I
104TH CONGRESS
1ST SESSION
H. R. 2131
To amend the Federal securities laws in order to promote efficiency and
capital formation in the financial markets.
IN THE HOUSE OF REPRESENTATIVES
JULY 27, 1995
Mr. FIELDS of Texas (for himself, Mr. FRISA, Mr. OXLEY, Mr. GILLMOR, Mr.
PAXON, Mr. HASTERT, Mr. BARTON of Texas, and Mr. WHITE) intro-
duced the following bill; which was referred to the Committee on Com-
merce
A BILL
To amend the Federal securities laws in order to promote
efficiency and capital formation in the financial markets.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Capital Markets Deregulation and Liberalization Act of
1995’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Investment recommendations to institutional clients.
Sec. 3. Creation of national securities markets.
Sec. 4. Securities margin requirements.
Sec. 5. Minimizing transaction costs of corporate organization.
Sec. 6. Prospectus delivery.
Sec. 7. Exemptive authority.
Sec. 8. Promotion of efficiency, competition, and capital formation.
Sec. 9. Reduction in number of members of Commission.
Sec. 10. Privatization of EDGAR.
Sec. 11. Rules of self-regulatory organizations.
Sec. 12. Designation of primary SRO and examining authority.
Sec. 13. Treatment of press conferences.
Sec. 14. Repeal of Trust Indenture Act of 1939.
SEC. 2. INVESTMENT RECOMMENDATIONS TO INSTITU-
TIONAL CLIENTS.
(a) RULES OF NATIONAL SECURITIES EXCHANGES
PERTAINING TO INVESTMENT RECOMMENDATIONS TO IN-
STITUTIONAL CLIENTS.—Section 6(b) of the Securities
Exchange Act of 1934 (15 U.S.C. 78f(b)) is amended by
inserting after paragraph (9) the following new paragraph:
‘‘(10) INVESTMENT RECOMMENDATIONS TO IN-
STITUTIONAL CLIENTS.—
‘‘(A) IN GENERAL.—The rules of the ex-
change do not provide that a member is respon-
sible for the investment decisions of an institu-
tional client, except that the rules of the asso-
ciation may contain a provision in accordance
with subparagraph (B).
‘‘(B) PROVISION
FOR
WRITTEN
AGREE-
MENTS.—The rules of the exchange may pro-
vide that a broker or dealer is responsible for
an investment decision of an institutional client
if the following conditions are met—
‘‘(i) the broker or dealer and the insti-
tutional client expressly agree in writing,
prior to or contemporaneously with the
recommendation, that the recommendation
will be made by the broker or dealer on a
reasonable belief that the recommendation
is suitable for such institutional client,
based upon facts disclosed by such institu-
tional client as to its other security hold-
ings and as to its financial situation and
needs; and
‘‘(ii) such other conditions as the ex-
change may establish in accordance with
the requirements of this section.
‘‘(C) DEFINITION OF INSTITUTIONAL CLI-
ENT.—For purposes of this paragraph, the
term ‘institutional client’ means any person
other than a natural person that has at least
$10,000,000 invested in securities in the aggre-
gate in its portfolio.’’.
(b) PRESUMPTION IN ACTIONS PERTAINING TO REC-
OMMENDATIONS
TO INSTITUTIONAL CLIENTS.—Section
15 of the Securities Exchange Act of 1934 (15 U.S.C.
78o) is amended by inserting after subsection (g) the fol-
lowing new subsection:
‘‘(h) INVESTMENT RECOMMENDATIONS TO INSTITU-
TIONAL CLIENTS.—
‘‘(1) PRESUMPTION.—In any action brought
against a broker or dealer or a person associated
with a broker or dealer under this title or under any
rule or regulation thereunder pertaining to an in-
vestment recommendation to an institutional client,
the broker or dealer or associated person shall be en-
titled to a presumption that it is not liable for the
investment decisions of an institutional client.
‘‘(2) STANDARD
FOR
REBUTTING
PRESUMP-
TION.—The presumption set out in paragraph (1)
may only be rebutted by proof that the broker or
dealer or associated person and the institutional cli-
ent expressly agreed in writing, prior to or contem-
poraneously with the recommendation, that the rec-
ommendation would be made by the broker or dealer
or associated person on a reasonable belief that the
recommendation would be suitable for such institu-
tional client, based upon facts disclosed by such in-
stitutional client as to its other security holdings and
as to its financial situation and needs.
