[104th Congress Public Law 290]
[From the U.S. Government Printing Office]
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[DOCID: f:publ290.104]
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NATIONAL SECURITIES MARKETS IMPROVEMENT ACT OF 1996
[[Page 110 STAT. 3416]]
Public Law 104-290
104th Congress
An Act
To amend the Federal securities laws in order to promote efficiency and
capital formation 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. <<NOTE: Oct. 11, 1996 - [H.R. 3005]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: National
Securities Markets Improvement Act of 1996.>>
SECTION 1. <<NOTE: 15 USC 78a note.>> SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``National Securities
Markets Improvement Act of 1996''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Severability.
TITLE I--CAPITAL MARKETS
Sec. 101. Short title.
Sec. 102. Creation of national securities markets.
Sec. 103. Broker-dealer exemptions from State law.
Sec. 104. Broker-dealer funding.
Sec. 105. Exemptive authority.
Sec. 106. Promotion of efficiency, competition, and capital formation.
Sec. 107. Privatization of EDGAR.
Sec. 108. Improving coordination of supervision.
Sec. 109. Increased access to foreign business information.
TITLE II--INVESTMENT COMPANY ACT AMENDMENTS
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. Reports to the Commission and shareholders.
Sec. 207. Books, records, and inspections.
Sec. 208. Prohibition on deceptive investment company names.
Sec. 209. Amendments to definitions.
Sec. 210. Performance fees exemptions.
TITLE III--INVESTMENT ADVISERS SUPERVISION COORDINATION ACT
Sec. 301. Short title.
Sec. 302. Funding for enhanced enforcement priority.
Sec. 303. Improved supervision through State and Federal cooperation.
Sec. 304. Interstate cooperation.
Sec. 305. Disqualification of convicted felons.
Sec. 306. Investor access to information.
Sec. 307. Continued State authority.
Sec. 308. Effective date.
TITLE IV--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION
Sec. 401. Short title.
[[Page 110 STAT. 3417]]
Sec. 402. Purposes.
Sec. 403. Authorization of appropriations.
Sec. 404. Registration fees.
Sec. 405. Transaction fees.
Sec. 406. Time for payment.
Sec. 407. Sense of the Congress concerning fees.
TITLE V--REDUCING THE COST OF SAVING AND INVESTMENT
Sec. 501. Exemption for economic, business, and industrial development
companies.
Sec. 502. Intrastate closed-end investment company exemption.
Sec. 503. Definition of eligible portfolio company.
Sec. 504. Definition of business development company.
Sec. 505. Acquisition of assets by business development companies.
Sec. 506. Capital structure amendments.
Sec. 507. Filing of written statements.
Sec. 508. Church employee pension plans.
Sec. 509. Promoting global preeminence of American securities markets.
Sec. 510. Studies and reports.
SEC. 2. <<NOTE: 15 USC 78a note.>> DEFINITIONS.
For purposes of this Act--
(1) the term ``Commission'' means the Securities and
Exchange Commission; and
(2) the term ``State'' has the same meaning as in section 3
of the Securities Exchange Act of 1934.
SEC. 3. <<NOTE: 15 USC 78a note.>> 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 unconstitutional, 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.
TITLE I--CAPITAL <<NOTE: Capital Markets Efficiency Act of
1996.>> MARKETS
SEC. 101. <<NOTE: 15 USC 78a note.>> SHORT TITLE.
This title may be cited as the ``Capital Markets Efficiency Act of
1996''.
SEC. 102. CREATION OF NATIONAL SECURITIES MARKETS.
(a) In General.--Section 18 of the Securities Act of 1933 (15 U.S.C.
77r) is amended to read as follows:
``SEC. 18. EXEMPTION FROM STATE REGULATION OF SECURITIES OFFERINGS.
``(a) Scope of Exemption.--Except as otherwise provided in this
section, no law, rule, regulation, or order, or other administrative
action of any State or any political subdivision thereof--
``(1) requiring, or with respect to, registration or
qualification of securities, or registration or qualification of
securities transactions, shall directly or indirectly apply to a
security that--
``(A) is a covered security; or
``(B) will be a covered security upon completion of
the transaction;
``(2) shall directly or indirectly prohibit, limit, or
impose any conditions upon the use of--
``(A) with respect to a covered security described
in subsection (b), any offering document that is
prepared by or on behalf of the issuer; or
[[Page 110 STAT. 3418]]
``(B) any proxy statement, report to shareholders,
or other disclosure document relating to a covered
security or the issuer thereof that is required to be
and is filed with the Commission or any national
securities organization registered under section 15A of
the Securities Exchange Act of 1934, except that this
subparagraph does not apply to the laws, rules,
regulations, or orders, or other administrative actions
of the State of incorporation of the issuer; or
``(3) shall directly or indirectly prohibit, limit, or
impose conditions, based on the merits of such offering or
issuer, upon the offer or sale of any security described in
paragraph (1).
``(b) Covered Securities.--For purposes of this section, the
following are covered securities:
``(1) Exclusive federal registration of nationally traded
securities.--A security is a covered security if such security
is--
``(A) listed, or authorized for listing, on the New
York Stock Exchange or the American Stock Exchange, or
listed on the National Market System of the Nasdaq Stock
Market (or any successor to such entities);
``(B) listed, or authorized for listing, on a
national securities exchange (or tier or segment
thereof) that has listing standards that the Commission
determines by rule (on its own initiative or on the
basis of a petition) are substantially similar to the
listing standards applicable to securities described in
subparagraph (A); or
``(C) is a security of the same issuer that is equal
in seniority or that is a senior security to a security
described in subparagraph (A) or (B).
``(2) Exclusive federal registration of investment
companies.--A security is a covered security if such security is
a security issued by an investment company that is registered,
or that has filed a registration statement, under the Investment
Company Act of 1940.
``(3) Sales to qualified purchasers.--A security is a
covered security with respect to the offer or sale of the
security to qualified purchasers, as defined by the Commission
by rule. In prescribing such rule, the Commission may define the
term `qualified purchaser' differently with respect to different
categories of securities, consistent with the public interest
and the protection of investors.
``(4) Exemption in connection with certain exempt
offerings.--A security is a covered security with respect to a
transaction that is exempt from registration under this title
pursuant to--
``(A) paragraph (1) or (3) of section 4, and the
issuer of such security files reports with the
Commission pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934;
``(B) section 4(4);
``(C) section 3(a), other than the offer or sale of
a security that is exempt from such registration
pursuant to paragraph (4) or (11) of such section,
except that a municipal security that is exempt from
such registration pursuant to paragraph (2) of such
section is not a covered security with respect to the
offer or sale of such security
[[Page 110 STAT. 3419]]
in the State in which the issuer of such security is
located; or
``(D) Commission rules or regulations issued under
section 4(2), except that this subparagraph does not
prohibit a State from imposing notice filing
requirements that are substantially similar to those
required by rule or regulation under section 4(2) that
are in effect on September 1, 1996.
