National Securities Markets Improvement Act of 1996

TABLE OF CONTENTS:

Title I: Capital Markets

Title II: Investment Company Act Amendments

Title III: Investment Advisers Supervision Coordination Act

Title IV: Securities and Exchange Commission Authorization

Title V: Reducing the Cost of Saving and Investment

National Securities Markets Improvement Act of 1996 - Title I: Capital Markets - Capital Markets Efficiency Act of 1996 - Amends the Securities Act of 1933 to preempt State regulation of "covered securities," including: (1) nationally traded securities and investment company securities subject to Federal registration requirements; (2) securities transactions with certain "qualified purchasers"; (3) securities offered or sold to qualified purchasers; and (4) certain securities whose offer or sale is exempt from registration and report-filing requirements.

(Sec. 102) Retains State investigation and enforcement authority with respect to: (1) securities fraud or deceit; and (2) certain notice filings and fee requirements. Allows continued State collection of filing and registration fees as in effect before enactment of this Act, until State law or regulation adopted after enactment of this Act provides otherwise. Provides a three-year period after enactment of this Act during which a State securities commission may require the registration of securities whose issuer refuses to pay such fees.

Directs the Securities and Exchange Commission (SEC) to study and report to the Congress on the extent to which uniformity of State regulatory requirements for securities has been achieved for non-covered securities.

(Sec. 103) Amends the Securities Exchange Act of 1934 to preempt State law with respect to capital, margin, recordkeeping, bonding, and reporting requirements.

(Sec. 104) Exempts certain national securities exchange members, brokers, and dealers from Federal margin requirements.

Repeals the borrowing and lending restrictions imposed upon members, brokers, and dealers of a national securities exchange.

(Sec. 105) Amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to grant the SEC general exemptive authority regarding registration requirements (but not authority to exempt persons, securities, transactions, or classes of these, from government securities or government securities broker, dealer, and associated person requirements, rules, and regulations).

(Sec. 106) 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 investor protection pursuant to a rulemaking function.

(Sec. 107) Prescribes guidelines for the SEC to examine and report to the Congress on proposals for the privatization of the EDGAR system.

(Sec. 108) Amends the Securities Exchange Act of 1934 to mandate that the SEC and certain self-regulatory organizations ("examining authorities") coordinate their examination functions according to prescribed guidelines in order to eliminate duplication in the examination process. Prescribes general requirements for confidentiality of information as well as appropriate disclosure to the Congress or a Federal agency, or in compliance with a Federal court order.

(Sec. 109) Directs the SEC to adopt rules under the Securities Act of 1933 concerning the registration status of foreign press conferences and foreign press releases by persons engaged in securities transactions.

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 (or a registered unit investment trust) 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: (1) the 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, adding market intermediaries (or "swap dealers") to the exempt list. Instructs the SEC to prescribe rules: (1) implementing such modified guidelines; and (2) permitting ownership by knowledgeable employees of an issuer of the securities without loss of the issuer's statutory exception from treatment as an investment company.

(Sec. 210) Authorizes the SEC to provide exemptions from certain investment advisory performance fee contract restrictions to the extent that an exemption relates to a contract with any person that the SEC determines does not need the statutory protections.

Title III: Investment Advisers Supervision Coordination Act - Investment Advisers Supervision Coordination Act - Authorizes additional appropriations to the SEC for FY 1997 and 1998 to enforce the Investment Advisers Act of 1940.

(Sec. 303) Amends the Investment Advisers Act of 1940 to exempt from SEC registration requirements investment advisers subject to a State securities regulator, unless they: (1) manage at least $25 million in assets; and (2) serve as advisers to certain federally registered investment companies.

Exempts from State regulation advisers subject to SEC regulation, or excepted from the SEC definition of investment adviser. Permits States, in such cases, to: (1) require the filing of documents for notice purposes; and (2) investigate fraud or deceit and bring enforcement actions.

(Sec. 304) Prohibits the enforcement of any State law or regulation that sets recordkeeping or capital and bond requirements in addition to those of the State in which an adviser maintains its principal place of business and is in compliance with applicable requirements.

Exempts from State registration, licensing, or qualification requirements certain investment advisers who: (1) do not have a place of business located within the State; and (2) have had fewer than six clients who are residents of that State during the preceding 12-month period.

(Sec. 305) Directs the SEC to restrict the activities of investment advisers convicted of certain felonies (including convictions of a substantially equivalent crime by a foreign court).

(Sec. 306) Directs the SEC to: (1) provide for the establishment and maintenance of a readily accessible telephonic or other electronic process to receive inquiries regarding disciplinary actions and proceedings involving investment advisers; and (2) promptly respond to such inquiries.

(Sec. 307) Declares that nothing in this title prohibits a State securities commission (or similar agency) from requiring the filing of any documents filed with the SEC pursuant to securities laws solely for notice purposes, together with consent to service of process and any required fee. Allows continued State collection of filing and registration fees as in effect before enactment of this Act, until State law or regulation adopted after enactment of this Act provides otherwise. Provides a three-year period after enactment of this Act during which a State securities commission may require the registration of securities whose issuer refuses to pay such fees.

