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H.R. 2131 (104th): Capital Markets Deregulation and Liberalization Act of 1995


The text of the bill below is as of Jul 27, 1995 (Introduced). The bill was not enacted into law.


HR 2131 IH

104th CONGRESS

1st Session

H. R. 2131

To amend the Federal securities laws in order to promote efficiency and capital formation in the financial markets.

IN THE HOUSE OF REPRESENTATIVES

July 27, 1995

Mr. FIELDS of Texas (for himself, Mr. FRISA, Mr. OXLEY, Mr. GILLMOR, Mr. PAXON, Mr. HASTERT, Mr. BARTON of Texas, and Mr. WHITE) introduced the following bill; which was referred to the Committee on Commerce


A BILL

To amend the Federal securities laws in order to promote efficiency and capital formation in the financial markets.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Capital Markets Deregulation and Liberalization Act of 1995’.

    (b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

      Sec. 1. Short title; table of contents.

      Sec. 2. Investment recommendations to institutional clients.

      Sec. 3. Creation of national securities markets.

      Sec. 4. Securities margin requirements.

      Sec. 5. Minimizing transaction costs of corporate organization.

      Sec. 6. Prospectus delivery.

      Sec. 7. Exemptive authority.

      Sec. 8. Promotion of efficiency, competition, and capital formation.

      Sec. 9. Reduction in number of members of Commission.

      Sec. 10. Privatization of EDGAR.

      Sec. 11. Rules of self-regulatory organizations.

      Sec. 12. Designation of primary SRO and examining authority.

      Sec. 13. Treatment of press conferences.

      Sec. 14. Repeal of Trust Indenture Act of 1939.

SEC. 2. INVESTMENT RECOMMENDATIONS TO INSTITUTIONAL CLIENTS.

    (a) RULES OF NATIONAL SECURITIES EXCHANGES PERTAINING TO INVESTMENT RECOMMENDATIONS TO INSTITUTIONAL CLIENTS- Section 6(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(b)) is amended by inserting after paragraph (9) the following new paragraph:

      ‘(10) INVESTMENT RECOMMENDATIONS TO INSTITUTIONAL CLIENTS-

        ‘(A) IN GENERAL- The rules of the exchange do not provide that a member is responsible for the investment decisions of an institutional client, except that the rules of the association may contain a provision in accordance with subparagraph (B).

        ‘(B) PROVISION FOR WRITTEN AGREEMENTS- The rules of the exchange may provide that a broker or dealer is responsible for an investment decision of an institutional client if the following conditions are met--

          ‘(i) the broker or dealer and the institutional client expressly agree in writing, prior to or contemporaneously with the recommendation, that the recommendation will be made by the broker or dealer on a reasonable belief that the recommendation is suitable for such institutional client, based upon facts disclosed by such institutional client as to its other security holdings and as to its financial situation and needs; and

          ‘(ii) such other conditions as the exchange may establish in accordance with the requirements of this section.

        ‘(C) DEFINITION OF INSTITUTIONAL CLIENT- For purposes of this paragraph, the term ‘institutional client’ means any person other than a natural person that has at least $10,000,000 invested in securities in the aggregate in its portfolio.’.

    (b) PRESUMPTION IN ACTIONS PERTAINING TO RECOMMENDATIONS TO INSTITUTIONAL CLIENTS- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by inserting after subsection (g) the following new subsection:

    ‘(h) INVESTMENT RECOMMENDATIONS TO INSTITUTIONAL CLIENTS-

      ‘(1) PRESUMPTION- In any action brought against a broker or dealer or a person associated with a broker or dealer under this title or under any rule or regulation thereunder pertaining to an investment recommendation to an institutional client, the broker or dealer or associated person shall be entitled to a presumption that it is not liable for the investment decisions of an institutional client.

      ‘(2) STANDARD FOR REBUTTING PRESUMPTION- The presumption set out in paragraph (1) may only be rebutted by proof that the broker or dealer or associated person and the institutional client expressly agreed in writing, prior to or contemporaneously with the recommendation, that the recommendation would be made by the broker or dealer or associated person on a reasonable belief that the recommendation would be suitable for such institutional client, based upon facts disclosed by such institutional client as to its other security holdings and as to its financial situation and needs.