‘‘(3) DEFINITION OF INSTITUTIONAL CLIENT.—
For purposes of this subsection, the term ‘institu-
tional client’ means any person other than a natural
person that has at least $10,000,000 invested in se-
curities in the aggregate in its portfolio.
‘‘(4) LIMITATION.—This subsection shall not be
deemed to create or affirm any private right of ac-
tion against a broker or dealer or associated person
for any investment recommendation to an institu-
tional client.’’.
(c) RULES OF SECURITIES ASSOCIATIONS.—Section
15A(b) of the Securities Exchange Act of 1934 (15 U.S.C.
78o–3(b)) is amended by inserting after paragraph (13)
the following new paragraph:
‘‘(14) INVESTMENT RECOMMENDATIONS TO IN-
STITUTIONAL CLIENTS.—
‘‘(A) IN GENERAL.—The rules of the asso-
ciation do not provide that a member is respon-
sible for the investment decisions of an institu-
tional client, except that the rules of the asso-
ciation may contain a provision in accordance
with subparagraph (B).
‘‘(B) PROVISION
FOR
WRITTEN
AGREE-
MENTS.—The rules of the association may pro-
vide that a broker or dealer is responsible for
an investment decision of an institutional client
if the following conditions are met—
‘‘(i) the broker or dealer and the insti-
tutional client expressly agree in writing,
prior to or contemporaneously with the
recommendation, that the recommendation
will be made by the broker or dealer on a
reasonable belief that the recommendation
is suitable for such institutional client,
based upon facts disclosed by such institu-
tional client as to its other security hold-
ings and as to its financial situation and
needs; and
‘‘(ii) such other conditions as the as-
sociation may establish in accordance with
the requirements of this section.
‘‘(C) DEFINITION OF INSTITUTIONAL CLI-
ENT.—For purposes of this paragraph, the
term ‘institutional client’ means any person
other than a natural person that has at least
$10,000,000 invested in securities in the aggre-
gate in its portfolio.’’.
SEC. 3. CREATION OF NATIONAL SECURITIES MARKETS.
(a) SECURITIES ACT OF 1933.—
(1) EXEMPTION FROM STATE CONTROL.—Sec-
tion 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 SECURI-
TIES OFFERINGS.
‘‘(a) EXEMPTION FROM STATE LAW
FOR REG-
ISTERED SECURITIES.—No law of any State or Territory
of the United States, or the District of Columbia, or any
political subdivision thereof, requiring, or with respect to,
registration or qualification of securities or securities
transactions shall apply to any securities that are offered
or sold using any means or instruments of transportation
or communication in interstate commerce or of the mails
pursuant to—
‘‘(1) a registration statement filed pursuant to
this title, with the exception of a registration state-
ment filed by an issuer which is a blank check com-
pany as defined in section 7(b) of this title;
‘‘(2) an exemption from registration set forth in
section 3(a) of this title, with the exception of sec-
tion 3(a)(11) or any rule or regulation promulgated
thereunder; or
‘‘(3) any other exemption from section 5 of this
title, except where the Commission may, by rule or
regulation, exclude such securities from the provi-
sions of this section 18(a) upon a finding that the
public interest and the protection of investors would
be served by State regulation.
‘‘(b) PRESERVATION OF FILING REQUIREMENTS.—
Nothing contained in this title shall prohibit the securities
commission (or any agency or office performing like func-
tions) of any State or Territory of the United States, or
the District of Columbia, 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 securities,
or transactions relating to securities, that are of the same
class as securities, or are senior to such a class, listed on
the New York Stock Exchange or the American Stock Ex-
change or designated for trading in the National Market
System of the National Association of Securities Dealers
Automated Quotation System, or securities that will be so
listed or designated for trading upon completion of the
transaction.
‘‘(c) EXCEPTIONS.—Nothing in this title shall affect
the jurisdiction of the securities commission (or any agen-
cy or office performing like functions) of any State or Ter-
ritory of the United States, or the District of Columbia,
over—
‘‘(1) any securities or transactions in securities
excluded, by statute, rule, or regulation, from the
operation of section 18(a), or
‘‘(2) any person who, in the offer or sale of any
securities subject to section 18(a), directly or indi-
rectly, engages in conduct that violates section 17(a)
of this title, regardless of whether the jurisdictional
means specified therein are satisfied.’’.
