14) of the
Investment Company Act of 1940; and’’.
(2) EXEMPTION FROM BROKER-DEALER PROVI-
SIONS.—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) CHURCH PLANS.—No church plan described in
section 414(e) of the Internal Revenue Code of 1986, no per-
son or entity eligible to establish and maintain such a plan
under the Internal Revenue Code of 1986, no company or
account that is excluded from the definition of an invest-
ment company under section 3(c)(14) of the Investment
Company Act of 1940, and no trustee, director, officer or
employee of or volunteer for such plan, company, account
person, or entity, acting within the scope of that person’s
employment or activities with respect to such plan, shall
be deemed to be a ‘broker’, ‘dealer’, ‘municipal securities
broker’, ‘municipal securities dealer’, ‘government securities
broker’, ‘government securities dealer’, ‘clearing agency’, or
‘transfer agent’ for purposes of this title—
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‘‘(1) solely because such plan, company, person,
or entity buys, holds, sells, trades in, or transfers se-
curities or acts as an intermediary in making pay-
ments in connection with transactions in securities
for its own account in its capacity as trustee or ad-
ministrator of, or otherwise on behalf of, or for the ac-
count of, any church plan, company, or account that
is excluded from the definition of an investment com-
pany under section 3(c)(14) of the Investment Com-
pany Act of 1940; and
‘‘(2) if no such person or entity receives a com-
mission or other transaction-related sales compensa-
tion in connection with any activities conducted in
reliance on the exemption provided by this sub-
section.’’.
(d) AMENDMENT TO THE INVESTMENT ADVISERS ACT
OF 1940.—Section 203(b) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b–3(b)) is amended—
(1) in paragraph (3), by striking ‘‘or’’ at the
end;
(2) in paragraph (4), by striking the period at
the end and inserting ‘‘; or’’; and
(3) by adding at the end the following new para-
graph:
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‘‘(5) any plan described in section 414(e) of the
Internal Revenue Code of 1986, any person or entity
eligible to establish and maintain such a plan under
the Internal Revenue Code of 1986, or any trustee, di-
rector, officer, or employee of or volunteer for any
such plan or person, if such person or entity provides
investment advice exclusively to any plan, person, or
entity or any company, account, or fund that is ex-
cluded from the definition of an investment company
under section 3(c)(14) of the Investment Company
Act of 1940.’’.
(e) AMENDMENT TO THE TRUST INDENTURE ACT OF
1939.—Section 304(a)(4)(A) of the Trust Indenture Act of
1939 (15 U.S.C. 77ddd(4)(A)) is amended by striking ‘‘or
(11)’’ and inserting ‘‘(11), or (14)’’.
(f) PROTECTION
OF CHURCH EMPLOYEE BENEFIT
PLANS UNDER STATE LAW.—
(1) REGISTRATION REQUIREMENTS.—Any secu-
rity issued by or any interest or participation in any
church plan, company, or account that is excluded
from the definition of an investment company under
section 3(c)(14) of the Investment Company Act of
1940, as added by subsection (a) of this section, and
any offer, sale, or purchase thereof, shall be exempt
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from any law of a State that requires registration or
qualification of securities.
(2) TREATMENT OF CHURCH PLANS.—No church
plan described in section 414(e) of the Internal Reve-
nue Code of 1986, no person or entity eligible to es-
tablish and maintain such a plan under the Internal
Revenue Code of 1986, no company or account that
is excluded from the definition of an investment com-
pany under section 3(c)(14) of the Investment Com-
pany Act of 1940, as added by subsection (a) of this
section, and no trustee, director, officer, or employee
of or volunteer for any such plan, person, entity, com-
pany, or account shall be required to qualify, register,
or be subject to regulation as an investment company
or as a broker, dealer, investment adviser, or agent
under the laws of any State solely because such plan,
person, entity, company, or account buys, holds, sells,
or trades in securities for its own account or in its
capacity as a trustee or administrator of or otherwise
on behalf of, or for the account of, or provides invest-
ment advice to, for, or on behalf of, any such plan,
person, or entity or any company or account that is
excluded from the definition of an investment com-
pany under section 3(c)(14) of the Investment Com-
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pany Act of 1940, as added by subsection (a) of this
section.