      ‘(3) DEFINITION OF INSTITUTIONAL CLIENT- For purposes of this subsection, the term ‘institutional client’ means any person other than a natural person that has at least $10,000,000 invested in securities in the aggregate in its portfolio.

      ‘(4) LIMITATION- This subsection shall not be deemed to create or affirm any private right of action against a broker or dealer or associated person for any investment recommendation to an institutional client.’.

    (c) RULES OF SECURITIES ASSOCIATIONS- Section 15A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3(b)) is amended by inserting after paragraph (13) the following new paragraph:

      ‘(14) INVESTMENT RECOMMENDATIONS TO INSTITUTIONAL CLIENTS-

        ‘(A) IN GENERAL- The rules of the association do not provide that a member is responsible for the investment decisions of an institutional client, except that the rules of the association may contain a provision in accordance with subparagraph (B).

        ‘(B) PROVISION FOR WRITTEN AGREEMENTS- The rules of the association may provide that a broker or dealer is responsible for an investment decision of an institutional client if the following conditions are met--

          ‘(i) the broker or dealer and the institutional client expressly agree in writing, prior to or contemporaneously with the recommendation, that the recommendation will be made by the broker or dealer on a reasonable belief that the recommendation is suitable for such institutional client, based upon facts disclosed by such institutional client as to its other security holdings and as to its financial situation and needs; and

          ‘(ii) such other conditions as the association may establish in accordance with the requirements of this section.

        ‘(C) DEFINITION OF INSTITUTIONAL CLIENT- For purposes of this paragraph, the term ‘institutional client’ means any person other than a natural person that has at least $10,000,000 invested in securities in the aggregate in its portfolio.’.

SEC. 3. CREATION OF NATIONAL SECURITIES MARKETS.

    (a) SECURITIES ACT OF 1933-

      (1) EXEMPTION FROM STATE CONTROL- Section 18 of the Securities Act of 1933 (15 U.S.C. 77r) is amended to read as follows:

‘SEC. 18. EXEMPTION FROM STATE CONTROL OF SECURITIES OFFERINGS.

    ‘(a) EXEMPTION FROM STATE LAW FOR REGISTERED SECURITIES- No law of any State or Territory of the United States, or the District of Columbia, or any political subdivision thereof, requiring, or with respect to, registration or qualification of securities or securities transactions shall apply to any securities that are offered or sold using any means or instruments of transportation or communication in interstate commerce or of the mails pursuant to--

      ‘(1) a registration statement filed pursuant to this title, with the exception of a registration statement filed by an issuer which is a blank check company as defined in section 7(b) of this title;

      ‘(2) an exemption from registration set forth in section 3(a) of this title, with the exception of section 3(a)(11) or any rule or regulation promulgated thereunder; or

      ‘(3) any other exemption from section 5 of this title, except where the Commission may, by rule or regulation, exclude such securities from the provisions of this section 18(a) upon a finding that the public interest and the protection of investors would be served by State regulation.

    ‘(b) PRESERVATION OF FILING REQUIREMENTS- Nothing contained in this title shall prohibit the securities commission (or any agency or office performing like functions) of any State or Territory of the United States, or the District of Columbia, from requiring the filing of any documents filed with the Commission pursuant to this title solely for notice purposes, along with a consent to service of process and requisite fee; except that no such filing, consent, or fee may be required with respect to securities, or transactions relating to securities, that are of the same class as securities, or are senior to such a class, listed on the New York Stock Exchange or the American Stock Exchange or designated for trading in the National Market System of the National Association of Securities Dealers Automated Quotation System, or securities that will be so listed or designated for trading upon completion of the transaction.

