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1 SEC. 13. The provisions of this Act or of any rule or 2 regulation thereunder shall not apply to any person acting

3

as a transfer agent with respect to securities transactions 4 which occur without the jurisdiction of the United States, 5 unless he acts in contravention of such rules and regulations 6 as the Commission may prescribe as necessary or appropri7 ate to prevent the evasion of this Act.

8

SEC. 14. Determinations of the Commission, for pur

9 poses of making rules or regulations pursuant to section 5, 10 6, 7, or 8 shall be after appropriate notice and opportunity 11 for a hearing, and for submission of views of interested 12 persons, in accordance with the rulemaking procedures 13 specified in section 553 of title 5, United States Code, but 14 the holding of a hearing shall not prevent adoption of any 15 such rule or regulation upon expiration of the notice period 16 specified in subsection (d) of such section and shall not be 17 required to be on a record within the meaning of subchapter 18 II of chapter 5 of such title.

19

SEC. 15. This Act shall become effective on August 1, 20 1972, except that sections 4 (a), 5, 6, 7, 8, and 9 shall 21 become effective on December 29, 1972.

92D CONGRESS 2D SESSION

S. 3297

IN THE SENATE OF THE UNITED STATES

MARCH 6, 1972

Mr. WILLIAMS (for himself, Mr. BENNETT, Mr. PROXMIRE, and Mr. TowER) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing and Urban Affairs

1

A BILL

To amend the Securities Exchange Act of 1934.

Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 SECTION 1. Section 15 (c) (3) of the Securities Ex

4 change Act of 1934 (15 U.S.C. 780 (c) (3)) is amended 5 to read as follows:

7

or of

6 "(3) No broker or dealer shall make use of the mails any means or instrumentality of interstate commerce to 8 effect any transaction in, or to induce or attempt to induce 9 the purchase or sale of, any security (other than an ex10 empted security or commercial paper, bankers acceptances, 11 or commercial bills) in contravention of such rules and regu12 lations as the Commission shall prescribe as necessary or

2

1 appropriate in the public interest or for the protection of

2 investors

"(A) to regulate the time and method of making settlements, payments, and deliveries and of closing accounts; and

"(B) to provide safeguards with respect to the financial responsibilities and related practices of brokers and dealers including, but not limited to, the acceptance of custody and use of customers securities, and the carrying and use of customers' deposits or credit balances, and

shall require the maintenance of reserves with respect to

customers' deposits or credit balances, as determined by such rules and regulations."

SEC. 2. Section 15A (k) (2) of the Securities Exchange Act of 1934 (15 U.S.C. 780-3 (k) (2)) is amended by inserting after clause (D) the following:

“(E) the time and method of making settlements, payments, and deliveries and of closing accounts."

SEC. 3. 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 paragraphs:

"(22) The term 'clearing agency' means any person

who acts as intermediary among participants in making payments and/or deliveries in connection with transactions in

securities or who engages in providing facilities for partic

3

1 ipants (A) for netting of purchases and sales of specific 2 securities to reduce the number of settlements of individual 3 transactions, or (B) for allocation of cash and securities 4 settlement responsibilities among itself and participants. 5 Such term also means and includes a person who acts as 6 the custodian of securities in accordance with a system 7 whereby securities so held may (i) be transferred between 8 participants without physical delivery, or (ii) be made the subject of a pledge or other security interest by participants without physical delivery; or such custody otherwise plays

9

10

11

12

13

an integral role in the settlement of securities transactions or in the hypothecation of securities.

"(23) The term 'participant', when used with respect to 14 a clearing agency, means any person who maintains one or 15 more accounts with a clearing agency for the purpose of

16

settling or comparing transactions in securities or making 17 or receiving payment for or delivery or hypothecation of 18 securities."

19

SEC. 4. The Securities Exchange Act of 1934 is amended 20 by inserting after section 17 the following new section:

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"SEC. 17A. (a) It shall be unlawful for any person, 22 directly or indirectly, to make use of the mails or any means 23 or instrumentality of interstate commerce for the purpose 24 of using a clearing agency to settle or clear any transaction in 25 a security or to transfer, hold or hypothecate any security

4

1 unless such clearing agency is registered as a national secu2 rities clearing agency under this section: Provided, however, 3 That the Commission, by rules and regulations upon its own 4 motion, or by order upon application, may conditionally or 5 unconditionally exempt any person, security, transaction or 6 clearing agency, or any class or classes of persons, securities, 7 transactions or clearing agencies from any provision or pro8 visions of this section or of any rule or regulation thereunder, 9 if and to the extent that such exemption is necessary or 10 appropriate in the public interest and consistent with the pro11 tection of investors and the purposes fairly intended by the 12 policy and provisions of this section.

13

"(b) Any clearing agency may be registered with the 14 Commission as a national securities clearing agency under 15 the terms and conditions hereinafter provided in this section 16 by filing with the Commission a registration statement in 17 such form as the Commission may prescribe setting forth the 18 following information and accompanied by the following 19 documents:

20

"(1) Such data as to its organization, participation, 21 rules of procedure, financial condition and results of opera22 tion, methods of safekeeping, transferring, hypothecating and 23 accounting for funds and securities, and such other informa24 tion as the Commission may, by rules and regulations re