Market Reform Act of 1990
PL 101-432 (H.R.3657), enacted 10/16/1990

PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 963 
Public Law 101-432 
101st Congress 
An Act 
To amend the Securities Exchange Act of 1934 to strengthen regulatory oversight of 
the United States securities markets, improve supervision of financial market 
participants, and improve the safety and efficiency of market mechanisms, and for 
other purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
Oct. 16, 1990 
[H.R. 3657] 
Market Reform 
Act of 1990. 
Brokers. 
15 u s e 78a 
This Act may be cited as the "Market Reform Act of 1990". note. 
SECTION 1. SHORT TITLE. 
SEC. 2. EMERGENCY AUTHORITY; TRADING HALTS. 
Section 12(k) of the Securities Exchange Act of 1934 (15 U.S.C. 15 USC 78/. 
781(k)) is amended to read as follows: 
"(k) TRADING SUSPENSIONS; EMERGENCY AUTHORITY.— 
"(1) TRADING SUSPENSIONS.—If in its opinion the public 
interest and the protection of investors so require, the Commis-
sion is authorized by order— 
"(A) summarily to suspend trading in any security (other 
than an exempted security) for a period not exceeding 10 
business days, and 
"(B) summarily to suspend all trading on any national 
securities exchange or otherwise, in securities other than 
exempted securities, for a period not exceeding 90 calendar 
days. 
The action described in subparagraph (B) shall not take effect 
unless the Commission notifies the President of its decision and 
the President notifies the Commission that the President does 
not disapprove of such decision. 
"(2) EMERGENCY ORDERS.—(A) The Commission, in an emer-
gency, may by order summarily take such action to alter, 
supplement, suspend, or impose requirements or restrictions 
with respect to any matter or action subject to regulation by the 
Commission or a self-regulatory organization under this title, £is 
the Commission determines is necessary in the public interest 
and for the protection of investors— 
"(i) to maintain or restore fair and orderly securities 
markets (other than markets in exempted securities); or 
"(ii) to ensure prompt, accurate, and safe clearance and 
settlement of transactions in securities (other 
than 
exempted securities). 
"(B) An order of the Commission under this paragraph (2) 
shall continue in effect for the period specified by the Commis-
sion, and may be extended, except that in no event shall the 
Commission's action continue in effect for more than 10 busi-
ness days, including extensions. In exercising its authority 
under this paragraph, the Commission shall not be required to 
comply with the provisions of section 553 of title 5, United 
States Code, or with the provisions of section 19(c) of this title. 
"(3) TERMINATION OF EMERGENCY ACTIONS BY PRESIDENT.—The 
President may direct that action taken by the Commission 
49-139 O - 90 (432) 
104 STAT. 964 
PUBLIC LAW 101-432—OCT. 16, 1990 
under paragraph (IXB) or paragraph (2) of this subsection shall 
not continue in effect. 
"(4) CoMPUANCE WITH ORDERS.—No member of a national 
securities exchange, broker, or dealer shall make use of the 
mails or any means or instrumentality of interstate commerce 
to effect any transaction in, or to induce the purchase or sale of, 
any security in contravention of an order of the Commission 
under this subsection unless such order has been stayed, modi-
fied, or set aside as provided in paragraph (5) of this subsection 
or has ceased to be effective upon direction of the President as 
provided in paragraph (3). 
"(5) LIMITATIONS ON REVIEW OF ORDERS.—An order of the 
Commission pursuant to this subsection shall be subject to 
review only as provided in section 25(a) of this title. Review 
shall be based on an examination of all the information before 
the Commission at the time such order was issued. The review-
ing court shall not enter a stay, writ of mandamus, or similar 
relief unless the court finds, after notice and hearing before a 
panel of the court, that the Commission's action is arbitrary, 
capricious, an abuse of discretion, or otherwise not in accord-
auice with law. 
"(6) DEFINITION OF EMERGENCY.—For purposes of this subsec-
tion, the term 'emergency' means a major market disturbance 
characterized by or constituting— 
"(A) sudden and excessive fluctuations of securities prices 
generally, or a substantial threat thereof, that threaten fair 
and orderly markets, or 
"(B) a substantial disruption of the safe or efficient oper-
ation of the national system for clearance and settlement of 
securities, or a substantial threat thereof.". 
SEC. 3. LARGE TRADER REPORTING. 
Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 
is amended by adding at the end the following: 
"(h) LARGE TRADER REPORTING.— 
"(1) IDENTIFICATION REQUIREMENTS FOR LARGE TRADERS.—For 
the purpose of monitoring the impact on the securities markets 
of securities transactions involving a substantial volume or a 
large fair market value or exercise value and for the purpose of 
otherwise assisting the Commission in the enforcement of this 
title, each large trader shall— 
"(A) provide such information to the (Commission as the 
Commission may by rule or regulation prescribe as nec-
essary or appropriate, identifying such large trader and all 
accounts in or through which such large trader effects such 
trsmsactions; and 
"(B) identify, in accordance with such rules or regulations 
as the Commission may prescribe as necessary or appro-
priate, to any registered broker or dealer by or through 
whom such large trader directly or indirectly effects securi-
ties transactions, such large trader and all accounts directly 
or indirectly maintained with such broker or dealer by such 
large trader in or through which such transactions are 
effected. 