(2) FEDERAL-STATE
COOPERATION.—Section
19(c)(1) of such Act (15 U.S.C. 77s(c)(1)) is
amended to read as follows:
‘‘(c)(1) In connection with any regulation of securi-
ties, securities transactions or other securities matters by
any State or Territory of the United States, or the District
of Columbia, which has not been preempted by section 18
of this title, other Federal laws, or rules or regulations
promulgated thereunder, the Commission is authorized to
cooperate with any association composed of duly con-
stituted representatives of State governments whose pri-
mary assignment is the regulation of the securities busi-
ness within those States, and which, in the judgment of
the Commission, could assist in effectuating greater uni-
formity in such Federal-State securities matters. The
Commission may, at its discretion, cooperate, coordinate,
and share information with such an association for the
purposes of carrying out the policies and projects set forth
in paragraphs (2) and (3).’’.
(3) 
TECHNICAL
AMENDMENT.—Section
19(c)(3)(C) is amended by striking the last sentence.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall be effective 180 days after
the date of the enactment of this Act.
(b) SECURITIES EXCHANGE ACT OF 1934.—
(1) AMENDMENT.—Section 15 of the Securities
Exchange Act of 1934 (15 U.S.C. 78o) is amended
by adding at the end the following new subsection:
‘‘(h) EXEMPTION FROM STATE LAW
FOR REG-
ISTERED PERSONS.—
‘‘(1) EXEMPTION.—No law of any State or po-
litical subdivision thereof requiring the registration,
licensing, or qualification of a broker, dealer, or per-
son acting in a similar capacity in connection with
the purchase or sale of any security, shall apply to—
‘‘(A) any person who is registered with the
Commission as a broker or dealer, municipal se-
curities dealer, or government securities broker
or dealer under this title, or who the Commis-
sion by rule or order has exempted from reg-
istration, or any issuer;
‘‘(B) any member of a national securities
exchange; or
‘‘(C) any person associated with a broker
or dealer, member of a national securities ex-
change, municipal securities dealer, government
securities broker or dealer, or any issuer, in-
cluded within the coverage of subparagraph (A)
or (B).
‘‘(2) PERMITTED STATE ACTIVITIES.—Nothing
contained in this subsection shall prohibit a State
from requiring registration, licensing, or qualifica-
tion of any person, other than an issuer, who is
within the coverage of paragraph (1) of this sub-
section—
‘‘(A) in the case of paragraphs (1) (A) and
(B), the State performs its registration, licens-
ing, or qualification procedures through a
central registration depository system operated
by a national securities association registered
under section 15A of this title, and the State’s
requirements are substantially similar to the
Commission’s registration requirements and do
not include any provisions that are inconsistent
with, or in addition to, the Commission’s reg-
istration requirements; or
‘‘(B) in the case of paragraph (1)(C), the
State performs its registration, licensing, or
qualification procedures through a central reg-
istration depository system operated by a na-
tional securities association registered under
section 15A of this title and the State’s require-
ments are substantially similar to, and not in-
consistent with, the registration requirements of
such association or the Commission.
‘‘(3) PROHIBITED REQUIREMENTS.—No law of
any State or political subdivision thereof shall estab-
lish broker or dealer capital, books, and records, or
financial reporting requirements regarding persons
registered, licensed, or qualified pursuant to sub-
section (h)(1) that differ from requirements estab-
lished in these areas by the Commission.
‘‘(4) EXEMPTIONS.—The Commission may by
rule, regulation, or order exempt State requirements
from the provisions of paragraphs (1), (2), and (3)
of this subsection, in whole or in part, conditionally
or unconditionally, upon a finding that the public in-
terest, the protection of investors, and the mainte-
nance of fair and orderly markets would be served
by such State regulation.
‘‘(5) FEES PERMITTED.—Nothing in this sub-
section shall prohibit any State or political subdivi-
sion thereof from charging requisite fees in connec-
tion with the registration, licensing, or qualification
of persons within the coverage of this subsection.
‘‘(6) PRESERVATION OF AUTHORITY.—Nothing
contained in this subsection shall affect the jurisdic-
tion of any State or political subdivision thereof to
administer or enforce any provision of State law not
preempted by this subsection.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall be effective upon enactment.
(c) FEDERAL PREEMPTION OF STATE REGULATION
OF MATTERS REGULATED UNDER
THE INVESTMENT
COMPANY ACT OF 1940.—Section 50 of the Investment
Company Act of 1940 is amended by striking ‘‘under such
Act; nor’’ and all that follows and inserting the following:
‘‘under such Acts. The Commission shall have exclusive
jurisdiction with respect to all securities and transactions
to which this title applies, and to all persons to whom this
title applies.’’.
