Small Investor Protection Act of 1990 - Amends the Securities Exchange Act of 1934 to authorize the Securities and Exchange Commission (SEC) to deny registration of a security if it finds that 80 percent or more of its net offering proceeds are not specifically allocated for specified activities set forth in the issuer's business plan.
Sets forth specified disclosure-to-customer requirements for registered brokers and dealers. Mandates that a registered securities association shall establish a toll-free customer telephone listing to respond to inquiries regarding disciplinary actions involving its members.
Authorizes the SEC to issue cease and desist orders for violations of securities regulations. Authorizes the courts and the SEC to prohibit a violator of securities regulations from serving as an officer or director of a securities issuer.
S 2057 IS 101st CONGRESS 2d Session S. 2057 To amend the Securities Exchange Act of 1934. IN THE SENATE OF THE UNITED STATES February 1 (legislative day, JANUARY 23), 1990 Mr. BRYAN introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the `Small Investor Protection Act of 1990'. SEC. 2. BLANK CHECK BLIND POOLS. (a) REGISTRATION- Section 12(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(a)) is amended-- (1) by inserting `(1)' after `(a)'; and (2) by adding at the end the following: `(2) The Commission is authorized to deny registration of a security if it finds that 80 percent or more of the net offering proceeds, as defined by the Commission, is not specifically allocated for the purchase, construction, or development of identified property or products, for the payment of indebtedness, for the payment of overhead expenses, or for other activities set forth in the issuer's business plan.'. (b) MARKET MAKING- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following: `(g) No broker or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security that is denied registration under section 12(a)(2).'. SEC. 3. DISCLOSURE TO CUSTOMERS; DISCIPLINARY HISTORY. (a) IN GENERAL- Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at the end the following: `(h) Each registered broker or dealer shall-- `(1) prepare and send to each customer an account statement for each month in which a transaction occurs involving that account; `(2) when the bid/ask differential of any security offered exceeds 25 percent, disclose that fact on the confirmation delivered to the buyer of that security; `(3) before opening a new customer account, disclose in writing any disciplinary action taken against the broker or dealer during the preceding 5 years resulting from an administrative or judicial proceeding in which a violation of securities laws was found; and `(4) before taking a buy order on a security, disclose to the customer any business relationship between the broker or dealer and the issuer.'. (b) ACCESS TO INFORMATION- Section 15A of the Securities Exchange Act 1934 (15 U.S.C. 78o-3) is amended by adding at the end the following: `(i) A registered securities association shall establish and maintain a toll-free telephone listing to receive and respond to inquiries from customers and the public regarding disciplinary actions involving its members.'. SEC. 4. CEASE AND DESIST AUTHORITY. Section 21 of the Securities Exchange Act of 1934 (15 U.S.C. 78u) is amended by adding at the end the following new subsection: `(i)(1) If the Commission has reason to believe that any broker or dealer or person associated with a broker or dealer is engaged or is about to engage in acts or practices constituting a violation of-- `(A) any provision of this title or the rules or regulations thereunder, `(B) the rules of a national securities exchange or registered securities association of which such person is a member or a person associated with a member, `(C) the rules of a registered clearing agency in which such person is a participant, or `(D) the rules of the Municipal Securities Rulemaking Board, it may in the public interest and for the protection of investors issue an order described in paragraph (2). `(2) An order is described in this paragraph if it is an order which-- `(A) terminates the employment of an individual employed by a broker or dealer, `(B) prohibits an individual from participating in the conduct of the affairs of a broker or dealer, `(C) suspends the operations of a broker or dealer, `(D) prohibits the disposition or transfer of any asset owned or held by such broker or dealer, or `(E) requires the cessation of any other act or practice which constitutes a violation described in paragraph (1). `(3) An order issued pursuant to this subsection shall contain a statement of facts constituting the grounds therefor and shall fix a time and place at which a hearing will be held thereon. Such hearing shall be fixed for a date not earlier than 30 days nor later than 60 days after the date of service of such notice. `(4) An order issued under this subsection may become effective prior to a hearing under paragraph (3) if the Commission has reason to believe that such action is necessary to prevent dissipation of assets or irreparable injury.'. SEC. 5. DISQUALIFICATION. Section 15(b)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(6)) is amended by inserting after `associated with a broker or dealer' each place it appears the following: `or acting as a consultant to a broker or dealer'. SEC. 6. PROHIBITION AGAINST SERVICE AS AN OFFICER OR DIRECTOR. (a) AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM SERVING AS OFFICERS AND DIRECTORS- Section 20(b) of the Securities Act of 1933 (15 U.S.C. 77t(b)) is amended by inserting after the first sentence thereof the following: `In any proceeding under this subsection, the court may prohibit, conditionally or unconditionally, either permanently or for such period of time as it shall determine, any person found to have violated any provision of this title or any rule or regulation thereunder from acting as an officer or director of or consultant to any issuer that has a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 or that is required to file reports pursuant to subsection (d) of section 15 of such Act.'. (b) AMENDMENTS TO SECTION 15(c)(4)- Section 15(c)(4) of the Securities Act of 1934 (15 U.S.C. 78o(c)(4)) is amended-- (1) by striking `, or' the first time it appears; and (2) by inserting after `15' the following: `, or subsection (a) of section 16'; and (3) by adding at the end thereof the following: `In such an order, the Commission may also prohibit, conditionally or unconditionally, either permanently or for such period of time as it shall determine, any person found to have failed to comply or to have been a cause of the failure to comply from acting as an officer or director of or consultant to any issuer that has a class of securities registered pursuant to section 12 of this title or that is required to file reports pursuant to subsection (d) of section 15 of this title, if the Commission finds that such prohibition is in the public interest.'. (c) INVESTMENT COMPANY ACT OF 1940- Section 42 of the Investment Company Act of 1940 (15 U.S.C. 80a-41) is amended by inserting after the first sentence of subsection (d) the following: `In any proceeding under this subsection the court may prohibit, conditionally or unconditionally, either permanently or for such period of time as it shall determine, any person found to have violated any provision of this title or any rule, regulation, or order hereunder from acting as an officer or director of or consultant to any issuer that has a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 or that is required to file reports pursuant to subsection (d) of section 15 of such Act.'. (d) INVESTMENT ADVISERS ACT OF 1940- Section 209 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9) is amended by inserting after the first sentence of subsection (d) the following: `In any proceeding under this subsection, the court may prohibit, conditionally or unconditionally, either permanently or for such period of time as it shall determine, any person found to have violated any provision of this title, or of any rule, regulation, or order hereunder or has aided, abetted, counseled, commanded, induced, or procured such a violation, from acting as an officer or director of or consultant to any issuer that has a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 or that is required to file reports pursuant to subsection (d) of section 15 of such Act.'.
Introduced in Senate
Read twice and referred to the Committee on Banking.
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