Regulations. 
"(2) RECORDKEEPING AND REPORTING REQUIREMENTS FOR BRO-
KERS AND DEALERS.—Every registered broker or dealer shall 
make and keep for prescribed periods such records as the 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 965 
Commission by rule or regulation prescribes as necessary or 
appropriate in the public interest, for the protection of inves-
tors, or otherwise in furtherance of the purposes of this title, 
with respect to securities transactions that equal or exceed the 
reporting activity level effected directly or indirectly by or 
through such registered broker or dealer of or for any person 
that such broker or dealer knows is a large trader, or any 
person that such broker or dealer has reason to know is a large 
trader on the basis of transactions in securities effected by or 
through such broker or desder. Such records shall be available 
for reporting to the Commission, or any 
self-regulatory 
organization that the Commission shall designate to receive 
such reports, on the morning of the day following the day the 
transactions were effected, and shall be reported to the Commis-
sion or a self-regulatory organization designated by the Commis-
sion immediately upon request by the Commission or such a 
self-regulatory organization. Such records and reports shall be 
in a format and transmitted in a manner prescribed by the 
Commission (including, but not limited to, machine readable 
form). 
"(3) AGGREGATION RULES.—The Commission may prescribe 
rules or regulations governing the manner in which trans-
actions and accounts shall be aggregated for the purpose of this 
subsection, including aggregation on the basis of common 
ownership or control. 
"(4) 
EXAMINATION OF BROKER AND DEALER RECORDS.—All 
records required to be made and kept by registered brokers and 
^ 
dealers pursuant to this subsection with respect to transactions 
effected by large traders are subject at any time, or from time to 
time, to such reasonable periodic, special, or other examinations 
by representatives of the Commission as the Commission deems 
necessary or appropriate in the public interest, for the protec-
tion of investors, or otherwise in furtherance of the purposes of 
this title. 
"(5) FACTORS TO BE CONSIDERED IN COMMISSION ACTIONS.—In 
exercising its authority under this subsection, the Commission 
shall take into account— 
"(A) existing reporting systems; 
"(B) the costs associated with maintaining information 
with respect to transactions effected by large traders and 
reporting such information to the Commission or self-regu-
latory organizations; and 
"(C) the relationship between the United States and 
international securities markets. 
"(6) EXEMPTIONS.—The Commission, by rule, regulation, or 
order, consistent with the purposes of this title, may exempt any 
person or class of persons or any transaction or class of trans-
actions, either conditionally or upon specified terms and condi-
tions or for stated periods, from the operation of this subsection, 
and the rules and regulations thereunder. 
"(7) 
AUTHORITY OF COMMISSION TO LIMIT DISCLOSURE OF 
INFORMATION.—Notwithstanding any other provision of law, the 
Commission shall not be compelled to disclose any information 
required to be kept or reported under this subsection. Nothing 
in this subsection shall authorize the Commission to withhold 
information from Congress, or prevent the Commission from 
complying with a request for information from any other Fed-
104 STAT. 966 
PUBLIC LAW 101-432—OCT. 16, 1990 
eral department or agency requesting information for purposes 
within the scope of its jurisdiction, or complying with an order 
of a court of the United States in an action brought by the 
United States or the Commission. For purposes of section 552 of 
title 5, United States Code, this subsection shall be considered a 
statute described in subsection (b)(3)(B) of such section 552, 
"(8) DEFINITIONS.—For purposes of this subsection— 
"(A) the term 'large trader' means every person who, for 
his own account or an account for which he exercises 
investment discretion, effects transactions for the purchase 
or sale of any publicly traded security or securities by use of 
any means or instrumentality of interstate commerce or of 
the mails, or of any facility of a national securities 
exchange, directly or indirectly by or through a registered 
broker or dealer in an aggregate amount equal to or in 
excess of the identifying activity level; 
"(B) the term 'publicly traded security' means any equity 
security (including an option on individual equity securi-
ties, and an option on a group or index of such securities) 
listed, or admitted to unlisted trading privileges, on a 
national securities exchange, or quoted in an automated 
interdealer quotation system; 
"(C) the term 'identifying activity level' means trans-
actions in publicly traded securities at or above a level of 
volume, fair market value, or exercise value as shall be 
fixed from time to time by the Commission by rule or 
regulation, specifying the time interval during which such 
transactions shall be aggregated; 
"(D) the term 'reporting activity level' means trans-
actions in publicly traded securities at or above a level of 
volume, fair market value, or exercise value as shall be 
fixed from time to time by the Commission by rule, regula-
tion, or order, specifying the time interval during which 
such transactions shall be aggregated; and 
"(E) the term 'person' has the meaning given in section 
3(a)(9) of this title and also includes two or more persons 
acting £is a partnership, limited partnership, S5nidicate, or 
other group, but does not include a foreign central bank.". 