(g) AMENDMENT TO THE INVESTMENT COMPANY ACT
OF 1940.—Section 30 of the Investment Company Act of
1940 (15 U.S.C. 80a–29) is amended by adding at the end
the following new subsections:
‘‘(g) DISCLOSURE TO CHURCH PLAN PARTICIPANTS.—
A person that maintains a church plan that is excluded
from the definition of an investment company solely by rea-
son of section 3(c)(14) shall provide disclosure to plan par-
ticipants, in writing, and not less frequently than annually,
and for new participants joining such a plan after May
31, 1996, prior to joining such plan, that—
‘‘(1) the plan, or any company or account main-
tained to manage or hold plan assets and interests in
such plan, company, or account, are not subject to
registration, regulation, or reporting under this title,
the Securities Act of 1933, the Securities Exchange
Act of 1934, or State securities laws; and
‘‘(2) plan participants and beneficiaries therefore
will not be afforded the protections of those provisions.
‘‘(h) NOTICE TO COMMISSION.—The Commission may
issue rules and regulations to require any person that
maintains a church plan that is excluded from the defini-
tion of an investment company solely by reason of section
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3(c)(14) to file a notice with the Commission containing
such information and in such form as the Commission may
prescribe as necessary or appropriate in the public interest
or consistent with the protection of investors.’’.
SEC. 316. PROMOTING GLOBAL PREEMINENCE OF AMER-
ICAN SECURITIES MARKETS.
It is the sense of the Congress that—
(1) the United States and foreign securities mar-
kets 
are 
increasingly 
becoming 
international
securities markets, as issuers and investors seek the
benefits of new capital and secondary market oppor-
tunities without regard to national borders;
(2) as issuers seek to raise capital across
national borders, they confront differing accounting
requirements in the various regulatory jurisdictions;
(3) the establishment of a high-quality com-
prehensive set of generally accepted international ac-
counting standards in cross-border securities offerings
would greatly facilitate international financing ac-
tivities and, most significantly, would enhance the
ability of foreign corporations to access and list in
United States markets;
(4) in addition to the efforts made before the date
of enactment of this Act by the Commission to re-
spond to the growing internationalization of securities
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markets, the Commission should enhance its vigorous
support for the development of high-quality inter-
national accounting standards as soon as practicable;
and
(5) the Commission, in view of its clear author-
ity under law to facilitate the access of foreign cor-
porations to list their securities in United States
markets, should report to the Congress, not later than
1 year after the date of enactment of this Act, on
progress in the development of international account-
ing standards and the outlook for successful comple-
tion of a set of international standards that would be
acceptable to the Commission for offerings and list-
ings by foreign corporations in United States mar-
kets.
SEC. 317. BROKER-DEALER EXEMPTION FROM STATE LAW
FOR CERTAIN DE MINIMIS TRANSACTIONS.
(a) IN GENERAL.—Section 15 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o) is amended by adding
at the end the following new subsection:
‘‘(h) EXEMPTION FROM STATE LAW FOR CERTAIN DE
MINIMIS TRANSACTIONS.—
‘‘(1) IN GENERAL.—No law, rule, regulation, or
order, or other administrative action of any State or
political subdivision thereof may prohibit an associ-
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ated person of a broker or dealer from affecting a
transaction described in paragraph (2) 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.
‘‘(2) DESCRIBED TRANSACTIONS.—
‘‘(A) IN
GENERAL.—A transaction is de-
scribed in this paragraph if—
‘‘(i) such transaction is effected—
‘‘(I) on behalf of a customer that,
for 30 days prior to the day of the
transaction, maintained an account
with the broker or dealer; and
‘‘(II) by an associated person of
the broker or dealer—
‘‘(aa) to which the customer
was assigned for 14 days prior to
the day of the transaction; and
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‘‘(bb) who is registered with
a State in which the customer was
a resident or was present for at
least 30 consecutive days during
the one-year period prior to the
day of the transaction;
‘‘(ii) 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 an application for registra-
tion with the State in which the trans-
action is effected and ending on the
earlier of—
‘‘(aa) 60 days after the date
on which the application is filed;
or
‘‘(bb) the date on which such
State notifies the associated per-
son that it has denied the applica-
tion for registration or has stayed
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the pendency of the application
for cause.