    ‘(c) EXCEPTIONS- Nothing in this title shall affect the jurisdiction of the securities commission (or any agency or office performing like functions) of any State or Territory of the United States, or the District of Columbia, over--

      ‘(1) any securities or transactions in securities excluded, by statute, rule, or regulation, from the operation of section 18(a), or

      ‘(2) any person who, in the offer or sale of any securities subject to section 18(a), directly or indirectly, engages in conduct that violates section 17(a) of this title, regardless of whether the jurisdictional means specified therein are satisfied.’.

      (2) FEDERAL-STATE COOPERATION- Section 19(c)(1) of such Act (15 U.S.C. 77s(c)(1)) is amended to read as follows:

    ‘(c)(1) In connection with any regulation of securities, securities transactions or other securities matters by any State or Territory of the United States, or the District of Columbia, which has not been preempted by section 18 of this title, other Federal laws, or rules or regulations promulgated thereunder, the Commission is authorized to cooperate with any association composed of duly constituted representatives of State governments whose primary assignment is the regulation of the securities business within those States, and which, in the judgment of the Commission, could assist in effectuating greater uniformity in such Federal-State securities matters. The Commission may, at its discretion, cooperate, coordinate, and share information with such an association for the purposes of carrying out the policies and projects set forth in paragraphs (2) and (3).’.

      (3) TECHNICAL AMENDMENT- Section 19(c)(3)(C) is amended by striking the last sentence.

      (4) EFFECTIVE DATE- The amendments made by this subsection shall be effective 180 days after the date of the enactment of this Act.

    (b) SECURITIES EXCHANGE ACT OF 1934-

      (1) AMENDMENT- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following new subsection:

    ‘(h) EXEMPTION FROM STATE LAW FOR REGISTERED PERSONS-

      ‘(1) EXEMPTION- No law of any State or political subdivision thereof requiring the registration, licensing, or qualification of a broker, dealer, or person acting in a similar capacity in connection with the purchase or sale of any security, shall apply to--

        ‘(A) any person who is registered with the Commission as a broker or dealer, municipal securities dealer, or government securities broker or dealer under this title, or who the Commission by rule or order has exempted from registration, or any issuer;

        ‘(B) any member of a national securities exchange; or

        ‘(C) any person associated with a broker or dealer, member of a national securities exchange, municipal securities dealer, government securities broker or dealer, or any issuer, included within the coverage of subparagraph (A) or (B).

      ‘(2) PERMITTED STATE ACTIVITIES- Nothing contained in this subsection shall prohibit a State from requiring registration, licensing, or qualification of any person, other than an issuer, who is within the coverage of paragraph (1) of this subsection--

        ‘(A) in the case of paragraphs (1) (A) and (B), the State performs its registration, licensing, or qualification procedures through a central registration depository system operated by a national securities association registered under section 15A of this title, and the State’s requirements are substantially similar to the Commission’s registration requirements and do not include any provisions that are inconsistent with, or in addition to, the Commission’s registration requirements; or

        ‘(B) in the case of paragraph (1)(C), the State performs its registration, licensing, or qualification procedures through a central registration depository system operated by a national securities association registered under section 15A of this title and the State’s requirements are substantially similar to, and not inconsistent with, the registration requirements of such association or the Commission.

      ‘(3) PROHIBITED REQUIREMENTS- No law of any State or political subdivision thereof shall establish broker or dealer capital, books, and records, or financial reporting requirements regarding persons registered, licensed, or qualified pursuant to subsection (h)(1) that differ from requirements established in these areas by the Commission.

      ‘(4) EXEMPTIONS- The Commission may by rule, regulation, or order exempt State requirements from the provisions of paragraphs (1), (2), and (3) of this subsection, in whole or in part, conditionally or unconditionally, upon a finding that the public interest, the protection of investors, and the maintenance of fair and orderly markets would be served by such State regulation.

      ‘(5) FEES PERMITTED- Nothing in this subsection shall prohibit any State or political subdivision thereof from charging requisite fees in connection with the registration, licensing, or qualification of persons within the coverage of this subsection.

      ‘(6) PRESERVATION OF AUTHORITY- Nothing contained in this subsection shall affect the jurisdiction of any State or political subdivision thereof to administer or enforce any provision of State law not preempted by this subsection.’.