``(c) Preservation of Authority.--
``(1) Fraud authority.--Consistent with this section, the
securities commission (or any agency or office performing like
functions) of any State shall retain jurisdiction under the laws
of such State to investigate and bring enforcement actions with
respect to fraud or deceit, or unlawful conduct by a broker or
dealer, in connection with securities or securities
transactions.
``(2) Preservation of filing requirements.--
``(A) Notice filings permitted.--Nothing in this
section prohibits the securities commission (or any
agency or office performing like functions) of any State
from requiring the filing of any document filed with the
Commission pursuant to this title, together with annual
or periodic reports of the value of securities sold or
offered to be sold to persons located in the State (if
such sales data is not included in documents filed with
the Commission), solely for notice purposes and the
assessment of any fee, together with a consent to
service of process and any required fee.
``(B) Preservation of fees.--
``(i) In general.--Until otherwise provided by
law, rule, regulation, or order, or other
administrative action of any State, or any
political subdivision thereof, adopted after the
date of enactment of the Capital Markets
Efficiency Act of 1996, filing or registration
fees with respect to securities or securities
transactions shall continue to be collected in
amounts determined pursuant to State law as in
effect on the day before such date.
``(ii) Schedule.--The fees required by this
subparagraph shall be paid, and all necessary
supporting data on sales or offers for sales
required under subparagraph (A), shall be reported
on the same
schedule as would have been applicable had the
issuer not relied on the exemption provided in
subsection (a).
``(C) Availability of preemption contingent on
payment of fees.--
``(i) In general.--During the period beginning
on the date of enactment of the National
Securities
Market Improvement Act of 1996 and ending 3 years
after that date of enactment, the securities
commission (or any agency or office performing
like functions) of any State may require the
registration of securities issued by any issuer
who refuses to pay the fees required by
subparagraph (B).
``(ii) Delays.--For purposes of this
subparagraph, delays in payment of fees or
underpayments of fees
[[Page 110 STAT. 3420]]
that are promptly remedied shall not constitute a
refusal to pay fees.
``(D) Fees not permitted on listed securities.--
Notwithstanding subparagraphs (A), (B), and (C), no
filing or fee may be required with respect to any
security that is a covered security pursuant to
subsection (b)(1), or will be such a covered security
upon completion of the transaction, or is a security of
the same issuer that is equal in seniority or that is a
senior security to a security that is a covered security
pursuant to subsection (b)(1).
``(3) Enforcement of requirements.--Nothing in this section
shall prohibit the securities commission (or any agency or
office performing like functions) of any State from suspending
the offer or sale of securities within such State as a result of
the failure to submit any filing or fee required under law and
permitted under this section.
``(d) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Offering document.--The term `offering document'--
``(A) has the meaning given the term `prospectus' in
section 2(10), but without regard to the provisions of
subparagraphs (A) and (B) of that section; and
``(B) includes a communication that is not deemed to
offer a security pursuant to a rule of the Commission.
``(2) Prepared by or on behalf of the issuer.--Not later
than 6 months after the date of enactment of the Securities
Amendments Act of 1996, the Commission shall, by rule, define
the term `prepared by or on behalf of the issuer' for purposes
of this section.
``(3) State.--The term `State' has the same meaning as in
section 3 of the Securities Exchange Act of 1934.
``(4) Senior security.--For purposes of this paragraph, the
term `senior security' means any bond, debenture, note, or
similar obligation or instrument constituting a security and
evidencing indebtedness, and any stock of a class having
priority over any other class as to distribution of assets or
payment of dividends.''.
(b) Study <<NOTE: 15 USC 78r note.>> and Report on Uniformity.--The
Commission shall conduct a study, after consultation with States,
issuers, brokers, and dealers, on the extent to which uniformity of
State regulatory requirements for securities or securities transactions
has been achieved for securities that are not covered securities (within
the meaning of section 18 of the Securities Act of 1933, as amended by
paragraph (1) of this subsection). 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 such study.
SEC. 103. BROKER-DEALER EXEMPTIONS FROM STATE LAW.
(a) In General.--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) Limitations on State Law.--
``(1) Capital, margin, books and records, bonding, and
reports.--No law, rule, regulation, or order, or other
administrative action of any State or political subdivision
thereof shall establish capital, custody, margin, financial
responsibility, making and keeping records, bonding, or
financial or operational
[[Page 110 STAT. 3421]]
reporting requirements for brokers, dealers, municipal
securities dealers, government securities brokers, or government
securities dealers that differ from, or are in addition to, the
requirements in those areas established under this title. The
Commission shall consult periodically the securities commissions
(or any agency or office performing like functions) of the
States concerning the adequacy of such requirements as
established under this title.
``(2) De minimis transactions by associated persons.--No
law, rule, regulation, or order, or other administrative action
of any State or political subdivision thereof may prohibit an
associated person of a broker or dealer from affecting a
transaction described in paragraph (3) 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.
``(3) Described transactions.--
``(A) In general.--A transaction is described 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
``(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 1-
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) during the period beginning
on the date on which such associated
person files an application for
registration with the State in which the
transaction 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 person that it has
denied the application for
registration or has stayed the
pendency of the application for
cause.
``(B) Rules of construction.--For purposes of
subparagraph (A)(i)(II)--
``(i) each of up to 3 associated persons of a
broker or dealer who are designated to effect
transactions
[[Page 110 STAT. 3422]]
during the absence or unavailability of the
principal associated person for a customer may be
treated as an associated person to which such
customer is assigned; and
``(ii) if the customer is present in another
State for 30 or more consecutive days or has
permanently changed his or her residence to
another State, a transaction is not described in
this paragraph, unless the association 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.''.
(b) Technical Amendment.--Section 28(a) of the Securities 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. 104. BROKER-DEALER FUNDING.
(a) Margin Requirements.--
(1) Extensions of credit by broker-dealers.--Section 7(c) of
the Securities Exchange Act of 1934 (15 U.S.C. 78g(c)) is
amended to read as follows:
``(c) Unlawful Credit Extension to Customers.--
``(1) Prohibition.--It shall be unlawful for any member of a
national securities exchange or any broker or dealer, directly
or indirectly, to extend or maintain credit or arrange for the
extension or maintenance of credit to or for any
customer--
``(A) on any security (other than an exempted
security), in contravention of the rules and regulations
which the Board of Governors of the Federal Reserve
System (hereafter in this section referred to as the
`Board') shall
prescribe under subsections (a) and (b); and
``(B) without collateral or on any collateral other
than securities, except in accordance with such rules
and regulations as the Board may prescribe--
``(i) to permit under specified conditions and
for a limited period any such member, broker, or
dealer to maintain a credit initially extended in
conformity with the rules and regulations of the
Board; and
``(ii) to permit the extension or maintenance
of credit in cases where the extension or
maintenance of credit is not for the purpose of
purchasing or carrying securities or of evading or
circumventing the provisions of subparagraph (A).