‘‘(B) RULES OF CONSTRUCTION.—For pur-
poses of subparagraph (A)(i)(II)—
‘‘(i) each of up to 3 associated persons
of a broker or dealer who are designated to
effect transactions during the absence or un-
availability of the principal associated per-
son for a customer may be treated as an as-
sociated person to which such customer is
assigned; and
‘‘(ii) if the customer is present in an-
other State for 30 or more consecutive days
or has permanently changed his or her resi-
dence to another State, a transaction is not
described in this paragraph, unless the asso-
ciation person of the broker or dealer files
an application for registration with such
State not later than 10 business days after
the later of the date of the transaction, or
the date of the discovery of the presence of
the customer in the other State for 30 or
more consecutive days or the change in the
customer’s residence.’’.
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(b) TECHNICAL AMENDMENT.—Section 28(a) of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78bb(a)) is
amended by striking ‘‘Nothing’’ and inserting ‘‘Except as
otherwise specifically provided in this title, nothing’’.
SEC. 318. STUDIES AND REPORTS.
(a) IMPACT OF TECHNOLOGICAL ADVANCES.—
(1) STUDY.—
(A) IN
GENERAL.—The Commission shall
conduct a study of—
(i) the impact of technological ad-
vances and the use of on-line information
systems on the securities markets;
(ii) how such technologies have changed
the way in which the securities markets op-
erate; and
(iii) any steps taken by the Commis-
sion to address such changes.
(B) CONSIDERATIONS.—In conducting the
study under subparagraph (A), the Commission
shall consider how the Commission has adapted
its enforcement policies and practices in response
to technological developments with regard to—
(i) disclosure, prospectus delivery, and
other customer protection regulations;
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(ii) intermediaries and exchanges in
the domestic and international financial
services industry;
(iii) reporting by issuers, including
communications with holders of securities;
(iv) the relationship of the Commission
with other national regulatory authorities
and organizations to improve coordination
and cooperation; and
(v) the relationship of the Commission
with State regulatory authorities and orga-
nizations to improve coordination and co-
operation.
(2) REPORT.—Not later than 1 year after the
date of enactment of this Act, the Commission shall
submit a report to the Congress on the results of the
study conducted under paragraph (1).
(b) SHAREHOLDER PROPOSALS.—
(1) STUDY.—The Commission shall conduct a
study of—
(A) whether shareholder access to proxy
statements pursuant to section 14 of the Securi-
ties Exchange Act of 1934 has been impaired by
recent statutory, judicial, or regulatory changes;
and
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(B) the ability of shareholders to have pro-
posals relating to corporate practices and social
issues included as part of proxy statements.
(2) REPORT.—Not later than 1 year after the
date of enactment of this Act, the Commission shall
submit a report to the Congress on the results of the
study conducted under paragraph (1), together with
any recommendations for regulatory or legislative
changes that it considers necessary to improve share-
holder access to proxy statements.
(c) PREFERENCING.—
(1) STUDY.—The Commission shall conduct a
study of the impact on investors and the national
market 
system 
of 
the 
practice 
known 
as
‘‘preferencing’’ on one or more registered securities ex-
changes, including consideration of—
(A) how preferencing impacts—
(i) the execution prices received by re-
tail securities customers whose orders are
preferenced; and
(ii) the ability of retail securities cus-
tomers in all markets to obtain executions
of their limit orders in preferenced securi-
ties; and
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(B) the costs of preferencing to such cus-
tomers.
(2) REPORT.—Not later than 6 months after the
date of enactment of this Act, the Commission shall
submit a report to the Congress on the results of the
study conducted under paragraph (1).
(3) DEFINITION.—For purposes of this sub-
section, the term ‘‘preferencing’’ refers to the practice
of a broker acting as a dealer on a national securities
exchange, directing the orders of customers to buy or
sell securities to itself for execution under rules that
permit the broker to take priority in execution over
same-priced orders or quotations entered prior in
time.
Attest:
Secretary.
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