      (2) EFFECTIVE DATE- The amendments made by this subsection shall be effective upon enactment.

    (c) FEDERAL PREEMPTION OF STATE REGULATION OF MATTERS REGULATED UNDER THE INVESTMENT COMPANY ACT OF 1940- Section 50 of the Investment Company Act of 1940 is amended by striking ‘under such Act; nor’ and all that follows and inserting the following: ‘under such Acts. The Commission shall have exclusive jurisdiction with respect to all securities and transactions to which this title applies, and to all persons to whom this title applies.’.

    (d) FEDERAL PREEMPTION OF STATE REGULATION OF PERSONS REGULATED UNDER THE INVESTMENT ADVISERS ACT OF 1940- Section 222 of the Investment Advisers Act of 1940 is amended to read as follows:

‘SEC. 222. EXCLUSIVE JURISDICTION.

    ‘The Commission shall have exclusive jurisdiction with respect to all securities and transactions to which this title applies, and to all persons to whom this title applies.’.

SEC. 4. SECURITIES MARGIN REQUIREMENTS.

    (a) MARGIN REQUIREMENTS- Section 7 of the Securities Exchange Act of 1934 (15 U.S.C. 78g) is amended to read as follows:

‘SEC. 7. MARGIN REQUIREMENTS.

    ‘(a) Unlawful Credit Extension in Violation of Rules and Regulations; Exception to Application of Rules, Etc-

      ‘(1) GENERAL LIMITATIONS- It shall be unlawful for any person to extend or maintain credit on any equity security of a class designated by the Board of Governors of the Federal Reserve System for the purpose of purchasing or carrying any equity security of a class so designated, in contravention of such rules and regulations as the Board of Governors of the Federal Reserve System shall prescribe to prevent the excessive use of credit for the purchasing or carrying of equity securities of a class so designated.

      ‘(2) APPLICABILITY- Such rules and regulations shall designate the classes of equity securities subject to credit restrictions under this subsection and shall apply equally to banks, brokers, dealers, and other lenders. This subsection and the rules and regulations thereunder shall not apply to any credit extended or maintained--

        ‘(A) by a person not in the ordinary course of business;

        ‘(B) on an exempted security;

        ‘(C) to or for an excluded account; or

        ‘(D) as the Board of Governors of the Federal Reserve System shall, by such rules, regulations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions, or for stated periods, from the operation of this subsection and the rules and regulations thereunder.

      ‘(3) EXEMPTION- Notwithstanding subparagraphs (A), (B), and (C) of paragraph (2), the Board of Governors of the Federal Reserve System may impose such rules and regulations, in whole or in part, on any extension of credit otherwise exempted by such subparagraphs if the Board of Governors determines that such action is necessary to deal with substantial instability or the imminent threat of substantial instability in the financial markets.

    ‘(b) UNLAWFUL USE OF FOREIGN CREDIT FACILITIES-

      ‘(1) LIMITATIONS- It shall be unlawful for any United States person, or any foreign person controlled by a United States person or acting on behalf of or in conjunction with such person, to obtain, receive, or enjoy the beneficial use of any extension of credit from any lender (without regard to whether the lender’s office or place of business is in a State or the transaction occurred in whole or in part within a State) for the purpose of--

        ‘(A) purchasing or carrying United States equity securities of a class designated by the Board of Governors of the Federal Reserve System pursuant to subsection (a); or

        ‘(B) purchasing or carrying within the United States of any other equity securities of a class so designated, if, under this section or rules and regulations prescribed thereunder, the extension of credit is prohibited or would be prohibited if it had been made or the transaction had otherwise occurred in a lender’s office or other place of business in a State.

      ‘(2) DEFINITIONS- For the purposes of this subsection:

        ‘(A) The term ‘United States person’ includes a person which is organized or exists under the laws of any State or, in the case of a natural person, a citizen or resident of the United States; a domestic estate; or a trust in which one or more of the foregoing persons has a cumulative direct or indirect beneficial interest in excess of 50 percent of the value of the trust.