``(2) Exception.--This subsection and the rules and
regulations issued under this subsection shall not apply to any
credit extended, maintained, or arranged by a member of a
national securities exchange or a broker or dealer to or for a
member of a national securities exchange or a registered broker
or dealer--
``(A) a substantial portion of whose business
consists of transactions with persons other than brokers
or dealers; or
[[Page 110 STAT. 3423]]
``(B) to finance its activities as a market maker or
an underwriter;
except that the Board may impose such rules and regulations, in
whole or in part, on any credit otherwise exempted by this
paragraph if the Board determines that such action is necessary
or appropriate in the public interest or for the protection of
investors.''.
(2) Extensions of credit by other lenders.--Section 7(d) of
the Securities Exchange Act of 1934 (78 U.S.C. 78g(d)) is
amended to read as follows:
``(d) Unlawful Credit Extension in Violation of Rules and
Regulations; Exception to Application of Rules, Etc.--
``(1) Prohibition.--It shall be unlawful for any person not
subject to subsection (c) to extend or maintain credit or to
arrange for the extension or maintenance of credit for the
purpose of purchasing or carrying any security, in contravention
of such rules and regulations as the Board shall prescribe to
prevent the excessive use of credit for the purchasing or
carrying of or trading in securities in circumvention of the
other provisions of this section. Such rules and regulations may
impose upon all loans made for the purpose of purchasing or
carrying securities limitations similar to those imposed upon
members, brokers, or dealers by subsection (c) and the rules and
regulations thereunder.
``(2) Exceptions.--This subsection and the rules and
regulations issued under this subsection shall not apply to any
credit extended, maintained, or arranged--
``(A) by a person not in the ordinary course of
business;
``(B) on an exempted security;
``(C) to or for a member of a national securities
exchange or a registered broker or dealer--
``(i) a substantial portion of whose business
consists of transactions with persons other than
brokers or dealers; or
``(ii) to finance its activities as a market
maker or an underwriter;
``(D) by a bank on a security other than an equity
security; or
``(E) as the Board 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 unconditionally or upon
specified terms and conditions or for stated periods,
from the operation of this subsection and the rules and
regulations thereunder.
``(3) Board authority.--The Board may impose such rules and
regulations, in whole or in part, on any credit otherwise
exempted by subparagraph (C) if it determines that such action
is necessary or appropriate in the public interest or for the
protection of investors.''.
(b) Borrowing by Members, Brokers, and Dealers.--Section 8 of the
Securities Exchange Act of 1934 (15 U.S.C. 78h) is
amended--
(1) by striking subsection (a); and
(2) by redesignating subsections (b) and (c) as subsections
(a) and (b), respectively.
[[Page 110 STAT. 3424]]
SEC. 105. EXEMPTIVE AUTHORITY.
(a) General Exemptive Authority 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. <<NOTE: 15 USC 77z-3.>> GENERAL EXEMPTIVE AUTHORITY.
``The Commission, by rule or regulation, may conditionally 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 appropriate in the public interest, and is consistent with the
protection of investors.''.
(b) General Exemptive Authority 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. <<NOTE: 15 USC 78mm.>> GENERAL EXEMPTIVE AUTHORITY.
``(a) Authority.--
``(1) In general.--Except as provided in subsection (b), but
notwithstanding any other provision of this title, the
Commission, by rule, regulation, or order, may conditionally 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 thereunder, to the extent that such exemption is
necessary or appropriate in the public interest, and is
consistent with the protection of investors.
``(2) Procedures.--The <<NOTE: Regulations.>> Commission
shall, by rule or regulation, 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 thereunder or (for purposes of section 15C and the
rules and regulations issued thereunder) from any definition in
paragraph (42), (43), (44), or (45) of section 3(a).''.
SEC. 106. PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION.
(a) Securities Act of 1933.--Section 2 of the Securities 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 subsection:
``(b) Consideration of Promotion of Efficiency, Competition, and
Capital Formation.--Whenever pursuant to this title the Commission is
engaged in rulemaking and is required to
consider or determine whether an action is necessary or appropriate in
the public interest, the Commission shall also consider, in addition to
the protection of investors, 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 subsection:
[[Page 110 STAT. 3425]]
``(f) Consideration of Promotion of Efficiency, Competition, and
Capital Formation.--Whenever pursuant to this title the Commission is
engaged in rulemaking, or in the review of a rule of a self-regulatory
organization, and is required to consider or determine whether an action
is necessary or appropriate in the public interest, the Commission shall
also consider, in addition to the protection of investors, 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 subsection:
``(c) Consideration of Promotion of Efficiency, Competition, and
Capital Formation.--Whenever pursuant to this title the Commission is
engaged in rulemaking and is required to
consider or determine whether an action is consistent with the public
interest, the Commission shall also consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation.''.
SEC. 107. PRIVATIZATION OF EDGAR.
(a) Examination.--The Commission shall examine proposals for the
privatization of the EDGAR system. Such examination shall promote
competition in the automation and rapid collection and dissemination of
information required to be disclosed. Such examination shall include
proposals that maintain free public access to data filings in the EDGAR
system.
(b) Report.--Not later than 180 days after the date of enactment of
this Act, the Commission shall submit to the Congress a report on the
examination under subsection (a). Such report shall include such
recommendations for such legislative action as may be necessary to
implement the proposal that the Commission determines most effectively
achieves the objectives described in subsection (a).
SEC. 108. 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) Elimination of duplication.--The Commission and the
examining authorities, through cooperation and coordination of
examination and oversight activities, shall eliminate any
unnecessary and burdensome duplication in the examination
process.
``(2) Coordination of examinations.--The Commission and the
examining authorities shall share such information, including
reports of examinations, customer complaint information, and
other 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.
``(3) Examinations for cause.--At any time, any examining
authority may conduct an examination for cause of any broker or
dealer subject to its jurisdiction.
``(4) Confidentiality.--
``(A) In general.--Section 24 shall apply to the
sharing of information in accordance with this
subsection. The Commission shall take appropriate action
under section
[[Page 110 STAT. 3426]]
24(c) to ensure that such information is not
inappropriately disclosed.
``(B) Appropriate disclosure not prohibited.--
Nothing in this paragraph authorizes the Commission or
any examining authority to withhold information from the
Congress, or prevent the Commission or any examining
authority 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.
``(5) Definition.--For purposes of this subsection, the term
`examining authority' means a self-regulatory organization
registered with the Commission under this title (other than a
registered clearing agency) with the authority to examine,
inspect, and otherwise oversee the activities of a registered
broker or dealer.''.
SEC. 109. <<NOTE: 15 USC 77e note.>> INCREASED ACCESS TO FOREIGN
BUSINESS INFORMATION.
Not later than 1 year after the date of enactment of this Act, the
Commission shall adopt rules under the Securities Act of 1933 concerning
the status under the registration provisions of the Securities Act of
1933 of foreign press conferences and foreign press releases by persons
engaged in the offer and sale of securities.
TITLE II--INVESTMENT <<NOTE: Investment Company Act Amendments of
1996.>> COMPANY ACT AMENDMENTS
SEC. 201. <<NOTE: 15 USC 80a-51 note.>> SHORT TITLE.
