6

74

1 "(e) Any broker, dealer, member or other person ex2 tending credit who is subject to the rules and regulations 3 prescribed by the Board of Governors of the Federal Reserve 4 System pursuant to this title shall make such reports to the 5 Board as it may require as necessary or appropriate to enable it to perform the functions conferred upon it by this 7 title. If any such broker, dealer, member or other person 8 shall fail to make any such report or fail to furnish full 9 information therein, or, if in the judgment of the Board it 10 is otherwise necessary, such broker, dealer, member or other 11 person shall permit such inspections to be made by the 12 Board with respect to the business operations of such broker, 13 dealer, member or other person as the Board may deem nec14 essary to enable it to obtain the required information."

15

16

TITLE IV-SECURITIES PROCESSING

SEC. 401. Section 2 of the Securities Exchange Act of 17 1934 (15 U.S.C. 78b) is amended by striking the word 18 "and" immediately before the phrase "to impose require19 ments necessary to make such regulations and control rea20 sonably complete and effective," and by adding the following 21 immediately after that phrase: "and to provide for the devel22 opment of an integrated national system for the prompt and 23 accurate processing and settement of securities transactions,".

20-306 - 74 pt. 1 -- 7

75

1 SEC. 402. Section 3 (a) of the Securities Exchange Act 2 of 1934 (15 U.S.C. 78c (a)) is further amended by adding 3 at the end thereof the following new paragraphs:

4

5

"(22) (A) The term 'clearing agency' means any per

son who acts as an intermediary in making payments or 6 deliveries (or both) in connection with transactions in secu7 rities or who provides facilities (i) for comparison of data 8 respecting the terms of settlement of securities transactions, 9 (ii) to reduce the number of settlements of securities trans10 actions, or (iii) for the allocation of securities settlement 11 responsibilities.

12

"(B) The term 'securities depository' means any person 13 who acts as a custodian of securities in connection with a 14 system which permits securities so held to be transferred, 15 loaned, or pledged without physical delivery of securities certificates, or which otherwise permits or facilitates the 17 settlement of securities transactions or the hypothecation or 18 lending of securities without physical delivery of securities 19 certificates.

16

20 "(C) The terms 'clearing agency' and 'securities de21 pository' shall not include (i) Federal Reserve Banks, Fed22 eral Home Loan Banks, Federal Land Banks and (ii) banks, 23 brokers, building and loan, savings and loan, and homestead

76

1 associations and cooperative banks by reason of lending, fidu2 ciary, correspondent, or safekeeping functions commonly per3 formed by them on the date of enactment of this paragraph. "(D) The terms 'clearing agency' and 'securities deposi

4

5 tory' shall not include (i) life insurance companies, or their 6 registered separate accounts, by reason of functions commonly 7 performed by such entities in connection with variable an8 nuity contracts issued by insurance companies; or, (ii) regis9 tered open-end investment companies or unit investment 10 trusts by reason of functions commonly performed by such 11 entities in connection with shares in registered open-end 12 investment companies or unit investment trusts. 13 "(23) The term 'participant', when used with respect 14 to a clearing agency or securities depository, means any 15 person who uses a clearing agency or securities depository for 16 the purpose of settling or comparing transactions in securities or making or receiving payment for or delivery, lending, or 18 hypothecation of securities; but does not include a person 19 whose only use of a clearing agency or securities depository is 20 through another person.

17

21

“(24) The term 'person associated with a participant' 22 when used with respect to a registered clearing agency or 23 securities depository means any partner, officer, director, or 24 any person directly or indirectly controlling or controlled by 25 such participant, including any employee of such participant.

77

1 The Commission may by rules and regulations classify per

2

3

sons, including employees controlled by a participant.

"(25) The term 'transfer agent' means any person who 4 engages, on behalf of an issuer, or on behalf of itself as an 5 issuer, of securities in: (A) countersigning such securities 6 upon issuance; (B) monitoring the issuance of such securities 7 with a view to preventing unauthorized issuance, a function 8 commonly performed by a person called a registrar; (C) 9 registering the transfer of such securities; or (D) exchang10 ing or converting such securities. The term 'transfer agent' 11 shall not include any person who performs such functions 12 solely with respect to variable annuity contracts issued by 13 insurance companies.

14

"(26) The term 'bank regulatory agency', when used 15 with respect to a bank acting as a clearing agency, securities 16 depository, or transfer agent required to be registered under 17 this title means:

"(A) the Comptroller of the Currency, in the case

of a national bank or a bank operating under the Code of Law for the District of Columbia, or a subsidiary of any such bank;

"(B) the Board of Governors of the Federal Reserve System, in the case of a State member bank of

the Federal Reserve System or subsidiary thereof; and

"(C) the Federal Deposit Insurance Corporation

1

2

3

4

5

6

78

in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System) or a subsidiary thereof.

"(27) The terms 'rules of a clearing agency' or 'rules of

a securities depository' mean the clearing agency's or securi

ties depository's constitution, articles of incorporation, by7 laws, or rules or instruments corresponding to the foregoing, 8 and its stated policies and practices relating to its organiza9 tion, participation, rules of procedures, financial condition, 10 methods of safekeeping, transferring, hypothecating, lending 11 and accounting for funds and securities, and similar matters." SEC. 403. Section 15 (c) of the Securities Exchange Act

12

13 of 1934 (15 U.S.C. 780 (c)) is further amended by adding 14 the following new paragraph at the end thereof:

15

16

"(6) No broker or dealer shall make use of the mails

or of any means or instrumentality of interstate commerce 17 and no member of a national securities exchange shall make 18 use of an exchange facility to effect any transaction in, or 19 to induce or attempt to induce the purchase or sale of, 20 any security (other than an exempted security or commer21 cial paper, bankers' acceptances, or commercial bills) in 22 contravention of such rules and regulations as the Com23 mission shall prescribe as necessary or appropriate in the 24 public interest or for the protection of investors to regulate 25 the time and method of making settlements, payments, and