        ‘(B) The term ‘United States equity security’ means an equity security (other than an exempted security) issued by a person incorporated under the laws of any State, or whose principal place of business is within a State.

        ‘(C) The term ‘foreign person controlled by a United States person’ includes any noncorporate entity in which United States persons directly or indirectly have more than a 50 percent beneficial interest, and any corporation in which one or more United States persons, directly or indirectly, own stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote, or more than 50 percent of the total value of shares of all classes of stock.

      ‘(3) EXEMPTIONS- The Board of Governors of the Federal Reserve System may, in its discretion and with due regard for the purposes of this section, by rule, regulation, or order exempt any class of United States persons or foreign persons controlled by a United States person from the application of this subsection.

    ‘(c) INCONSISTENT RULES- No margin, financial responsibility, or other rule of any national securities exchange or of any national securities association shall impose any limitation on the extension or maintenance of credit more restrictive than, or otherwise inconsistent with, those provided for in this section and the rules and regulations of the Board of Governors of the Federal Reserve System adopted hereunder.’.

    (b) REMOVAL OF RESTRICTIONS ON BORROWING BY BROKER-DEALERS- Section 8 of the Securities Exchange Act of 1934 (15 U.S.C. 78h) is amended--

      (1) by striking out ‘member of a national securities exchange, or broker or dealer who transacts

business in securities through the medium of any member of a national securities exchange,’; and

      (2) by striking out subsection (a) and by redesignating subsections (b) and (c) as subsections (a) and (b), respectively.

    (c) TRADING BY MEMBERS OF EXCHANGES, BROKERS AND DEALERS- Section 11(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78k(d)) is amended--

      (1) by striking out ‘a member of a national securities exchange’ and inserting in lieu thereof ‘any person’;

      (2) by striking out ‘, or for any person who both as a broker and a dealer transacts a business in securities through the medium of a member or otherwise,’;

      (3) by striking out ‘in the case of a member’;

      (4) by inserting ‘(other than an excluded account)’ after ‘customer’ the first place it appears;

      (5) by inserting ‘equity’ before ‘security’ the first place it appears;

      (6) by striking out ‘(i)’ and by striking out ‘or (ii) any mortgage related security or any small business related security against full payment of the entire purchase price thereof upon such delivery within 180 days after such purchase or within such shorter period as the Commission may prescribe by rule or regulation’; and

      (7) by adding at the end thereof the following new sentence: ‘The Commission may, by such rules, regulations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt either unconditionally or upon specified terms and conditions, or for stated periods, any security or transaction, or class of securities or transactions from the operation of this subsection and the rules and regulations thereunder.’.

    (d) DEFINITION- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end thereof the following new paragraph:

      ‘(54) The term ‘excluded account’ means any person who comes within any of the following categories:

        ‘(A) A financial institution, trust company, savings association, or savings and loan association (acting in an individual, fiduciary, or agency capacity).

        ‘(B) A broker or dealer or an investment adviser (acting on its own behalf or on behalf of another).

        ‘(C) A futures commission merchant, floor broker, or floor trader (acting on its own behalf or on behalf of another).

        ‘(D) An insurance company.

        ‘(E) An investment company, small business investment company, business development company, or private business development company.

        ‘(F) Any governmental entity (including the United States, any State or any foreign government), any political subdivision thereof, any multinational or supranational entity, or any department, agency, or instrumentality of any of the foregoing.

        ‘(G) A corporation, partnership, proprietorship, organization, trust, or other entity, not formed for the specific purpose of evading the requirements of any rule or regulation adopted under section 7, with total assets exceeding $5,000,000 or the obligations of which with respect to any extension of credit are guaranteed or otherwise supported by a letter of credit or keepwell, support, or other agreement by any such entity or by an entity referred to in subparagraph (A), (B), (C), (D), (E), or (F) of this paragraph.

        ‘(H) An employee benefit plan with assets exceeding $5,000,000 or whose investment decisions are made by a bank, trust company, broker, dealer, or registered investment adviser.

        ‘(I) Any entity in which all the equity owners are ‘excluded accounts’.