This title may be cited as the ``Investment Company Act Amendments
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 investment
company is not a registered investment company,''; and
(B) by inserting ``in the event that such investment
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 following new
subparagraph:
``(G)(i) This paragraph does not apply to securities of a registered
open-end investment company or a registered unit investment trust
(hereafter in this subparagraph referred to as the `acquired company')
purchased or otherwise acquired by a registered open-end investment
company or a registered unit investment trust (hereafter in this
subparagraph referred to as the `acquiring company') if--
[[Page 110 STAT. 3427]]
``(I) the acquired company and the acquiring company are
part of the same group of investment companies;
``(II) the securities of the acquired company, securities of
other registered open-end investment companies and registered
unit investment trusts that are part of the same group of
investment companies, Government securities, and short-term
paper are the only investments held by the acquiring company;
``(III) with respect to--
``(aa) securities of the acquired company, the
acquiring company does not pay and is not assessed any
charges or fees for distribution-related activities,
unless the acquiring company does not charge a sales
load or other fees or charges for distribution-related
activities; or
``(bb) securities of the acquiring company, any
sales loads and other distribution-related fees charged,
when aggregated with any sales load and distribution-
related fees paid by the acquiring company with respect
to
securities of the acquired fund, are not excessive under
rules adopted pursuant to section 22(b) or section 22(c)
by a securities association 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 registered open-end investment
companies or registered unit investment trusts in reliance on
this subparagraph 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 acquisitions in accordance with this
subparagraph, as necessary and appropriate for the protection of
investors.
``(ii) For purposes of this subparagraph, the term `group of
investment companies' means any 2 or more registered investment
companies that hold themselves out to investors as related
companies for purposes of investment and investor services.''; and
(5) by adding at the end the following new subparagraph:
``(J) The Commission, by rule or regulation, upon its own motion or
by order upon application, may conditionally or unconditionally exempt
any person, security, or transaction, or any class or classes of
persons, securities, or transactions from any provision of this
subsection, if and to the extent that such exemption is consistent with
the public 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 Securities.--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 Securities.--
``(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-
[[Page 110 STAT. 3428]]
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 a company or trust referred
to in paragraph (1), the company or trust, as applicable, shall
pay a registration fee to the Commission, calculated 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
company or trust, reduced by--
``(A) the aggregate redemption or repurchase price
of the securities of the company or trust during that
year; and
``(B) the aggregate redemption or repurchase price
of the securities of the company or trust during any
prior fiscal year ending not more than 1 year before the
date of enactment of the Investment Company Act
Amendments of 1996, that were not used previously by the
company or trust to reduce fees payable under this
section.
``(3) Interest due on late payment.--A company or trust
paying the fee required by this subsection or any portion
thereof more than 90 days after the end of the fiscal year of
the company or trust shall pay to the Commission interest on
unpaid amounts, at the average investment rate for Treasury tax
and loan accounts published by the Secretary of the
Treasury pursuant to section 3717(a) 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 Commission may adopt rules
and regulations to implement this subsection.''.
(c) Effective <<NOTE: 15 USC 80a-24 note.>> 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 Investment Company Act
of 1940, as amended by this section.
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 following new subsection:
``(g) Additional <<NOTE: Regulations.>> Prospectuses.--In addition
to any prospectus permitted or required by section 10(a) of the
Securities Act of 1933, the Commission shall permit, by rules or
regulations deemed necessary or appropriate in the public interest or
for the protection of investors, the use of a prospectus for purposes of
section 5(b)(1) of that Act with respect to securities issued by a
registered investment company. Such a prospectus, which may include
information the substance of which is not included in the prospectus
specified in section 10(a) of the Securities Act of 1933, shall be
deemed to be permitted by section 10(b) of that Act.''.
[[Page 110 STAT. 3429]]
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 subsection:
``(e) Exemption.--
``(1) In general.--Subsection (a) does not apply to any
registered separate account funding variable insurance
contracts, or to the sponsoring insurance company and principal
underwriter of such account.
``(2) Limitation on sales.--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--
``(A) unless the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be
incurred, and the risks assumed by the insurance
company, and, beginning on the earlier of August 1,
1997, or the earliest effective date of any registration
statement or amendment thereto for such contract
following the date of enactment of this subsection, the
insurance company so represents in the registration
statement for the contract; and
``(B) unless the insurance company--
``(i) complies with all other applicable
provisions of this section, as if it were a
trustee or custodian of the registered separate
account;
``(ii) files with the insurance regulatory
authority of the State which is the domiciliary
State of the
insurance company, an annual statement of its
financial condition, 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 company, of
not less than $1,000,000, or such other amount as
the Commission may from time to time prescribe by
rule, as necessary or appropriate in the public
interest or for the protection of investors; and
``(iii) together with its registered separate
accounts, is supervised and examined periodically
by the
insurance authority of such State.
``(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 Commission 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 protection 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 subsection:
``(i)(1) This section does not apply to any registered separate
account funding variable insurance contracts, or to the sponsoring
insurance company and principal underwriter of such account, except as
provided in paragraph (2).
``(2) It shall be unlawful for any registered separate account
funding variable insurance contracts, or for the sponsoring
[[Page 110 STAT. 3430]]
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 section 26(e) and
any rules or regulations issued by the Commission under section
26(e).''.
SEC. 206. REPORTS TO THE COMMISSION AND SHAREHOLDERS.
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 information 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 unnecessary reporting by, and minimize the
compliance burdens on, registered investment
companies and their affiliated persons in exercising its authority--
``(A) under subsection (f); and
``(B) under subsection (b)(1), if the Commission requires
the filing of information, documents, and reports 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 comment on--
``(A) feasible alternatives that minimize the reporting
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 affiliated persons of providing
such information, documents, and reports.'';
(4) by inserting after subsection (e) (as redesignated by
paragraph (2) of this section), the following new subsection:
``(f) The Commission may, by rule, require that semiannual reports
containing the information set forth in subsection (e) include such
other information as the Commission deems necessary or appropriate in
the public interest or for the protection of investors.''; and
(5) in subsection (g) (as redesignated by paragraph (2) of
this section), by striking ``subsections (a) and (d)'' and
inserting ``subsections (a) and (e)''.
SEC. 207. 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 inserting the
following:
``(a) Maintenance of Records.--
``(1) In general.--Each registered investment company, and
each underwriter, broker, dealer, or investment adviser that is
a majority-owned subsidiary of such a company, shall
[[Page 110 STAT. 3431]]
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 regulations, may
prescribe as necessary or appropriate in the public interest or
for the protection of investors. <<NOTE: Regulations.>> Each
investment adviser that is not a majority-owned subsidiary of,
and each depositor of any registered investment company, 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 person's transactions with such
registered
company.
``(2) Minimizing compliance burden.--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 recordkeeping by, and minimize the compliance burden
on, persons 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
recordkeeping 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
requirement would have on internal compliance policies
and
procedures.
``(b) Examinations of Records.--
``(1) In general.--All records required to be maintained and
preserved 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
prescribe.
``(2) Availability.--For purposes of examinations referred
to in paragraph (1), any subject person shall make available to
the Commission or its representatives 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.