SEC. 4. RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS. 
(a) AMENDMENT.—Section 17 of the Securities Exchange Act of 
1934 (15 U.S.C. 78q) is amended by adding at the end the following: 
"(h) RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS.— 
"(1) OBUGATIONS TO OBTAIN, MAINTAIN, AND REPORT INFORMA-
TION.—Every person who is (A) a registered broker or dealer, or 
(B) a registered municipal securities dealer for which the 
Commission is the appropriate regulatory agency, shall obtain 
such information and make and keep such records as the 
Commission by rule prescribes concerning the registered per-
son's policies, procedures, or systems for monitoring and 
controlling financial and operational risks to it resulting from 
the activities of any of its associated persons, other than a 
natural person. Such records shall describe, in the aggregate, 
each of the financial and securities activities conducted by, and 
the customary sources of capital and funding of, those of its 
associated persons whose business activities are reasonably 
likely to have a material impact on the financial or operational 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 967 
condition of such registered person, including its net capital, its 
liquidity, or its ability to conduct or finance its operations. The 
Commission, by rule, may require summary reports of such 
information to be filed with the Commission no more frequently 
than quarterly. 
"(2) AUTHORITY TO REQUIRE ADDITIONAL INFORMATION.—If, as a 
result of adverse market conditions or based on reports provided 
to the Commission pursuant to paragraph (1) of this subsection 
or other available information, the Commission reasonably con-
cludes that it has concerns regarding the financial or oper-
ational condition of (A) any registered broker or dealer, or (B) 
any registered municipal securities dealer, government securi-
ties broker, or government securities dealer for which the 
Commission is the appropriate regulatory agency, the Commis-
sion may require the registered person to make reports concern-
ing the financial and securities activities of any of such person's 
associated persons, other than a natural person, whose business 
activities are reasonably likely to have a material impact on the 
financial or operational condition of such registered person. The 
Commission, in requiring reports pursuant to this paragraph, 
shall specify the information required, the period for which it is 
required, the time and date on which the information must be 
furnished, and whether the information is to be furnished 
directly to the Commission or to a self-regulatory organization 
with primary responsibility for examining the registered per-
son's financial and operational condition. 
"(3) SPECIAL PROVISIONS WITH RESPECT TO ASSOCIATED PERSONS 
SUBJECT TO FEDERAL BANKING AGENCY REGULATION.— 
"(A) COOPERATION IN IMPLEMENTATION.—In developing 
and implementing reporting requirements pursuant to 
paragraph (1) of this subsection with respect to associated 
persons subject to examination by or reporting require-
ments of a Federal banking agency, the Commission shall 
consult with and consider the views of each such Federal 
banking agency. If a Federal banking agency comments in 
writing on a proposed rule of the Commission under this 
subsection that has been published for comment, the 
Commission shall respond in writing to such written com-
ment before adopting the proposed rule. The Commission 
Federal 
shall, at the request of the Federal banking agency, publish 
^®^fj^f 
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^ 
such comment and response in the Federal Register at the 
time of publishing the adopted rule. 
"(B) USE OF BANKING AGENCY REPORTS.—A registered 
broker, dealer, or municipal securities dealer shall be in 
compliance with any recordkeeping or reporting require-
ment adopted pursuant to paragraph (1) of this subsection 
concerning an associated person that is subject to examina-
tion by or reporting requirements of a Federal banking 
agency if such broker, dealer, or municipal securities dealer 
utilizes for such recordkeeping or reporting requirement 
copies of reports filed by the associated person with the 
Federal banking agency pursuant to section 5211 of the 
Revised Statutes, section 9 of the Federal Reserve Act, 
section 7(a) of the Federal Deposit Insurance Act, section 
10(b) of the Home Owners' Loan Act, or section 8 of the 
Bank Holding Company Act of 1956. The Commission may, 
however, by rule adopted pursuant to paragraph (1), require 
publication. 
104 STAT. 968 
PUBLIC LAW 101-432—OCT. 16, 1990 
any broker, dealer, or municipal securities dealer filing 
such reports with the Commission to obtain, maintain, or 
report supplemental information if the Commission makes 
an explicit finding that such supplemental information is 
necessary to inform the Commission regarding potential 
risks to such broker, dealer, or municipal securities dealer. 
Prior to requiring any such supplemental information, the 
Commission shall first request the Federal banking agency 
to expand its reporting requirements to include such 
information. 