        ‘(J) Any person, other than a natural person, who is an affiliate of the person extending or maintaining credit.

        ‘(K) Such other persons as the Board of Governors of the Federal Reserve System shall, by rule, regulation, or order, designate as an ‘excluded account’, either unconditionally or upon specified terms and conditions, or for specified periods.’.

    (e) EFFECTIVE DATE- The amendments made by this section shall be effective 270 days after the date of enactment of this Act.

SEC. 5. MINIMIZING TRANSACTION COSTS OF CORPORATE ORGANIZATION.

    (a) AMENDMENTS TO SECTION 13 OF THE 1934 ACT- Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended--

      (1) by striking subsections (d) and (e); and

      (2) by redesignating subsections (f), (g), and (h) as subsections (d), (e), and (f), respectively.

    (b) AMENDMENTS TO SECTION 14 OF THE 1934 ACT- Section 14 of such Act (15 U.S.C. 78n) is amended--

      (1) by striking subsections (d), (f), and (g); and

      (2) by redesignating subsections (e) and (h) as subsections (d) and (e), respectively.

    (c) CONFORMING AMENDMENTS-

      (1) Section 6(b)(9) of such Act (15 U.S.C. 78f(b)(9)) is amended by striking ‘section 14(h)’ and inserting ‘section 14(e)’.

      (2) Section 12(i) of such Act (15 U.S.C. 78l(i)) is amended by striking ‘14(f),’.

      (3) Section 13(d)(1) of such Act (as redesignated by subsection (a)(1) of this section) is amended--

        (A) by striking ‘equity securities of a class described in section 13(d)(1) of this title’ and inserting ‘equity security of a class which is registered pursuant to section 12 of this title, or any equity security of an insurance company which would have been required to be so registered except for the exemption contained in section 12(g)(2)(G) of this title, or any equity security issued by a closed-end investment company registered under the Investment Company Act of 1940 or any equity security issued by a Native Corporation pursuant to section 37(d)(6) of the Alaska Native Claims Settlement Act,’;

        (B) in subparagraph (C), by striking ‘each equity security of a class described in section 13(d)(1) of this title’ and inserting ‘each such equity security’;

        (C) in subparagraph (E), by striking ‘any equity security of a class described in section 13(d)(1) of this title’ and inserting ‘any such equity security’.

      (4) Section 13(d)(3) of such Act (as so redesignated) is amended by striking ‘all equity securities of a class described in section 13(d)(1) of this title,’ and inserting ‘all equity securities of a class described in paragraph (1) of this subsection’.

      (5) Section 14(e) of such Act (as so redesignated) is amended--

        (A) in paragraph (1), by striking ‘subsections (a) and (d)’ and inserting ‘subsection (a)’; and

        (B) in paragraph (3), by striking ‘subsection (a) or (d)’ each place it appears and inserting ‘subsection (a)’.

      (6) Paragraphs (12) and (13) of section 15A(b) of such Act (15 U.S.C. 78o-3(b)(12), (13)) are each amended by striking ‘section 14(h)’ and inserting ‘section 14(e)’.

      (7) Section 23(b)(4)(F) of such Act (15 U.S.C. 78w(b)(4)(F)) is amended by striking ‘section 13(f)’ and inserting ‘section 13(d)’.

SEC. 6. PROSPECTUS DELIVERY.

    (a) DEFINITION OF PROSPECTUS- Section 2(10) of the Securities Act of 1933 (15 U.S.C. 77b(10)) is amended by striking ‘or confirms the sale of any security’.

    (b) DELIVERY ON REQUEST- Section 5(b)(2) of the Securities Act of 1933 (15 U.S.C. 77e(b)(2)) is amended by inserting before the period at the end the following: ‘, if the purchaser or prospective purchaser of such security has requested a prospectus’.