``(3) Commission action.--The Commission shall exercise its
authority under this subsection with due regard for the benefits
of internal compliance policies and procedures and the effective
implementation and operation thereof.'';
(2) by redesignating subsections (c) and (d) as subsections
(e) and (f), respectively;
(3) by inserting after subsection (b) the following new
subsections:
``(c) Limitations on Disclosure by Commission.--Notwithstanding any
other provision of law, the Commission shall not be compelled to
disclose any internal compliance or audit records,
[[Page 110 STAT. 3432]]
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 jurisdiction 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 purposes of section 552 of
title 5, United States Code, this section shall be considered a statute
described in subsection (b)(3)(B) of such section 552.
``(d) Definitions.--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 person in accordance with
internal compliance policies and procedures.'';
(4) in subsection (e), as redesignated, by inserting
``Regulatory Authority.--'' before ``The Commission''; and
(5) in subsection (f), as redesignated, by inserting
``Exemption Authority.--'' before ``The Commission''.
SEC. 208. PROHIBITION ON DECEPTIVE INVESTMENT COMPANY 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) Deceptive or Misleading Names.--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. 209. AMENDMENTS TO DEFINITIONS.
(a) Excepted Investment Companies.--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 limitations set forth in
subparagraphs (A)(i) and (B)(i) of section 12(d)(1) governing
the purchase or other acquisition by such issuer of any security
issued by any registered investment company and the sale of any
security 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 investment 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 market
intermediary,'';
(B) by inserting ``(A)'' after ``(2)''; and
[[Page 110 STAT. 3433]]
(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 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,
commodities, currencies, interest or other rates,
other measures of value, or any other financial 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
(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, regulations, 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 issuer is within
the exception provided by this paragraph if--
``(i) in addition to qualified purchasers,
outstanding securities of that issuer are beneficially
owned by not more than 100 persons who are not qualified
purchasers, if--
``(I) such persons acquired any portion of the
securities of such issuer on or before September
1, 1996; and
``(II) at the time at which such persons
initially acquired the securities of such issuer,
the issuer was excepted 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, as determined under paragraph
(1), that future investors will be limited to
qualified purchasers, and that ownership in such
issuer is no longer limited to not more than 100
persons; and
[[Page 110 STAT. 3434]]
``(II) concurrently with or after such
disclosure, such issuer has provided each
beneficial owner, as determined under paragraph
(1), with a reasonable opportunity to redeem any
part or all of their interests in the issuer,
notwithstanding any agreement to the contrary
between the issuer and such persons, for that
person's proportionate 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 person's share in assets of the issuer. If the issuer
elects 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 paragraph 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 investment 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 securities of the issuer
excepted under this paragraph are owned by persons that are not
qualified purchasers. Nothing in this subparagraph shall be
construed to establish that a person is a bona fide qualified
purchaser for purposes of this paragraph or a bona fide
beneficial owner for purposes of paragraph (1).''.
(b) 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 person who
holds a joint, community property, or other similar
shared ownership interest in an issuer 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 directly or
indirectly by or for 2 or more natural persons who are
related as siblings or spouse (including former
spouses), or direct lineal descendants by birth or
adoption, spouses of such persons, 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 clause (ii)
and that was not formed for the specific purpose of
acquiring
[[Page 110 STAT. 3435]]
the securities offered, as to which the trustee or other
person authorized to make decisions with respect to the
trust, and each settlor or other person who has
contributed assets to the trust, is a person described
in clause (i), (ii), or (iv); or
``(iv) any person, acting for its own account or the
accounts of other qualified purchasers, who in the
aggregate owns and invests on a discretionary basis, not
less than $25,000,000 in investments.
``(B) The Commission may adopt such rules and regulations
applicable to the persons and trusts specified in clauses (i)
through (iv) 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 include 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'), unless all beneficial owners of its
outstanding securities (other than short-term paper), determined
in accordance with section 3(c)(1)(A), that acquired such
securities 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, directly 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.''.
(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 paragraph (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 <<NOTE: 15 USC 80a-3 note.>> 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 implement
the requirements of section 3(c)(1)(B) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(1)(B)), as amended by this
section.
(2) Identification <<NOTE: 15 USC 80a-2 note.>> 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
purposes of section 2(a)(51) of the Investment Company Act of
1940, as added by this Act.
[[Page 110 STAT. 3436]]
(3) Employee <<NOTE: 15 USC 80a-3 note.>> exception.--Not
later than 1 year after the date of enactment of this Act, the
Commission shall prescribe rules pursuant to its authority under
section 6 of the Investment Company Act of 1940 to permit the
ownership of securities by knowledgeable 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.
(4) Beneficial <<NOTE: 15 USC 80a-3 note.>> ownership.--Not
later than 180 days after the date of enactment of this Act, the
Commission shall prescribe rules defining the term ``beneficial
owner'' for purposes of section 3(c)(7)(B) of the Investment
Company Act of 1940, as amended by this Act.
(e) Effective <<NOTE: 15 USC 80a-2 note.>> 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. 210. PERFORMANCE FEES EXEMPTIONS.
Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5)
is amended--
(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 subsection:
``(e) The Commission, by rule or regulation, upon its own motion, or
by order upon application, may conditionally or unconditionally exempt
any person or transaction, or any class or classes of persons or
transactions, from subsection (a)(1), if and to the extent that the
exemption 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 experience in financial
matters, amount of assets under management,
relationship with a registered investment adviser, and such other
factors as the Commission determines are consistent with this
section.''.
TITLE <<NOTE: Investment Advisers Supervision Coordination Act.>> III--
INVESTMENT ADVISERS SUPERVISION COORDINATION ACT
SEC. 301. <<NOTE: 15 USC 80b-20 note.>> SHORT TITLE.
This title may be cited as the ``Investment Advisers Supervision
Coordination Act''.
[[Page 110 STAT. 3437]]
SEC. 302. <<NOTE: Appropriation authorization.>> FUNDING FOR ENHANCED
ENFORCEMENT PRIORITY.
There are authorized to be appropriated to the Commission, for the
enforcement of the Investment Advisers Act of 1940, not more than
$20,000,000 in each of fiscal years 1997 and 1998, in addition to any
funds authorized to be appropriated to the Commission for this or other
purposes.
SEC. 303. 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. <<NOTE: 15 USC 80b-3a.>> 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 investment adviser in the
State in which it maintains its principal office and place of
business shall register under section 203, unless the investment
adviser--
``(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 company
registered under title I of this Act.
``(2) Definition.--For purposes of this subsection, the term
`assets under management' means the securities portfolios with
respect to which an investment adviser provides continuous and
regular supervisory or management services.
``(b) Advisers Subject to Commission Authority.--
``(1) In general.--No law of any State or political
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 person, except that a State may license, register,
or otherwise qualify any investment adviser
representative who has a place of business located
within that State; or
``(B) that is not registered under section 203
because that person is excepted from the definition of
an investment adviser under section 202(a)(11).
``(2) Limitation.--Nothing in this subsection shall prohibit
the securities commission (or any agency or office performing
like functions) of any State from investigating and bringing
enforcement actions with respect to fraud or deceit against an
investment adviser or person associated 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.