"(C) PROCEDURE FOR REQUIRING ADDITIONAL INFORMA-
TION.—Prior to making a request pursuant to paragraph (2) 
of this subsection for information with respect to an associ-
ated person that is subject to examination by or reporting 
requirements of a Federal banking agency, the Commission 
shall— 
"(i) notify such agency of the information required 
with respect to such associated person; and 
"(ii) consult with such agency to determine whether 
the information required is available from such agency 
and for other purposes, unless the Commission deter-
mines that any delay resulting from such consultation 
would be inconsistent with ensuring the financial and 
operational condition of the broker, dealer, municipal 
securities dealer, government securities broker, or 
government securities dealer or the stability or integ-
rity of the securities markets. 
"(D) EXCLUSION FOR EXAMINATION REPORTS.—Nothing in 
this subsection shall be construed to permit the Commission 
to require any registered broker or dealer, or any registered 
municipal securities dealer, government securities broker, 
or government securities dealer for which the Commission 
is the appropriate regulatory agency, to obtain, maintain, 
or furnish any examination report of any Federal banking 
agency or any supervisory recommendations or analysis 
contained therein. 
"(E) 
CONFIDENTIALITY OF INFORMATION PROVIDED.—No 
information provided to or obtained by the Commission 
from any Federal banking agency pursuant to a request by 
the Commission under subparagraph (C) of this paragraph 
regarding any associated person which is subject to exam-
ination by or reporting requirements of a Federal banking 
agency may be disclosed to any other person (other than a 
self-regulatory organization), without the prior written 
approval of the Federal banking agency. Nothing in this 
subsection shall authorize the Commission to withhold 
information from 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 its jurisdiction, 
or complying with an order of a court of the United States 
in an action brought by the United States or the Commis-
sion. 
"(F) NOTICE TO BANKING AGENCIES CONCERNING FINANCIAL 
AND OPERATIONAL CONDITION CONCERNS.—The Commission 
shall notify the Federal banking agency of any concerns of 
the Commission regarding significant financial or oper-
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 969 
ational risks resulting from the activities of any registered 
broker or dealer, or any registered municipal securities 
dealer, government securities broker, or government securi-
ties dealer for which the Commission is the appropriate 
regulatory agency, to any associated person thereof which 
is subject to examination by or reporting requirements of 
the Federal banking agency. 
"(G) DEFINITION.—For purposes of this paragraph, the 
term 'Federal banking agency' shall have the same mean-
ing £is the term 'appropriate Federal bank agency' in sec-
tion 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(q)). 
"(4) EXEMPTIONS.—The Commission by rule or order may 
exempt any person or class of persons, under such terms and 
conditions and for such periods as the Commission shall provide 
in such rule or order, from the provisions of this subsection, and 
the rules thereunder. In granting such exemptions, the Commis-
sion shall consider, among other factors— 
"(A) whether information of the type required under this 
subsection is available from a supervisory agency (as 
defined in section 1101(6) of the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401(6))), a State insurance commis-
sion or similar State agency, the Commodity Futures Trad-
ing Commission, or a similar foreign regulator; 
"(B) the primary business of any associated person; 
"(C) the nature and extent of domestic or foreign regula-
tion of the associated person's activities; 
"(D) the nature and extent of the registered person's 
securities activities; and 
"(E) with respect to the registered person and its associ-
ated persons, on a consolidated basis, the amount and 
proportion of assets devoted to, and revenues derived from, 
activities in the United States securities markets. 
"(5) AUTHORITY TO UMIT DISCLOSURE OF INFORMATION.—Not-
withstanding any other provision of law, the Commission shall 
not be compelled to disclose any information required to be 
reported under this subsection, or any information supplied to 
the Commission by any domestic or foreign regulatory agency 
that relates to the financial or operational condition of any 
associated person of a registered broker, dealer, government 
securities broker, government securities dealer, or municipal 
securities dealer. Nothing in this subsection shall authorize the 
Commission to withhold information from 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 its jurisdiction, or 
complying with an order of a court of the United States in an 
action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in subsection 
(bX3XB) of such section 552. In prescribing regulations to carry Regulations. 
out the requirements of this subsection, the Commission shall 
designate information described in or obtained pursuant to 
subparagraph (B) or (C) of pareigraph (3) of this subsection as 
confidential information for purposes of section 24(b)(2) of this 
title.". 
104 STAT. 970 
PUBLIC LAW 101-432—OCT. 16, 1990 
15 use 78o-5. 
(I,) CONFORMING AMENDMENT.—Section 15C0)) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-4(b)) is amended— 
(1) by redesignating paragraphs (2) through (5) as paragraphs 
(3) through (6), respectively; and 
(2) by inserting after paragraph (1) the following new para-
graph: 
"(2) RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS.— 
Records. 
"(A) OBLIGATIONS TO OBTAIN, MAINTAIN, AND REPORT INFORMA-
TION.—Every person who is registered as a government securi-
ties broker or government securities dealer under this section 
shall obtain such information and make and keep such records 
as the Secretary by rule prescribes concerning the registered 
person's policies, procedures, or systems for monitoring and 
controlling financial and operational risks to it resulting from 
the activities of any of its associated persons, other than a 
natural person. Such records shall describe, in the aggregate, 
each of the financial and securities activities conducted by, and 
customary sources of capital and funding of, those of its associ-
ated persons whose business activities are reasonably likely to 
have a material impact on the financial or operational condition 
of such registered person, including its capital, its liquidity, or 
its ability to conduct or finance its operations. The Secretary, by 
rule, may require summary reports of such information to be 
filed with the registered person s appropriate regulatory agency 
no more frequently than quarterly. 