    (c) AUTHORITY TO EXEMPT- Section 5 of the Securities Act of 1933 (15 U.S.C. 77(e)) is amended by adding a new subsection (d) after subsection (c) as follows:

    ‘(d) AUTHORITY TO EXEMPT- The Commission may from time to time by its rules and regulations and subject to such terms and conditions as may be prescribed therein, upon its own motion or by order on application by an interested person, exempt from subsection (b) of section 5 any person or prospectus, or any class or classes of persons or prospectuses, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors. The Commission shall by rules and regulations determine the procedures under which an exemption under this subsection shall be granted, and may, in its sole discretion, decline to entertain any application for an order of exemption under this subsection.’.

SEC. 7. EXEMPTIVE AUTHORITY.

    (a) SMALL OFFERING EXEMPTION- Section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) is amended by striking ‘$5,000,000’ and inserting ‘$15,000,000’.

    (b) GENERAL EXEMPTIVE AUTHORITY- Section 3 of the Securities Act of 1933 (15 U.S.C. 77c) is amended by adding at the end the following new subsection:

    ‘(d) EXEMPTIVE AUTHORITY- The Commission may by rule, regulation, or order, exempt, in whole or in part, conditionally or unconditionally, any security or class of securities from the registration requirements of this title if it finds that such exemption is consistent with the public interest and the protection of investors.’.

SEC. 8. PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION.

    (a) SECURITIES ACT OF 1933- Section 2 of the 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 in this title the Commission is required to consider or determine whether an action is consistent with the public interest or the protection of investors (or both), the Commission shall also consider or determine whether the action will promote efficiency, competition, and capital formation.’.

    (b) SECURITIES EXCHANGE ACT of 1934- Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended by adding at the end the following new subsection:

    ‘(e) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION- Whenever in this title the Commission is required to consider or determine whether an action is consistent with the public interest or the protection of investors (or both), the Commission shall also consider or determine whether the action will promote efficiency, competition, and capital formation.’.

    (c) INVESTMENT COMPANY ACT of 1940- Section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a-2) is amended by adding at the end the following new subsection:

    ‘(c) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION- Whenever in this title the Commission is required to consider or determine whether an action is consistent with the public interest or the protection of investors (or both), the Commission shall also consider or determine whether the action will promote efficiency, competition, and capital formation.’.

    (d) INVESTMENT ADVISERS ACT of 1940- Section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2) is amended by adding at the end the following new subsection:

    ‘(c) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION- Whenever in this title the Commission is required to consider or determine whether an action is consistent with the public interest or the protection of investors (or both), the Commission shall also consider or determine whether the action will promote efficiency, competition, and capital formation.’.

SEC. 9. REDUCTION IN NUMBER OF MEMBERS OF COMMISSION.

    (a) AMENDMENTS- Section 4(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(a)) is amended--

      (1) by striking ‘five commissioners’ and inserting ‘3 commissioners’; and

      (2) by striking ‘three of such commissioners’ and inserting ‘2 of such commissioners’.

    (b) EFFECTIVE DATE; IMPLEMENTATION- The amendments made by subsection (a) shall take effect on the date of enactment of this Act, except that--

      (1) the offices the terms of which expired on June 5, 1994, and June 5, 1995, shall be abolished; and

      (2) notwithstanding section 4(a) of the Securities Exchange Act of 1934--

        (A) upon the expiration of the term of office prescribed by law to occur on June 5, 1996, any person appointed to serve as a commissioner of the Securities and Exchange Commission to fill such office for the following term shall be eligible to serve until June 5, 1999;

        (B) upon the expiration of the term of office prescribed by law to occur on June 5, 1997, any person appointed to serve as a commissioner of the Securities and Exchange Commission to fill such office for the following term shall be eligible to serve until June 5, 2001; and

        (C) upon the expiration of the term of office prescribed by law to occur on June 5, 1998, any person appointed to serve as a commissioner of the Securities and Exchange Commission to fill such office for the following term shall be eligible to serve until June 5, 2003.

SEC. 10. PRIVATIZATION OF EDGAR.

    (a) REQUEST FOR PROPOSALS- The Securities and Exchange Commission shall, by public notice, request proposals for the privatization of the EDGAR system. Such notice shall specify the methods by which the Commission will evaluate such proposal, which shall include the following objectives:

      (1) return to the Government on its investment in the establishment of such system; and

      (2) promote the automation and rapid dissemination of information required to be disclosed.

