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United States · Law · HR

H.R. 3005 (104th)

National Securities Markets Improvement Act of 1996

enactedUnited States· United States Congress· EN

Introduced

5 March 1996

Last action

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Status

Became Public Law No: 104-290.

Sponsors

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Subjects

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Source updated

7 April 2025

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Summary

TABLE OF CONTENTS: Title I: Capital Markets Deregulation and Liberalization Title II: Investment Company Act Amendments Securities Amendments of 1996 - Title I: Capital Markets Deregulation and Liberalization - Capital Markets Deregulation and Liberalization Act of 1996 - Amends the Securities Exchange Act of 1934 to include among the prerequisites to registration as a national securities exchange or association that the rules of the organization will not impose an obligation upon a broker or dealer to form a belief as to the suitability of an investment recommendation made by a member for an institutional client unless an agreement in writing has been executed to that effect. (Sec. 102) Establishes a rebuttable presumption that a broker or dealer is not liable for the investment decisions of an institutional client. (Sec. 103) Amends the Securities Act of 1933 to exempt securities offerings from State law (including State restrictions upon any prospectus, sales literature, or sale based upon the merits of the offering or its issuer), with specified exceptions. Amends the Securities Exchange Act of 1934 to exempt persons registered with the Securities and Exchange Commission (SEC), with specified exceptions, from State law governing: (1) registration, licensing, or qualification requirements; or (2) broker or dealer capital, records, or financial reporting requirements that differ from SEC requirements. Permits State registration, licensing, and qualification requirements (including fees) if: (1) the State performs its procedures through a central registration depository system operated by a national securities association; and (2) the State's requirements are substantially similar to SEC registration requirements, and do not conflict with them. (Sec. 104) Amends the Securities Exchange Act of 1934 to repeal the statutory percentage formula for margin requirements. Exempts certain excluded accounts from margin requirements. Precludes a national securities exchange or association from imposing any limitation upon the extension of credit more restrictive than that imposed by the Board of Governors of the Federal Reserve System (the Board). Repeals the restrictions on borrowing placed upon a securities broker or dealer relating to the use of credit to finance securities transactions in the ordinary course of business. Repeals the exemption of mortgage and small business related securities whose delivery is delayed for bona fide reasons from the proscription against broker-dealer extensions of credit to purchase securities with which the broker-dealer has specified connections. Grants the SEC exemption authority with respect to credit restrictions governing securities transactions. (Sec. 105) Requires the SEC to study and report to the Congress on: (1) the burdens imposed upon institutional investors by certain disclosure requirements for five percent beneficial owners, large traders, and brokers and dealers; and (2) the extent to which the disclosure requirements affecting five percent beneficial owners redistribute income from active to passive investors. (Sec. 106) Amends the Securities Act of 1933 to: (1) remove securities sale confirmations from the meaning of "prospectus"; and (2) modify the requirement that a prospectus be delivered to a purchaser or prospective purchaser of securities, to require delivery only if requested. Grants the SEC exemptive authority with respect to the prospectus delivery requirement. (Sec. 107) Specifies the SEC's general exemptive authority regarding registration requirements. (Sec. 108) Amends specified securities laws to direct the SEC to consider whether an action will promote efficiency, competition, and capital formation whenever it is required to consider the impact of an action upon consumer protection. (Sec. 109) Amends the Securities Exchange Act of 1934 to reduce SEC membership from five to three commissioners. (Sec. 110) Directs the SEC to request, by public notice, proposals for the privatization of the EDGAR system. (Sec. 111) Instructs the SEC to designate a self-regulatory organization as its examining authority for each registered broker or dealer. Grants such organization exclusive authority for routine examinations and concomitant reports. (Sec. 112) Amends the Securities Act of 1933 to exclude from the definition of "offer to buy" and "prospectus" certain offshore press conferences, meetings with issuer representatives conducted offshore, press releases or other material released offshore in which an offshore offering is discussed, irrespective of whether journalists from the United States or journalists for publications (including on- line services) with circulation in the United States attend such press conferences or receive such materials. (Sec. 113) Directs the SEC to report to the Congress on the continuing need for, and options for modification or elimination of, the Trust Indenture Act of 1939. Title II: Investment Company Act Amendments - Investment Company Act Amendments of 1996 - Amends the Investment Company Act of 1940 to exempt from certain acquisition prohibitions the securities of a registered open-end investment company acquired by another such company belonging to the same group of investment companies if specified circumstances apply. (Sec. 203) Revises requirements for the amendment of registration statements under the Securities Act of 1933 relating to securities issued by face-amount certificate companies, open-end management companies or unit investment trusts. Repeals provisions for an increase in the number of securities specified in a registration, and deems any such registration to be for an indefinite number of securities. Prescribes formulae for the determination of registration fees, including interest due on late payments. (Sec. 204) Directs the SEC to permit the use of a prospectus containing substantive information not included in the prospectus specified in the Securities Act, but which shall be deemed permitted under such Act. (Sec. 205) Prescribes guidelines for the sale of variable insurance contracts. (Sec. 206) Repeals the requirement that a registered investment company file quarterly or semi-annual reports with the SEC. Requires the SEC to take specified steps to avoid unnecessary reporting and minimize the compliance burdens upon registered investment companies and their affiliated persons when exercising its authority to require the filing of information on a basis more frequently than semi-annually, and in the maintenance and preservation of requisite records. (Sec. 207) Revises the guidelines for the: (1) maintenance and preservation of investment company records for the SEC; and (2) annual reports to the SEC and shareholders. (Sec. 208) Revises the strictures on deceptive or misleading investment company names to declare unlawful the adoption of a name which is materially deceptive or misleading (the current standard is "deceptive or misleading"). Repeals the SEC's authority to bring an action in a U.S. district court for injunctive relief against a violator of such prohibition. (Sec. 209) Modifies the guidelines that exempt investment companies from the Act. Instructs the SEC to prescribe rules: (1) implementing such modified guidelines; and (2) permitting ownership by knowledgeable employees of an issuer of the securities of that issuer without loss of the issuer's statutory exception from treatment as an investment company.

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