Title IV: Securities and Exchange Commission Authorization - Securities and Exchange Commission Authorization Act of 1996 - Authorizes additional appropriations for the SEC for FY 1997.

(Sec. 404) Amends the Securities Act of 1933 to require the SEC to collect securities registration fees that are designed to recover the costs to the Government of the securities registration process, and related costs, including enforcement activities, policy and rulemaking activities, administration, legal services, and international regulatory activities.

States that the registration fee shall be the sum of a general revenue fee and an offsetting collection fee.

Sets the general revenue fee at $200 for each $1 million of the maximum aggregate price at which the securities in question are sold (reduced to $67 per $1 million beginning FY 2007).

Schedules the offsetting collection rate for each $1 million of the maximum aggregate sales price of the securities in question in declining specified levels from $95 in FY 1998 to $5 in FY 2005 and zero in each succeeding fiscal year. Declares: (1) that no offsetting collection fees shall be collected for any fiscal year except to the extent provided in advance in appropriations Acts; and (2) that such fees collected during any fiscal year shall be deposited and credited as offsetting collections in accordance with appropriations Acts.

States that, if on the first day of a fiscal year a regular appropriation to the SEC has not been enacted, the SEC shall continue to collect offsetting collections fees at the preceding fiscal year rate, until such regular appropriation is enacted.

Requires that such rates be applied pro rata to amounts and balances under $1 million.

(Sec. 405) Amends the Securities Exchange Act of 1934 to revise annual transaction fees that national securities exchanges must pay the SEC.

Requires the SEC to collect transaction fees designed to recover the costs to the Government of the supervision and regulation of securities markets and securities professionals, and related costs.

Requires every national securities exchange to pay the SEC an annual exchange-traded securities fee at a rate of one three-hundredth of one percent (reduced in FY 2007 to one eight-hundredth of the aggregate dollar amount of sales of securities (other than bonds, debentures, and other evidences of indebtedness) transacted on such exchange.

Eliminates specific reference to registered brokers and dealers.

Requires every national securities association to pay the SEC an annual off-exchange-trade fee at a rate of one three-hundredth of one percent of the aggregate dollar amount of sales (reduced in FY 2007 to one eight-hundredth of one percent) 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).

Requires every national securities association to pay the SEC an annual fee for off-exchange-trades of last-sale-reported securities at one three-hundredth 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 under SEC rules or the rules of a registered national securities association.

Declares that no offsetting collection fees shall be collected for any fiscal year except to the extent provided in advance in appropriations Acts. States that any such fees collected during any fiscal year, except in excess of certain levels, shall be deposited and credited as offsetting collections to the account providing appropriations to the SEC.

States that, if on the first day of a fiscal year a regular appropriation to the SEC has not been enacted, the SEC shall continue to collect fees for off-exchange-trades of last-sale-reported securities (as offsetting collections) at the preceding fiscal year rate, until such regular appropriation is enacted.

Sets forth annual due dates for all fees. Requires annual publication of fee rates in the Federal Register.

(Sec. 406) Authorizes the SEC to specify the time that fee payments shall be determined and paid relative to the filing with the SEC of any statement or document.

(Sec. 407) Declares the sense of the Congress that in order to maintain the competitiveness of U.S. 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 non-traditional trading hours.

Title V: Reducing the Cost of Saving and Investment - Exempts from the purview of the Investment Company Act of 1940 specified companies not engaged in the business of issuing redeemable securities, but whose financial or managerial assistance operations are subject to State regulation, if their activities are limited to the promotion of economic, business, or industrial development through the provision of such assistance to certain enterprises.

(Sec. 502) Increases from $100,000 to $10 million the maximum size of closed-end investment companies exempt from the purview of the Act.

(Sec. 503) Redefines: (1) "eligible portfolio company" to include maximum total assets of $4 million, and maximum capital and surplus of $2 million; and (2) "business development company" to provide that it need not make available significant managerial assistance to specified companies.

(Sec. 505) Revises guidelines governing business development companies, including: (1) acquisitions of assets; (2) capital structure; and (3) filing of written statements.

(Sec. 508) Amends the Investment Company Act of 1940 to exempt certain church employee pension plans from its definition of investment company (thus removing such plans from its purview). Amends the Securities Exchange Act of 1934 to mandate disclosure to church plan participants that: (1) such plans are not subject to Federal or State regulatory oversight; and (2) plan participants and beneficiaries will therefore not be afforded the protections concomitant with such oversight.

(Sec. 509) Expresses the sense of the Congress that the SEC should present a status report to the Congress regarding: (1) the development of international accounting standards; and (2) the outlook for completion of such standards for offerings and listings by foreign corporations in U.S. markets.

(Sec. 510) Directs the SEC to study and report to the Congress on: (1) the impact of technological advances and on-line information systems upon securities markets operations (including steps taken by the SEC to facilitate electronic delivery of prospectuses to investors); (2) shareholder proposals and access to proxy statements; (3) the impact of "preferencing" upon investors and the national market system; and (4) the impact of disparate State licensing requirements on associated persons of registered brokers or dealers and methods for States to attain uniformity in such requirements.