    (b) REVIEW AND REPORT- Within 180 days after the date of enactment of this Act, the Commission shall review the proposal received pursuant to subsection (a) and submit to the Congress a report thereon. Such report shall include such recommendations for such legislative action as may be necessary to implement the proposal that the Commission determines most effectively achieves the objections described in subsection (a).

SEC. 11. RULES OF SELF-REGULATORY ORGANIZATIONS.

    Section 19(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(1)) is amended by striking ‘upon the filing’ and inserting ‘within 30 days of the filing (unless the self-regulatory organization consents to a longer period)’.

SEC. 12. DESIGNATION OF PRIMARY SRO AND EXAMINING AUTHORITY.

    (a) AMENDMENTS- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following new subsection:

    ‘(g) DESIGNATION OF EXAMINING AUTHORITIES-

      ‘(1) DESIGNATION- After notice and comment, the Commission shall designate for each registered broker or dealer, a self-regulatory organization (other than a registered clearing agency) as its examining authority. In no event shall the Commission designate more than one examining authority for any broker or dealer.

      ‘(2) ENFORCEMENT OF RULES BY EXAMINING AUTHORITY- A designated examining authority shall enforce its own rules with respect to such broker or dealer, as well as the rules of any other self-regulatory organization (other than a registered clearing agency) of which such broker or dealer is a member.

      ‘(3) CHANGES IN DESIGNATION- A broker or dealer for which the Commission previously has designated an examining authority, may request that the Commission designate a different examining authority. The Commission shall grant such request by order if its is consistent with the public interest and the protection of investors. The issuance of such an order shall not alter or extinguish any pending disciplinary proceeding that the originally designated examining authority has brought against the broker or dealer or any person associated with a broker or dealer.

      ‘(4) COMMISSION RULES- The Commission may adopt rules for the designation of an examining authority for a broker or dealer, and for changing such designation. Such rules shall be designed to minimize the costs and burdens on the registered broker or dealer, consistent with the protection of investors and the public.

      ‘(5) PRESERVATION OF EXISTING AUTHORITY- Nothing in this section shall alter the Commission’s authority to bring any action under this title against any broker or dealer, or against any person associated with a broker or dealer.’.

    (b) DEFINITION- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78e) is amended by adding the following paragraph:

      ‘(53) The term ‘examining authority’ means a self-regulatory organization (other than a registered clearing agency), as designated by the Commission, with exclusive authority to examine, inspect, and otherwise oversee the activities of a registered broker or dealer.’.

    (c) INITIAL DESIGNATION- The Commission shall complete the initial designations of examining authorities for brokers and dealers required by section 15(g) of the Security Exchange Act of 1934 no later than one year after the date of enactment of this Act.

SEC. 13. TREATMENT OF PRESS CONFERENCES.

    (a) DEFINITION OF OFFER- Section 2(3) of the Securities Act of 1933 (15 U.S.C. 77b(3)) is amended by inserting after the third sentence the following new sentence: ‘The terms defined in this paragraph and the term ‘offer to buy’ as used in subsection (c) of section 5 also shall not include press conferences, press releases and meetings with issuer press spokespersons to which journalists for publications (including on-line services) with a general circulation in the United States are generally provided access, in which an offering of or exchange offer for securities is discussed.’

    (b) DEFINITION OF PROSPECTUS- Section 2(10) of the Securities Act of 1933 is amended--

      (1) by striking ‘and’ at the end of clause (a); and

      (2) by inserting before the period at the end of clause (b) the following: ‘, and (c) any press release made generally available to journalists for publications (including on-line services) with a general circulation in the United States, in which an offer of or exchange offer for securities is discussed, shall not be deemed a prospectus if such press releases states that it is not an offer of securities for sale, that any public offering will be made by means of a prospectus, and the person from whom a prospectus may be obtained’.

SEC. 14. REPEAL OF TRUST INDENTURE ACT OF 1939.

    The Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is repealed.