June 26, 1990
TO: BOARD OF GOVERNORS NO. 45-90
RE: HOUSE APPROVES H.R. 3657, THE "SECURITIES MARKETS
REFORM ACT OF 1990"
__________________________________________________________
The U.S. House of Representatives has approved by voice
vote H.R. 3657, the "Securities Markets Reform Act of 1990". A
copy of the bill as passed by the House is attached. The
proposed legislation is intended to alleviate problems caused by
disruption in the securities markets by giving the SEC broader
power to regulate practices that may contribute to market
volatility. As you may recall, last October George Bissell,
Chairman of the Institute's Task Force on Market Reform,
testified before the House Telecommunications and Finance
Subcommittee on an earlier version of the bill. ( See Memorandum
to Board of Governors No. 65-89, dated October 27, 1989.)
The House-approved bill covers four main areas. First, it
would authorize the SEC, after notifying the president and
subject to his veto, to close down the stock markets. Second,
the bill includes broker-dealer reporting requirements with
respect to large traders, to assist the SEC in analyzing the
impact on the markets of significant market moves. Third, the
bill would authorize the SEC (in coordination with federal
banking agencies where appropriate) to obtain information
regarding certain broker-dealer holding companies, to enable the
SEC to assess the possible impact of risk-taking activities of
such companies on the affiliated broker-dealers. Finally, the
bill would permit the SEC, during periods of extraordinary market
volatility, to prohibit or constrain any activity (such as
program trading) that it determines has previously caused
volatility and disruption of the markets and is likely to do so
again if not constrained.
We will keep you informed of developments.
Frances M. Stadler
Assistant General Counsel
Attachment