(d) FEDERAL PREEMPTION OF STATE REGULATION
OF PERSONS REGULATED UNDER THE INVESTMENT AD-
VISERS ACT OF 1940.—Section 222 of the Investment Ad-
visers Act of 1940 is amended to read as follows:
‘‘SEC. 222. EXCLUSIVE JURISDICTION.
‘‘The Commission shall have exclusive jurisdiction
with respect to all securities and transactions to which this
title applies, and to all persons to whom this title ap-
plies.’’.
SEC. 4. SECURITIES MARGIN REQUIREMENTS.
(a) MARGIN REQUIREMENTS.—Section 7 of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78g) is amended
to read as follows:
‘‘SEC. 7. MARGIN REQUIREMENTS.
‘‘(a) UNLAWFUL CREDIT EXTENSION IN VIOLATION
OF RULES AND REGULATIONS; EXCEPTION TO APPLICA-
TION OF RULES, ETC.—
‘‘(1) GENERAL LIMITATIONS.—It shall be un-
lawful for any person to extend or maintain credit
on any equity security of a class designated by the
Board of Governors of the Federal Reserve System
for the purpose of purchasing or carrying any equity
security of a class so designated, in contravention of
such rules and regulations as the Board of Gov-
ernors of the Federal Reserve System shall prescribe
to prevent the excessive use of credit for the pur-
chasing or carrying of equity securities of a class so
designated.
‘‘(2) APPLICABILITY.—Such rules and regula-
tions shall designate the classes of equity securities
subject to credit restrictions under this subsection
and shall apply equally to banks, brokers, dealers,
and other lenders. This subsection and the rules and
regulations thereunder shall not apply to any credit
extended or maintained—
‘‘(A) by a person not in the ordinary
course of business;
‘‘(B) on an exempted security;
‘‘(C) to or for an excluded account; or
‘‘(D) as the Board of Governors of the
Federal Reserve System shall, by such rules,
regulations, or orders as it may deem necessary
or appropriate in the public interest or for the
protection of investors, exempt, either uncondi-
tionally or upon specified terms and conditions,
or for stated periods, from the operation of this
subsection and the rules and regulations there-
under.
‘‘(3) EXEMPTION.—Notwithstanding subpara-
graphs (A), (B), and (C) of paragraph (2), the
Board of Governors of the Federal Reserve System
may impose such rules and regulations, in whole or
in part, on any extension of credit otherwise exempt-
ed by such subparagraphs if the Board of Governors
determines that such action is necessary to deal with
substantial instability or the imminent threat of sub-
stantial instability in the financial markets.
‘‘(b) UNLAWFUL USE OF FOREIGN CREDIT FACILI-
TIES.—
‘‘(1) LIMITATIONS.—It shall be unlawful for
any United States person, or any foreign person con-
trolled by a United States person or acting on behalf
of or in conjunction with such person, to obtain, re-
ceive, or enjoy the beneficial use of any extension of
credit from any lender (without regard to whether
the lender’s office or place of business is in a State
or the transaction occurred in whole or in part with-
in a State) for the purpose of—
‘‘(A) purchasing or carrying United States
equity securities of a class designated by the
Board of Governors of the Federal Reserve Sys-
tem pursuant to subsection (a); or
‘‘(B) purchasing or carrying within the
United States of any other equity securities of
a class so designated, if, under this section or
rules and regulations prescribed thereunder, the
extension of credit is prohibited or would be
prohibited if it had been made or the trans-
action had otherwise occurred in a lender’s of-
fice or other place of business in a State.
‘‘(2) DEFINITIONS.—For the purposes of this
subsection:
‘‘(A) The term ‘United States person’ in-
cludes a person which is organized or exists
under the laws of any State or, in the case of
a natural person, a citizen or resident of the
United States; a domestic estate; or a trust in
which one or more of the foregoing persons has
a cumulative direct or indirect beneficial inter-
est in excess of 50 percent of the value of the
trust.
‘‘(B) The term ‘United States equity secu-
rity’ means an equity security (other than an
exempted security) issued by a person incor-
porated under the laws of any State, or whose
principal place of business is within a State.