``(d) Filing Depositories.--The Commission may, by rule, require an
investment adviser--
[[Page 110 STAT. 3438]]
``(1) to file with the Commission any fee, application,
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 securities 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 investment adviser under
section 203A'' after ``satisfied''; and
(2) in subsection (h), in the second sentence--
(A) by striking ``existence or'' and inserting
``existence,''; and
(B) by inserting ``or is prohibited from registering
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 ``requires, the
following definitions shall apply:''; and
(2) by adding at the end the following new paragraph:
``(25) `Supervised person' means any partner, officer,
director (or other person occupying a similar status or
performing similar functions), or employee of an investment
adviser, or other person who provides 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. 304. INTERSTATE COOPERATION.
Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
18a) is amended to read as follows:
``SEC. 222. STATE REGULATION OF INVESTMENT ADVISERS.
``(a) Jurisdiction of State Regulators.--Nothing in this title shall
affect the jurisdiction of the securities commissioner (or any agency or
officer performing like functions) 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 investment 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.
[[Page 110 STAT. 3439]]
``(c) Limitation on Capital and Bond Requirements.--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 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 net capital or
bonding requirements of the State in which it maintains its
principal place of business.
``(d) National De Minimis Standard.--No law of any State or
political subdivision thereof requiring the registration, licensing, or
qualification as an investment adviser shall require an investment
adviser to register with the securities commissioner of the State (or
any agency or officer performing like functions) or to comply with such
law (other than any provision thereof prohibiting fraudulent conduct) if
the investment adviser--
``(1) does not have a place of business located within the
State; and
``(2) during the preceding 12-month period, has had fewer
than 6 clients who are residents of that State.''.
SEC. 305. 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 following new
paragraph:
``(3) has been convicted during the 10-year period preceding
the date of filing of any application for registration, or at
any time thereafter, of--
``(A) any crime that is punishable by imprisonment
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--
(1) in subsection (e)(6) (as redesignated by subsection (a)
of this section), by striking ``this paragraph (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 inserting
``paragraph (1), (5), (6), or (8) of subsection (e)'';
(B) by striking ``paragraph (3)'' and inserting
``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. 306. <<NOTE: 15 USC 80b-10 note.>> INVESTOR ACCESS TO INFORMATION.
The Commission shall--
(1) provide for the establishment and maintenance of a
readily accessible telephonic or other electronic process to
[[Page 110 STAT. 3440]]
receive inquiries regarding disciplinary actions and proceedings
involving investment advisers and persons associated with
investment advisers; and
(2) provide for prompt response to any inquiry described in
paragraph (1).
SEC. 307. <<NOTE: 15 USC 80b-3a note.>> CONTINUED STATE AUTHORITY.
(a) Preservation of Filing Requirements.--Nothing in this title or
any amendment made by this title prohibits the securities commission (or
any agency or office performing like functions) of any State from
requiring the filing of any documents filed with the Commission pursuant
to the securities laws solely for notice purposes, together with a
consent to service of process and any required fee.
(b) Preservation of Fees.--Until otherwise provided by law, rule,
regulation, or order, or other administrative action of any State, or
any political subdivision thereof, adopted after the date of enactment
of this Act, filing, registration, or licensing fees shall,
notwithstanding the amendments made by this title, continue to be paid
in amounts determined pursuant to the law, rule, regulation, or order,
or other administrative action as in effect on the day before such date
of enactment.
(c) Availability of Preemption Contingent on Payment of Fees.--
(1) In general.--During the period beginning on the date of
enactment of this Act and ending 3 years after that
date of enactment, the securities commission (or any agency or
office performing like functions) of any State may require
registration of any investment adviser that fails or refuses to
pay the fees required by subsection (b) in or to such State,
notwithstanding the limitations on the laws, rules, regulations,
or orders, or other administrative actions of any State, or any
political subdivision thereof, contained in subsection (a), if
the laws of such State require registration of investment
advisers.
(2) Delays.--For purposes of this subsection, delays in
payment of fees or underpayments of fees that are promptly
remedied in accordance with the applicable laws, rules,
regulations, or orders, or other administrative actions of the
relevant State shall not constitute a failure or refusal to pay
fees.
SEC. 308. <<NOTE: 15 USC 80b-2 note.>> EFFECTIVE DATE.
(a) In General.--This title and the amendments made by this title
shall take effect 180 days after the date of enactment of this Act.
(b) Conforming Amendment.--
(1) In general.--Section 3(38)(B) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002(38)(B)) is amended
by inserting ``or under the laws of any State'' after ``1940''.
(2) Sunset.--The <<NOTE: 29 USC 1002 note.>> amendment made
by paragraph (1) shall cease to be effective 2 years after the
date of enactment of this Act.
[[Page 110 STAT. 3441]]
TITLE <<NOTE: Securities and Exchange Commission Authorization Act of
1996.>> IV--SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION
<<NOTE: 15 USC 78a note.>> SEC. 401. <<NOTE: 15 USC 78a note.>> SHORT
TITLE.
This title may be cited as the ``Securities and Exchange Commission
Authorization Act of 1996''.
<<NOTE: 15 USC 78a note.>> SEC. 402. PURPOSES.
The purposes of this title are--
(1) to authorize appropriations for the Commission for
fiscal year 1997; and
(2) to reduce over time the rates of fees charged under the
Federal securities laws.
SEC. 403. AUTHORIZATION OF APPROPRIATIONS.
Section <<NOTE: 15 USC 78kk.>> 35 of the Securities Exchange Act of
1934 is amended to read as follows:
``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.
``There are authorized to be appropriated to carry out the
functions, powers, and duties of the Commission $300,000,000 for fiscal
year 1997, in addition to any other funds authorized to be appropriated
to the Commission.''.
SEC. 404. REGISTRATION FEES.
Section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) is
amended to read as follows:
``(b) Registration Fee.--
``(1) Recovery of cost of services.--The Commission shall,
in accordance with this subsection, collect registration fees
that are designed to recover the costs to the government of the
securities registration process, and costs related to such
process, including enforcement activities, policy and rulemaking
activities, administration, legal services, and international
regulatory activities.
``(2) Fee payment required.--At the time of filing a
registration statement, the applicant shall pay to the
Commission a fee that shall be equal to the sum of the amounts
(if any) determined under the rates established by paragraphs
(3) and (4). The Commission shall publish in the Federal
Register notices of the fee rates applicable under this section
for each fiscal year.
``(3) General revenue fees.--The rate determined under this
paragraph is a rate equal to $200 per $1,000,000 of the maximum
aggregate price at which such securities are proposed to be
offered, except that during fiscal year 2007 and any succeeding
fiscal year such rate is equal to $67 per $1,000,000 of the
maximum aggregate price at which such securities are proposed to
be offered. Fees collected during any fiscal year pursuant to
this paragraph shall be deposited and credited as general
revenues of the Treasury.