"(B) AUTHORITY TO REQUIRE ADDITIONAL INFORMATION.—If, as 
a result of adverse market conditions or based on reports pro-
vided pursuant to subparagraph (A) of this paragraph or other 
available information, the appropriate regulatory 
agency 
reasonably concludes that it has concerns regarding the finan-
cial or operational condition of any government securities 
broker or government securities dealer registered under this 
section, such agency may require the registered person to make 
reports concerning the financial and securities activities of any 
of such person's associated persons, other than a natural person, 
whose business activities are reasonably likely to have a mate-
rial impact on the financial or operational condition of such 
registered person. The appropriate regulatory agency, in requir-
ing reports pursuEuit to this subparagraph, shall specify the 
information required, the period for which it is required, the 
I time and date on which the information must be furnished, and 
whether the information is to be furnished directly to the 
appropriate regulatory agency or to a self-regulatory organiza-
tion with primary responsibility for examining the registered 
person's financial and operational condition. 
"(C) SPECIAL PROVISIONS WITH RESPECT TO ASSOCIATED PERSONS 
SUBJECT TO FEDERAL BANKING AGENCY REGULATION.— 
"(i) COOPERATION IN IMPLEMENTATION.—In developing and 
implementing reporting requirements pursuant to subpara-
graph (A) of this paragraph with respect to associated 
persons subject to examination by or reporting require-
ments of a Federal banking agency, the Secretary shall 
^ 
consult with and consider the views of each such Federal 
banking agency. If a Federal banking agency comments in 
writing on a proposed rule of the Secretary under this 
paragraph that has been published for comment, the Sec-
retary shall respond in writing to such written comment 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 971 
before adopting the proposed rule. The Secretary shall, at 
the request of a Federal banking agency, publish such 
comment and response in the Federal Register at the time 
of publishing the adopted rule. 
"(ii) USE OF BANKING AGENCY REPORTS,—A registered 
government securities broker or government securities 
dealer shall be in compliance with any recordkeeping or 
reporting requirement adopted pursuant to subparagraph 
(A) of this paragraph concerning an associated person that 
is subject to examination by or reporting requirements of a 
Federal banking agency if such government securities 
broker or government securities dealer utilizes for such 
recordkeeping or reporting requirement copies of reports 
filed by the associated person with the Federal banking 
gigency pursuant to section 5211 of the Revised Statutes, 
section 9 of the Federal Reserve Act, section 7(a) of the 
Federal Deposit Insurance Act, section 10(b) of the Home 
Owners' Loan Act, or section 8 of the Bank Holding Com-
pany Act of 1956. The Secretary may, however, by rule 
adopted pursuant to subparagraph (A), require any 
registered government securities broker or government 
securities dealer filing such reports with the appropriate 
regulatory agency to obtain, maintain, or report supple-
mental information if the Secretary makes an explicit find-
ing, based on information provided by the appropriate 
regulatory agency, that such supplemental information is 
necessary to inform the appropriate regulatory agency 
regarding potential risks to such government securities 
broker or government securities dealer. Prior to requiring 
any such supplemental information, the Secretary shall 
first request the Federal banking E^ency to expand its 
reporting requirements to include such information. 
(iii) PROCEDURE FOR REQUIRING ADDITIONAL INFORMA-
TION.—Prior to making a request pursuant to subparagraph 
(B) of this paragraph for information with respect to an 
associated person that is subject to examination by or 
reporting requirements of a Federal banking agency, the 
appropriate regulatory agency shall— 
"(I) notify such banking agency of the information 
required with respect to such associated person; and 
' (II) consult with such agency to determine whether 
the information required is available from such agency 
and for other purposes, unless the appropriate regu-
latory agency determines that any delay resulting from 
such consultation would be inconsistent with ensuring 
the financial and operational condition of the govern-
ment securities broker or government securities dealer 
or the stability or integrity of the securities markets, 
"(iv) EXCLUSION FOR EXAMINATION REPORTS.—Nothing in 
this subpargigraph shall be construed to permit the Sec-
retary or an appropriate regulatory Eigency to require any 
registered government securities broker or government 
securities dealer to obtain, maintain, or furnish any exam-
ination report of any Federal banking agency or any super-
visory recommendations or analysis contained therein. 
"(v) CONFIDENTIAUTY OF INFORMATION PROVIDED.—No 
information provided to or obtained by an appropriate regu-
Federal 
Register, 
publication. 