‘‘(C) The term ‘foreign person controlled
by a United States person’ includes any
noncorporate entity in which United States per-
sons directly or indirectly have more than a 50
percent beneficial interest, and any corporation
in which one or more United States persons, di-
rectly or indirectly, own stock possessing more
than 50 percent of the total combined voting
power of all classes of stock entitled to vote, or
more than 50 percent of the total value of
shares of all classes of stock.
‘‘(3) EXEMPTIONS.—The Board of Governors of
the Federal Reserve System may, in its discretion
and with due regard for the purposes of this section,
by rule, regulation, or order exempt any class of
United States persons or foreign persons controlled
by a United States person from the application of
this subsection.
‘‘(c) INCONSISTENT RULES.—No margin, financial
responsibility, or other rule of any national securities ex-
change or of any national securities association shall im-
pose any limitation on the extension or maintenance of
credit more restrictive than, or otherwise inconsistent
with, those provided for in this section and the rules and
regulations of the Board of Governors of the Federal Re-
serve System adopted hereunder.’’.
(b) REMOVAL OF RESTRICTIONS ON BORROWING BY
BROKER-DEALERS.—Section 8 of the Securities Exchange
Act of 1934 (15 U.S.C. 78h) is amended—
(1) by striking out ‘‘member of a national secu-
rities exchange, or broker or dealer who transacts
business in securities through the medium of any
member of a national securities exchange,’’; and
(2) by striking out subsection (a) and by redes-
ignating subsections (b) and (c) as subsections (a)
and (b), respectively.
(c) TRADING BY MEMBERS OF EXCHANGES, BRO-
KERS AND DEALERS.—Section 11(d) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78k(d)) is amended—
(1) by striking out ‘‘a member of a national se-
curities exchange’’ and inserting in lieu thereof ‘‘any
person’’;
(2) by striking out ‘‘, or for any person who
both as a broker and a dealer transacts a business
in securities through the medium of a member or
otherwise,’’;
(3) by striking out ‘‘in the case of a member’’;
(4) by inserting ‘‘(other than an excluded ac-
count)’’ after ‘‘customer’’ the first place it appears;
(5) by inserting ‘‘equity’’ before ‘‘security’’ the
first place it appears;
(6) by striking out ‘‘(i)’’ and by striking out ‘‘or
(ii) any mortgage related security or any small busi-
ness related security against full payment of the en-
tire purchase price thereof upon such delivery within
180 days after such purchase or within such shorter
period as the Commission may prescribe by rule or
regulation’’; and
(7) by adding at the end thereof the following
new sentence: ‘‘The Commission may, by such rules,
regulations, or orders as it may deem necessary or
appropriate in the public interest or for the protec-
tion of investors, exempt either unconditionally or
upon specified terms and conditions, or for stated
periods, any security or transaction, or class of secu-
rities or transactions from the operation of this sub-
section and the rules and regulations thereunder.’’.
(d) DEFINITION.—Section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)) is amended by
adding at the end thereof the following new paragraph:
‘‘(54) The term ‘excluded account’ means any
person who comes within any of the following cat-
egories:
‘‘(A) A financial institution, trust com-
pany, savings association, or savings and loan
association (acting in an individual, fiduciary,
or agency capacity).
‘‘(B) A broker or dealer or an investment
adviser (acting on its own behalf or on behalf
of another).
‘‘(C) A futures commission merchant, floor
broker, or floor trader (acting on its own behalf
or on behalf of another).
‘‘(D) An insurance company.
‘‘(E) An investment company, small busi-
ness investment company, business development
company, or private business development com-
pany.
‘‘(F) Any governmental entity (including
the United States, any State or any foreign
government), any political subdivision thereof,
any multinational or supranational entity, or
any department, agency, or instrumentality of
any of the foregoing.
‘‘(G) A corporation, partnership, propri-
etorship, organization, trust, or other entity,
not formed for the specific purpose of evading
the requirements of any rule or regulation
adopted under section 7, with total assets ex-
ceeding $5,000,000 or the obligations of which
with respect to any extension of credit are guar-
anteed or otherwise supported by a letter of
credit or keepwell, support, or other agreement
by any such entity or by an entity referred to
in subparagraph (A), (B), (C), (D), (E), or (F)
of this paragraph.
‘‘(H) An employee benefit plan with assets
exceeding $5,000,000 or whose investment deci-
sions are made by a bank, trust company,
broker, dealer, or registered investment adviser.
‘‘(I) Any entity in which all the equity
owners are ‘excluded accounts’.
