Pub.L. 104-291 <> To amend title 49, United States Code, to authorize appropriations for fiscal years 1997, 1998, and 1999 for the National Transportation Safety Board, and for other purposes. ...

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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.

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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:

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