104 STAT. 972 
PUBLIC LAW 101-432—OCT. 16, 1990 
latory agency from any Federal banking agency pursuant 
to a request under clause (iii) of this subparagraph regard-
ing any associated person which is subject to examination 
, 
by or reporting requirements of a Federal banking agency 
may be disclosed to any other person (other than a self-
regulatory 
organization), 
without 
the 
prior 
written 
approval of the Federal banking agency. Nothing in this 
clause shall authorize the Secretary or any appropriate 
regulatory agency to withhold information from Congress, 
or prevent the Secretary or any appropriate regulatory 
agency from complying with a request for information from 
any other Federal department or agency requesting the 
information for purposes within the scope of its jurisdiction, 
or complying with an order of a court of the United States 
in an action brought by the United States or the Commis-
sion. 
"(vi) NOTICE TO BANKING AGENCIES CONCERNING FINAN-
CIAL AND OPERATIONAL CONDITION CONCERNS.—The Sec-
retary or appropriate regulatory agency shall notify the 
Federal banking agency of any concerns of the Secretary or 
the appropriate regulatory agency regarding significant 
financial or operational risks resulting from the activities 
of any government securities broker or government securi-
ties dealer to any associated person thereof which is subject 
to examination by or reporting requirements of the Federal 
banking agency. 
"(vii) DEFINITION.—For purposes of this subparagraph, 
the term 'Federal banking agency' shall have the same 
meaning as the term 'appropriate Federal banking agency' 
in section 3(q) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(q)). 
"(D) EXEMPTIONS.—The Secretary by rule or order may 
exempt any person or class of persons, under such terms and 
conditions and for such periods as the Secretary shall provide in 
such rule or order, from the provisions of this paragraph, and 
the rules thereunder. In granting such exemptions, the Sec-
retary shall consider, among other factors— 
"(i) whether information of the type required under this 
paragraph is available from a supervisory agency (as 
defined in section 1101(6) of the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401(6))), a State insurance commis-
sion or similar State agency, the Commodity Futures Trad-
ing Commission, or a similar foreign regulator; 
(ii) the primary business of any associated person; 
"(iii) the nature and extent of domestic or foreign regula-
tion of the associated person's activities; 
"(iv) the nature and extent of the registered person's 
securities transactions; and 
"(v) with respect to the registered person and its associ-
ated persons, on a consolidated basis, the amount and 
proportion of assets devoted to, and revenues derived from, 
activities in the United States securities markets. 
"(E) CONFORMITY WITH REQUIREMENTS UNDER SECTION 17(h).— 
In exercising authority pursuant to subparagraph (A) of this 
paragraph concerning information with respect to associated 
persons of government securities brokers and government secu-
rities dealers who are also associated persons of registered 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 973 
brokers or dealers reporting to the Commission pursuant to 
section 17(h) of this title, the requirements relating to such 
associated persons shall conform, to the greatest extent prac-
ticable, to the requirements under section 17(h). 
"(F) AUTHORITY TO LIMIT DISCLOSURE OF INFORMATION.—Not-
withstanding any other provision of law, the Secretary and any 
appropriate regulatory agency shall not be compelled to disclose 
any information required to be reported under this paragraph, 
or any information supplied to the Secretary or any appropriate 
regulatory agency by any domestic or foreign regulatory agency 
that relates to the financial or operational condition of any 
associated person of a registered government securities broker 
or a government securities dealer. Nothing in this paragraph 
shall authorize the Secretary or any appropriate regulatory 
agency to withhold information from Congress, or prevent the 
Secretary or any appropriate regulatory agency from complying 
with a request for information from any other Federal depart-
ment or agency requesting the information for purposes within 
the scope of its jurisdiction, or complying with an order of a 
court of the United States in an action brought by the United 
States or the Commission. For purposes of section 552 of title 5, 
United States Code, this paragraph shall be considered a statute 
described in subsection (b)(8XB) of such section 552.". 
SEC. 5. COORDINATED CLEARING. 
(a) AUTHORITY TO FACILITATE COORDINATED CLEARING MECHA-
NISMS.—Section 17A(a)(2) of the Securities Exchange Act of 1934 (15 
U.S.C 78q-l) is amended to read as follows: 
"(2XA) The Commission is directed, therefore, having due regard 
for the public interest, the protection of investors, the safeguarding 
of securities and funds, and maintenance of fair competition among 
brokers and dealers, clearing agencies, and transfer agents, to use 
its authority under this title— 
"(i) to facilitate the establishment of a national system for the 
prompt and accurate clearance and settlement of transactions 
in securities (other than exempt securities); and 
"(ii) to facilitate the establishment of linked or coordinated 
facilities for clearance and settlement of transactions in securi-
ties, securities options, contracts of sale for future delivery and 
options thereon, and commodity options; 
in accordance with the findings and to carry out the objectives set 
forth in pareigraph (1) of this subsection. 
"(B) The Commission shall use its authority under this title to 
assure equal regulation under this title of registered clearing 
agencies and registered transfer agents. In carrying out its respon-
sibilities set forth in subparagraph (AXii) of this paragraph, the 
Commission shall coordinate with the Commodity Futures Trading 
Commission and consult with the Board of Governors of the Federal 
Reserve System.". 