‘‘(J) Any person, other than a natural per-
son, who is an affiliate of the person extending
or maintaining credit.
‘‘(K) Such other persons as the Board of
Governors of the Federal Reserve System shall,
by rule, regulation, or order, designate as an
‘excluded account’, either unconditionally or
upon specified terms and conditions, or for
specified periods.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall be effective 270 days after the date of
enactment of this Act.
SEC. 5. MINIMIZING TRANSACTION COSTS OF CORPORATE
ORGANIZATION.
(a) AMENDMENTS TO SECTION 13 OF THE 1934
ACT.—Section 13 of the Securities Exchange Act of 1934
(15 U.S.C. 78m) is amended—
(1) by striking subsections (d) and (e); and
(2) by redesignating subsections (f), (g), and
(h) as subsections (d), (e), and (f), respectively.
(b) AMENDMENTS TO SECTION 14 OF THE 1934
ACT.—Section 14 of such Act (15 U.S.C. 78n) is amend-
ed—
(1) by striking subsections (d), (f), and (g); and
(2) by redesignating subsections (e) and (h) as
subsections (d) and (e), respectively.
(c) CONFORMING AMENDMENTS.—
(1) Section 6(b)(9) of such Act (15 U.S.C.
78f(b)(9)) is amended by striking ‘‘section 14(h)’’
and inserting ‘‘section 14(e)’’.
(2) Section 12(i) of such Act (15 U.S.C. 78l(i))
is amended by striking ‘‘14(f),’’.
(3) Section 13(d)(1) of such Act (as redesig-
nated by subsection (a)(1) of this section) is amend-
ed—
(A) by striking ‘‘equity securities of a class
described in section 13(d)(1) of this title’’ and
inserting ‘‘equity security of a class which is
registered pursuant to section 12 of this title,
or any equity security of an insurance company
which would have been required to be so reg-
istered except for the exemption contained in
section 12(g)(2)(G) of this title, or any equity
security issued by a closed-end investment com-
pany registered under the Investment Company
Act of 1940 or any equity security issued by a
Native 
Corporation 
pursuant 
to 
section
37(d)(6) of the Alaska Native Claims Settle-
ment Act,’’;
(B) in subparagraph (C), by striking ‘‘each
equity security of a class described in section
13(d)(1) of this title’’ and inserting ‘‘each such
equity security’’;
(C) in subparagraph (E), by striking ‘‘any
equity security of a class described in section
13(d)(1) of this title’’ and inserting ‘‘any such
equity security’’.
(4) Section 13(d)(3) of such Act (as so redesig-
nated) is amended by striking ‘‘all equity securities
of a class described in section 13(d)(1) of this title,’’
and inserting ‘‘all equity securities of a class de-
scribed in paragraph (1) of this subsection’’.
(5) Section 14(e) of such Act (as so redesig-
nated) is amended—
(A) in paragraph (1), by striking ‘‘sub-
sections (a) and (d)’’ and inserting ‘‘subsection
(a)’’; and
(B) in paragraph (3), by striking ‘‘sub-
section (a) or (d)’’ each place it appears and in-
serting ‘‘subsection (a)’’.
(6) Paragraphs (12) and (13) of section 15A(b)
of such Act (15 U.S.C. 78o–3(b)(12), (13)) are each
amended by striking ‘‘section 14(h)’’ and inserting
‘‘section 14(e)’’.
(7) Section 23(b)(4)(F) of such Act (15 U.S.C.
78w(b)(4)(F)) is amended by striking ‘‘section
13(f)’’ and inserting ‘‘section 13(d)’’.
SEC. 6. PROSPECTUS DELIVERY.
(a) DEFINITION OF PROSPECTUS.—Section 2(10) of
the Securities Act of 1933 (15 U.S.C. 77b(10)) is amend-
ed by striking ‘‘or confirms the sale of any security’’.
(b) DELIVERY ON REQUEST.—Section 5(b)(2) of the
Securities Act of 1933 (15 U.S.C. 77e(b)(2)) is amended
by inserting before the period at the end the following:
‘‘, if the purchaser or prospective purchaser of such secu-
rity has requested a prospectus’’.