``(4) Offsetting collection fees.--
``(A) In general.--Except as provided in sub-
paragraphs (B) and (C), the rate determined under this
paragraph is a rate equal to the following amount per
$1,000,000 of the maximum aggregate price at which such
securities are proposed to be offered:
[[Page 110 STAT. 3442]]
``(i) $95 during fiscal year 1998;
``(ii) $78 during fiscal year 1999;
``(iii) $64 during fiscal year 2000;
``(iv) $50 during fiscal year 2001;
``(v) $39 during fiscal year 2002;
``(vi) $28 during fiscal year 2003;
``(vii) $9 during fiscal year 2004;
``(viii) $5 during fiscal year 2005; and
``(ix) $0 during fiscal year 2006 or any
succeeding fiscal year.
``(B) Limitation; deposit.--Except as provided in
subparagraph (C), no amounts shall be collected pursuant
to this paragraph (4) for any fiscal year except to the
extent provided in advance in appropriations Acts. Fees
collected during any fiscal year pursuant to this
paragraph shall be deposited and credited as offsetting
collections in accordance with appropriations Acts.
``(C) Lapse of appropriations.--If on the first day
of a fiscal year a regular appropriation to the
Commission has not been enacted, the Commission shall
continue to collect fees (as offsetting collections)
under this paragraph at the rate in effect during the
preceding fiscal year, until such a regular
appropriation is enacted.
``(5) Pro rata application of rates.--The rates required by
this subsection shall be applied pro rata to amounts and
balances equal to less than $1,000,000.''.
SEC. 405. TRANSACTION FEES.
(a) Amendment.--Section 31 of the Securities Exchange Act of 1934
(15 U.S.C. 78ee) is amended to read as follows:
``SEC. 31. TRANSACTION FEES.
``(a) Recovery of Cost of Services.--The Commission shall, in
accordance with this subsection, collect transaction fees that are
designed to recover the costs to the Government of the
supervision and regulation of securities markets and securities
professionals, and costs related to such supervision and regulation,
including enforcement activities, policy and rulemaking activities,
administration, legal services, and international regulatory activities.
``(b) Exchange-Traded Securities.--Every national securities
exchange shall pay to the Commission a fee at a rate equal to \1/300\ of
one percent of the aggregate dollar amount of sales of securities (other
than bonds, debentures, and other evidences of indebtedness) transacted
on such national securities exchange, except that for fiscal year 2007
or any succeeding fiscal year such rate shall be equal to \1/800\ of one
percent of such aggregate dollar amount of sales. Fees collected
pursuant to this subsection shall be deposited and collected as general
revenue of the Treasury.
``(c) Off-Exchange Trades of Exchange Registered
Securities.--Each national securities association shall pay to the
Commission a fee at a rate equal to \1/300\ of one percent of the
aggregate dollar amount of sales transacted by or through any member of
such association otherwise than on a national securities exchange of
securities registered on such an exchange (other than bonds, debentures,
and other evidences of indebtedness), except that for fiscal year 2007
or any succeeding fiscal year such rate shall be equal to \1/800\ of one
percent of such aggregate dollar
[[Page 110 STAT. 3443]]
amount of sales. Fees collected pursuant to this subsection shall be
deposited and collected as general revenue of the Treasury.
``(d) Off-Exchange Trades of Last-Sale-Reported
Securities.--
``(1) Covered transactions.--Each national securities
association shall pay to the Commission a fee at a rate equal to
\1/300\ of one percent of the aggregate dollar amount of sales
transacted by or through any member of such association
otherwise than on a national securities exchange of securities
(other than bonds, debentures, and other evidences of
indebtedness) subject to prompt last sale reporting pursuant to
the rules of the Commission or a registered national securities
association, excluding any sales for which a fee is paid under
subsection (c), except that for fiscal year 2007, or any
succeeding fiscal year, such rate shall be equal to \1/800\ of
one percent of such aggregate dollar amount of sale.
``(2) Limitation; deposit of fees.--Except as provided in
paragraph (3), no amounts shall be collected pursuant to
subsection (d) for any fiscal year, except to the extent
provided in advance in appropriations Acts. Fees collected
during any such fiscal year pursuant to this subsection shall be
deposited and credited as offsetting collections to the account
providing appropriations to the Commission.
``(3) Lapse of appropriations.--If on the first day of a
fiscal year a regular appropriation to the Commission has not
been enacted, the Commission shall continue to collect fees (as
offsetting collections) under this subsection at the rate in
effect during the preceding fiscal year, until such a regular
appropriation is enacted.
``(e) Dates for Payment of Fees.--The fees required by subsections
(b), (c), and (d) of this section shall be paid--
``(1) on or before March 15, with respect to transactions
and sales occurring during the period beginning on the preceding
September 1 and ending at the close of the preceding December
31; and
``(2) on or before September 30, with respect to
transactions and sales occurring during the period beginning on
the
preceding January 1 and ending at the close of the preceding
August 31.
``(f) Exemptions.--The Commission, by rule, may exempt any sale of
securities or any class of sales of securities from any fee imposed by
this section, if the Commission finds that such exemption is consistent
with the public interest, the equal regulation of markets and brokers
and dealers, and the development of a national market system.
``(g) Publication.--The <<NOTE: Federal Register,
publication.>> Commission shall publish in the
Federal Register notices of the fee rates applicable under this section
for each fiscal year.''.
(b) Effective <<NOTE: 15 USC 78ee note.>> Dates; Transition.--
(1) In general.--Except as provided in paragraph (2), the
amendment made by subsection (a) shall apply with respect to
transactions in securities that occur on or after October 1,
1997.
(2) Off-exchange trades of last sale reported
transactions.--The amendment made by subsection (a) shall apply
with respect to transactions described in section 31(d)(1) of
[[Page 110 STAT. 3444]]
the Securities Exchange Act of 1934 (as amended by subsection
(a) of this section) that occur on or after September 1, 1997.
SEC. 406. TIME FOR PAYMENT.
Section 4(e) of the Securities Exchange Act of 1934 (15 U.S.C.
78d(e)) is amended by inserting before the period at the end thereof the
following: ``and the Commission may also specify the time that such fee
shall be determined and paid relative to the filing of any statement or
document with the Commission''.
SEC. 407. SENSE OF THE CONGRESS CONCERNING FEES.
It is the sense of the Congress that, in order to maintain the
competitiveness of United States securities markets relative to foreign
markets, no fee should be assessed on transactions involving portfolios
of equity securities taking place at times of day characterized by low
volume and during nontraditional trading hours.
TITLE V--REDUCING THE COST OF SAVING AND INVESTMENT
SEC. 501. EXEMPTION FOR ECONOMIC, BUSINESS, AND INDUSTRIAL 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 operations of which are
subject to regulation by the State in which the company is
organized under a statute governing entities that provide
financial or managerial assistance to enterprises doing
business, or proposing 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, business, or industrial
development in the State through the provision of
financial or managerial assistance to enterprises doing
business, or proposing 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 offered in such
sale, on a class-by-class basis, are held by persons who
reside or who have a substantial 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(a)(15)
of the Securities Act of 1933, or to such other persons
that the Commission, as necessary or appropriate in the
public interest and consistent 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 company except for the exclusions
from
[[Page 110 STAT. 3445]]
the definition of the term `investment company' under
paragraph (1) or (7) of section 3(c), other than--
``(I) any debt security that is rated
investment grade by not less than 1 nationally
recognized statistical rating organization; or
``(II) any security issued by a registered
open-end investment company that is required by
its investment policies to invest not less than 65
percent of its total assets 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
described 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 if the company were an investment
company registered under this title.