(b) TRANSFER AND PLEDGE OF SECURITIES.—Section 17A 
of 
the 
Securities Exchange Act of 1934 (15 U.S.C. 78q-l) is amended by 
adding at the end the following: 
"(fKl) Notwithstanding any provision of State law, except as 
provided in paragraph (3), if the Commission makes each of the 
findings described in paragraph (2XA), the Commission may adopt 
rules concerning— 
104 STAT. 974 
PUBLIC LAW 101-432—OCT. 16, 1990 
"(A) the transfer of certificated or uncertificated securities 
(other than government securities issued pursuant to chapter 31 
of title 31, United States Code, or securities otherwise processed 
within a book-entry system operated by the Federal Reserve 
banks pursuant to a Federal book-entry regulation) or limited 
interests (including security interests) therein; and 
"(B) rights and obligations of purchasers, sellers, owners, 
lenders, borrowers, and financial intermediaries (including bro-
kers, dealers, banks, and clearing agencies) involved in or 
affected by such transfers, and the rights of third parties whose 
interests in such securities devolve from such transfers. 
"(2)(A) The findings described in this paragraph are findings by 
the Commission that— 
"(i) such rule is necessary or appropriate for the protection of 
investors or in the public interest and is reasonably designed to 
promote the prompt, accurate, and safe clearance and settle-
ment of securities transactions; 
"(ii) in the absence of a uniform rule, the safe and efficient 
operation of the national system for clearance and settlement of 
securities transactions will be, or is, substantially impeded; and 
"(iii) to the extent such rule will impair or diminish, directly 
or indirectly, rights of persons specified in paragraph (1)(B) 
under State law concerning transfers of securities (or limited 
interests therein), the benefits of such rule outweigh such 
impairment or diminution of rights. 
"(B) In making the findings described in subparagraph (A), the 
Commission shall give consideration to the recommendations of the 
Advisory Committee established under paragraph (4), and it shall 
consult with and consider the views of the Secretary of the Treasury 
and the Board of Governors of the Federal Reserve System. If the 
Secretary of the Treasury objects, in writing, to any proposed rule of 
the Commission on the basis of the Secretary's view on the issues 
described in clauses (i), (ii), and (iii) of subparagraph (A), the 
Commission shall consider all feasible alternatives to the proposed 
rule, and it shall not adopt any such rule unless the Commission 
makes an explicit finding that the rule is the most practicable 
method for achieving safe and efficient operation of the national 
clearance and settlement system. 
"(3) Any State may, prior to the expiration of 2 years after the 
Commission adopts a rule under this subsection, enact a statute that 
specifically refers to this subsection and the specific rule thereunder 
and establishes, prospectively from the date of enactment of the 
State statute, a provision that differs from that applicable under the 
Commission's rule. 
"(4)(A) Within 90 days after the date of enactment of this subsec-
tion, the Commission shall (and at such times thereafter as the 
Commission may determine, the Commission may), after consulta-
tion with the Secretary of the Treasury and the Board of Governors 
of the Federal Reserve System, establish an advisory committee 
Reports. 
under the Federal Advisory Committee Act (5 U.S.C. App.). The 
Advisory Committee shall be directed to consider and report to the 
Commission on such matters as the Commission, after consultation 
with the Secretary of the Treasury and the Board of Governors of 
the Federal Reserve System, determines, including the areas, if any, 
in which State commercial laws and related Federal laws concern-
ing the transfer of certificated or uncertificated securities, limited 
interests (including security interests) in such securities, or the 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 975 
creation or perfection of security interests in such securities do not 
provide the necessary certainty, uniformity, and clarity for pur-
chasers, 
sellers, 
owners, 
lenders, 
borrowers, 
and 
financial 
intermediaries concerning their respective rights and obligations. 
"(B) The Advisory Committee shall consist of 15 members, of 
which— 
"(i) 11 shall be designated by the Commission in accordance 
with the Federal Advisory Committee Act; and 
"(ii) 2 each shall be designated by the Board of Governors of 
the Federal Reserve System and the Secretary of the Treasury. 
"(C) The Advisory C!ommittee shall conduct its activities in accord-
ance with the Federal Advisory Committee Act. Within 6 months of Reports, 
its designation, or such longer time as the Commission may des-
ignate, the Advisory Committee shall issue a report to the Commis-
sion, and shall cause copies of that report to be delivered to the 
Secretary of the Tresisury and the Chairman of the Board of Gov-
ernors of the Federal Reserve System.". 
SEC. 6. LIMITATION ON PRACTICES WHICH RESULT IN VOLATILITY. 