(c) AUTHORITY TO EXEMPT.—Section 5 of the Secu-
rities Act of 1933 (15 U.S.C. 77(e)) is amended by adding
a new subsection (d) after subsection (c) as follows:
‘‘(d) AUTHORITY TO EXEMPT.—The Commission
may from time to time by its rules and regulations and
subject to such terms and conditions as may be prescribed
therein, upon its own motion or by order on application
by an interested person, exempt from subsection (b) of
section 5 any person or prospectus, or any class or classes
of persons or prospectuses, if and to the extent that such
exemption is necessary or appropriate in the public inter-
est and consistent with the protection of investors. The
Commission shall by rules and regulations determine the
procedures under which an exemption under this sub-
section shall be granted, and may, in its sole discretion,
decline to entertain any application for an order of exemp-
tion under this subsection.’’.
SEC. 7. EXEMPTIVE AUTHORITY.
(a) SMALL OFFERING EXEMPTION.—Section 3(b) of
the Securities Act of 1933 (15 U.S.C. 77c(b)) is amended
by striking ‘‘$5,000,000’’ and inserting ‘‘$15,000,000’’.
(b) GENERAL EXEMPTIVE AUTHORITY.—Section 3 of
the Securities Act of 1933 (15 U.S.C. 77c) is amended
by adding at the end the following new subsection:
‘‘(d) EXEMPTIVE
AUTHORITY.—The Commission
may by rule, regulation, or order, exempt, in whole or in
part, conditionally or unconditionally, any security or class
of securities from the registration requirements of this
title if it finds that such exemption is consistent with the
public interest and the protection of investors.’’.
SEC. 8. PROMOTION OF EFFICIENCY, COMPETITION, AND
CAPITAL FORMATION.
(a) SECURITIES ACT OF 1933.—Section 2 of the Se-
curities Act of 1933 (15 U.S.C. 77b) is amended—
(1) by inserting ‘‘(a) DEFINITIONS.—’’ after
‘‘SEC. 2.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) CONSIDERATION
OF PROMOTION
OF EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever in this title the Commission is required to con-
sider or determine whether an action is consistent with
the public interest or the protection of investors (or both),
the Commission shall also consider or determine whether
the action will promote efficiency, competition, and capital
formation.’’.
(b) SECURITIES EXCHANGE ACT of 1934.—Section
3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)
is amended by adding at the end the following new sub-
section:
‘‘(e) CONSIDERATION
OF PROMOTION
OF EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever in this title the Commission is required to con-
sider or determine whether an action is consistent with
the public interest or the protection of investors (or both),
the Commission shall also consider or determine whether
the action will promote efficiency, competition, and capital
formation.’’.
(c) INVESTMENT COMPANY ACT of 1940.—Section 2
of the Investment Company Act of 1940 (15 U.S.C. 80a–
2) is amended by adding at the end the following new sub-
section:
‘‘(c) CONSIDERATION
OF
PROMOTION
OF
EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever in this title the Commission is required to con-
sider or determine whether an action is consistent with
the public interest or the protection of investors (or both),
the Commission shall also consider or determine whether
the action will promote efficiency, competition, and capital
formation.’’.
(d) INVESTMENT ADVISERS ACT of 1940.—Section
202 of the Investment Advisers Act of 1940 (15 U.S.C.
80b–2) is amended by adding at the end the following new
subsection:
‘‘(c) CONSIDERATION
OF
PROMOTION
OF
EFFI-
CIENCY, COMPETITION, AND
CAPITAL
FORMATION.—
Whenever in this title the Commission is required to con-
sider or determine whether an action is consistent with
the public interest or the protection of investors (or both),
the Commission shall also consider or determine whether
the action will promote efficiency, competition, and capital
formation.’’.
SEC. 9. REDUCTION IN NUMBER OF MEMBERS OF COMMIS-
SION.
(a) AMENDMENTS.—Section 4(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78d(a)) is amended—
(1) by striking ‘‘five commissioners’’ and insert-
ing ‘‘3 commissioners’’; and
(2) by striking ‘‘three of such commissioners’’
and inserting ‘‘2 of such commissioners’’.
(b) EFFECTIVE
DATE; IMPLEMENTATION.—The
amendments made by subsection (a) shall take effect on
the date of enactment of this Act, except that—
(1) the offices the terms of which expired on
June 5, 1994, and June 5, 1995, shall be abolished;
and
(2) notwithstanding section 4(a) of the Securi-
ties Exchange Act of 1934—
(A) upon the expiration of the term of of-
fice prescribed by law to occur on June 5,
1996, any person appointed to serve as a com-
missioner of the Securities and Exchange Com-
mission to fill such office for the following term
shall be eligible to serve until June 5, 1999;
(B) upon the expiration of the term of of-
fice prescribed by law to occur on June 5,
1997, any person appointed to serve as a com-
missioner of the Securities and Exchange Com-
mission to fill such office for the following term
shall be eligible to serve until June 5, 2001;
and
(C) upon the expiration of the term of of-
fice prescribed by law to occur on June 5,
1998, any person appointed to serve as a com-
missioner of the Securities and Exchange Com-
mission to fill such office for the following term
shall be eligible to serve until June 5, 2003.