``(C) Any company proposing to rely on the exemption
provided by this paragraph shall file with the Commission a
notification stating that the company 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 conditions 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. 502. INTRASTATE CLOSED-END INVESTMENT COMPANY
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 amount as the Commission may set by rule,
regulation, or order''.
SEC. 503. 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. 504. DEFINITION OF BUSINESS DEVELOPMENT COMPANY.
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
[[Page 110 STAT. 3446]]
need not make available significant managerial assistance with respect
to any company described in paragraph (46)(C)(iii), or
with respect to any 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 purposes of
this title; and''.
SEC. 505. ACQUISITION OF ASSETS BY BUSINESS DEVELOPMENT 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 inserting ``from
any person''; and
(2) by inserting before the semicolon ``, or from any other
person, subject to such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public interest
or for the protection of investors''.
SEC. 506. 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 business
development company'' and all that follows through the end of
the paragraph and inserting a period;
(2) in paragraph (3)(A)--
(A) by striking ``senior securities representing
indebtedness accompanied by'';
(B) by inserting ``accompanied by securities,''
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 subparagraph (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 accompanied 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 warrants,
options, or rights is authorized by the
shareholders or partners of such business
development company, and such issuance is approved
by the required majority (as defined in section
57(o)) of the directors of or general
partners in such company on the basis that such
issuance is in the best interests of the company
and its shareholders or partners.''.
SEC. 507. 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''.
[[Page 110 STAT. 3447]]
SEC. 508. 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 benefit of plan participants or
beneficiaries, or any company or account that is--
``(A) established by a person that is eligible to
establish and maintain such a plan under section 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 contributed
to such church plans or other assets which are
permitted to be commingled with the assets of
church plans under the Internal Revenue Code of
1986; or
``(ii) administering or providing benefits
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 paragraph:
``(13) Any security 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.''.
(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 following new
clause:
``(vi) solely for purposes of sections 12, 13,
14, and 16 of this title, any security 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; and''.
(2) Exemption from broker-dealer provisions.--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:
``(g) Church Plans.--No church plan described in section 414(e) of
the Internal Revenue Code of 1986, no person 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
investment 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
[[Page 110 STAT. 3448]]
dealer', `clearing agency', or `transfer agent' for purposes of this
title--
``(1) solely because such plan, company, person, or entity
buys, holds, sells, trades in, or transfers securities or acts
as an intermediary in making payments in connection with
transactions in securities for its own account in its capacity
as trustee or administrator of, or otherwise on behalf of, or
for the account of, 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; and
``(2) if no such person or entity receives a commission or
other transaction-related sales compensation in connection with
any activities conducted in reliance on the exemption provided
by this subsection.''.
(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 paragraph:
``(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, director, officer, or employee of or
volunteer for any such plan or person, if such person or entity,
acting in such capacity, provides investment advice exclusively
to, or with respect to, any plan, person, or entity or any
company, account, or fund that is excluded 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 <<NOTE: 15 USC 80a-3 note.>> of Church Employee
Benefit Plans Under State Law.--
(1) Registration requirements.--Any security 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 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 Revenue Code of 1986, no person
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 investment company under
section 3(c)(14) of the Investment Company 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, company, 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
[[Page 110 STAT. 3449]]
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 investment 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 company under section 3(c)(14) of the Investment
Company 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 reason of section 3(c)(14) shall provide
disclosure to plan participants, in writing, and not less frequently
than annually, and for new participants joining such a plan after May
31, 1996, as soon as is practicable after joining such plan, that--
``(1) the plan, or any company or account maintained 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 definition of an investment company solely by reason
of section 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. 509. PROMOTING GLOBAL PREEMINENCE OF AMERICAN
SECURITIES MARKETS.
It is the sense of the Congress that--
(1) the United States and foreign securities markets are
increasingly becoming international securities markets, as
issuers and investors seek the benefits of new capital and
secondary market opportunities 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 comprehensive set of
generally accepted international accounting standards in cross-
border securities offerings would greatly facilitate
international financing activities 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 respond to the
growing internationalization of securities markets, the
Commission should enhance its vigorous support for the
development of high-quality international accounting standards
as soon as practicable; and
[[Page 110 STAT. 3450]]
(5) the Commission, in view of its clear authority under law
to facilitate the access of foreign corporations 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
accounting standards and the outlook for successful completion
of a set of international standards that would be acceptable to
the Commission for offerings and listings by foreign
corporations in United States markets.
SEC. 510. STUDIES AND REPORTS.
(a) Impact <<NOTE: 15 USC 78b note.>> of Technological Advances.--
(1) Study.--
(A) In general.--The Commission shall conduct a
study of--
(i) the impact of technological advances and
the use of on-line information systems on the
securities markets, including steps that the
Commission has taken to facilitate the electronic
delivery of prospectuses to institutional and
other investors;
(ii) how such technologies have changed the
way in which the securities markets operate; and
(iii) any steps taken by the Commission 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;
(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 organizations to
improve coordination and cooperation.
(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 <<NOTE: 15 USC 78n note.>> Proposals.--
(1) Study.--The Commission shall conduct a study of--
(A) whether shareholder access to proxy statements
pursuant to section 14 of the Securities Exchange Act of
1934 has been impaired by recent statutory, judicial, or
regulatory changes; and
(B) the ability of shareholders to have proposals
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 para
[[Page 110 STAT. 3451]]
graph (1), together with any recommendations for regulatory or
legislative changes that it considers necessary to improve
shareholder 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 exchanges, including consideration of--
(A) how preferencing impacts--
(i) the execution prices received by retail
securities customers whose orders are preferenced;
and
(ii) the ability of retail securities
customers in all markets to obtain executions of
their limit orders in preferenced securities; and
(B) the costs of preferencing to such customers.
(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 subsection, 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.
(d) Broker-Dealer <<NOTE: 15 USC 78o note.>> Uniformity.--
(1) Study.--The Commission, after consultation with
registered securities associations, national securities
exchanges, and States, shall conduct a study of the impact of
disparate State licensing requirements on associated persons of
registered brokers or dealers and methods for States to attain
uniform licensing requirements for such persons.
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Commission shall submit to the
Congress a report on the study conducted under paragraph (1).
Such report shall include recommendations concerning appropriate
methods described in paragraph (1)(B), including any necessary
legislative changes to implement such recommendations.
Approved October 11, 1996.
LEGISLATIVE HISTORY--H.R. 3005 (S. 1815):
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HOUSE REPORTS: Nos. 104-622 (Comm. on Commerce) and 104-864 (Comm. of
Conference).
CONGRESSIONAL RECORD, Vol. 142 (1996):
June 18, 19, considered and passed House.
June 27, considered and passed Senate, amended, in lieu of
S. 1815.
Sept. 28, House agreed to conference report.
Oct. 1, Senate agreed to conference report.
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