(a) IN GENERAL.—Section 9 of the Securities Exchange Act of 1934 
(15 U.S.C. 78i) is amended by adding at the end thereof the following 
new subsection: 
"(h) 
LIMITATIONS ON PRACTICES THAT AFFECT MARKET VOLA-
TiUTY.—It shall be unlawful for any person, by the use of the mails 
or any means or instrumentality of interstate commerce or of any 
facility of any national securities exchange, to use or employ any act 
or practice in connection with the purchase or sale of any equity 
security in contravention of such rules or regulations as the 
Commission may adopt, consistent with the public interest, the 
protection of investors, and the maintenance of fair and orderly 
markets— 
"(1) to prescribe means reasonably designed to prevent 
manipulation of price levels of the equity securities market or a 
substantial segment thereof; and 
"(2) to prohibit or constrain, during periods of extraordinary 
market volatility, any trading practice in connection with the 
purchase or sale of equity securities that the Commission deter-
mines (A) has previously contributed significantly to extraor-
dinary levels of volatility that have threatened the maintenance 
of fair and orderly markets; and (B) is reasonably certain to 
engender such levels of volatility if not prohibited or con-
strained. 
In adopting rules under paragraph (2), the Commission shall, 
consistent with the purposes of this subsection, minimize the impact 
on the normal operations of the market and a natural person's 
freedom to buy or sell any equity security.". 
(b) CONFORMING AMENDMENT.—Section 25(b)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78y(b)(l)) is amended by inserting 
"9(hX2)," after "section 6,". 
SEC. 7. NOTIFICATION OF SEC CONCERNING RISKS TO SECURITIES 
SUBSIDIARY. 
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
amended by adding at the end the following new section: 
104 STAT. 976 
PUBLIC LAW 101-432—OCT. 16, 1990 
12 use 1831/. 
"SEC. 35. COORDINATION OF RISK ANALYSIS BETWEEN SEC AND FED-
ERAL BANKING AGENCIES. 
"Any appropriate Federal banking agency shall notify the Securi-
ties and Exchange Commission of any concerns of the agency 
regarding significant financial or operational risks to any registered 
broker or dealer, or any registered municipal securities dealer, 
government securities broker, or government securities dealer for 
which the Commission is the appropriate regulatory agency (as 
defined in section 3 of the Securities Exchange Act of 1934), result-
ing from the activities of any insured depository institution, any 
depository institution holding company, or any afhliate of any such 
institution or company if such broker, dealer, municipal securities 
dealer, government securities broker, or government securities 
dealer is an affiliate of any such institution, company, or affiliate.". 
15 use 78b note. 
SEC. 8. REPORTS TO CONGRESS. 
(a) INTERMARKET COORDINATION.—The Secretary of the Treasury, 
the Chairman of the Board of Governors of the Federal Reserve 
System, the Chairman of the Securities and Exchange Commission, 
and the Chairman of the Commodity Futures Trading Commission, 
shall report to the Congress not later than May 31, 1991, and 
annually thereafter until May 31,1995, on the following: 
(1) the efforts their respective agencies have made relating to 
the coordination of regulatory activities to ensure the integrity 
and competitiveness of United States financial markets; 
(2) the efforts their respective agencies have made to formu-
late coordinated mechanisms across marketplaces to protect the 
payments and market systems during market emergencies; 
(3) the views of their respective agencies with respect to the 
adequacy of margin levels and use of leverage by market 
participants; and 
(4) such other issues and concerns relating to the soundness, 
stability, and integrity of domestic and international capital 
markets as may be appropriate. 
The agencies shall cooperate in the development of their reports, 
and prior to submitting its report to Congress, each agency shall 
provide copies to the other agencies. 
l5USe78q-l 
(b) CLEARANCE AND SETTLEMENT.—The Securities and Exchange 
Commission, in consultation with the Commodity Futures Trading 
Commission, the Board of Governors of the Federal Reserve System, 
and other relevant regulatory authorities, shall examine progress 
toward establishing linked or coordinated facilities for clearance 
and settlement of transactions in securities, securities options, con-
tracts of sale for future delivery and options thereon, and commod-
ity options, and shall submit to the Committees on Energy and 
Commerce and Agriculture of the House of Representatives and the 
note. 
PUBLIC LAW 101-432—OCT. 16, 1990 
104 STAT. 977 
Committees on Banking, Housing, and Urban Affairs and Agri-
culture, Nutrition, and Forestry of the Senate, not later than 2 years 
from the date of enactment of this section, a report detailing and 
evaluating such progress. 
Approved October 16, 1990. 
LEGISLATIVE HISTORY—H.R. 3657 (S. 648): 
HOUSE REPORTS: No. 101-524 (Comm. on Energy and C!ommerce). 
SENATE REPORTS: No. 101-300 accompanying S. 648 (Comm. on Banking, Housing, 
and Urban Affairs). 
CONGRESSIONAL RECORD, Vol. 136 (1990): 
June 5, considered and passed House. 
Aug. 4, S. 648 considered and passed Senate. 
Sept. 25, H.R. 3657 considered and peissed Senate, amended. 
Sept. 28, House concurred in Senate amendments. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 26 (1990): 
Oct. 16, Presidential statement.