SEC. 10. PRIVATIZATION OF EDGAR.
(a) REQUEST FOR PROPOSALS.—The Securities and
Exchange Commission shall, by public notice, request pro-
posals for the privatization of the EDGAR system. Such
notice shall specify the methods by which the Commission
will evaluate such proposal, which shall include the follow-
ing objectives:
(1) return to the Government on its investment
in the establishment of such system; and
(2) promote the automation and rapid dissemi-
nation of information required to be disclosed.
(b) REVIEW AND REPORT.—Within 180 days after
the date of enactment of this Act, the Commission shall
review the proposal received pursuant to subsection (a)
and submit to the Congress a report thereon. Such report
shall include such recommendations for such legislative ac-
tion as may be necessary to implement the proposal that
the Commission determines most effectively achieves the
objections described in subsection (a).
SEC. 11. RULES OF SELF-REGULATORY ORGANIZATIONS.
Section 19(b)(1) of the Securities Exchange Act of
1934 (15 U.S.C. 78s(b)(1)) is amended by striking ‘‘upon
the filing’’ and inserting ‘‘within 30 days of the filing (un-
less the self-regulatory organization consents to a longer
period)’’.
SEC. 12. DESIGNATION OF PRIMARY SRO AND EXAMINING
AUTHORITY.
(a) AMENDMENTS.—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:
‘‘(g) DESIGNATION OF EXAMINING AUTHORITIES.—
‘‘(1) DESIGNATION.—After notice and com-
ment, the Commission shall designate for each reg-
istered broker or dealer, a self-regulatory organiza-
tion (other than a registered clearing agency) as its
examining authority. In no event shall the Commis-
sion designate more than one examining authority
for any broker or dealer.
‘‘(2) ENFORCEMENT OF RULES BY EXAMINING
AUTHORITY.—A designated examining authority
shall enforce its own rules with respect to such
broker or dealer, as well as the rules of any other
self-regulatory organization (other than a registered
clearing agency) of which such broker or dealer is a
member.
‘‘(3) CHANGES IN DESIGNATION.—A broker or
dealer for which the Commission previously has des-
ignated an examining authority, may request that
the Commission designate a different examining au-
thority. The Commission shall grant such request by
order if its is consistent with the public interest and
the protection of investors. The issuance of such an
order shall not alter or extinguish any pending dis-
ciplinary proceeding that the originally designated
examining authority has brought against the broker
or dealer or any person associated with a broker or
dealer.
‘‘(4) COMMISSION
RULES.—The Commission
may adopt rules for the designation of an examining
authority for a broker or dealer, and for changing
such designation. Such rules shall be designed to
minimize the costs and burdens on the registered
broker or dealer, consistent with the protection of in-
vestors and the public.
‘‘(5) PRESERVATION
OF
EXISTING
AUTHOR-
ITY.—Nothing in this section shall alter the Com-
mission’s authority to bring any action under this
title against any broker or dealer, or against any
person associated with a broker or dealer.’’.
(b) DEFINITION.—Section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78e) is amended by adding
the following paragraph:
‘‘(53) The term ‘examining authority’ means a
self-regulatory organization (other than a registered
clearing agency), as designated by the Commission,
with exclusive authority to examine, inspect, and
otherwise oversee the activities of a registered broker
or dealer.’’.
(c) INITIAL DESIGNATION.—The Commission shall
complete the initial designations of examining authorities
for brokers and dealers required by section 15(g) of the
Security Exchange Act of 1934 no later than one year
after the date of enactment of this Act.
SEC. 13. TREATMENT OF PRESS CONFERENCES.
(a) DEFINITION OF OFFER.—Section 2(3) of the Se-
curities Act of 1933 (15 U.S.C. 77b(3)) is amended by
inserting after the third sentence the following new sen-
tence: ‘‘The terms defined in this paragraph and the term
‘offer to buy’ as used in subsection (c) of section 5 also
shall not include press conferences, press releases and
meetings with issuer press spokespersons to which journal-