June 4, 1993
TO: BROKER/DEALER ADVISORY COMMITTEE NO. 20-93
COMPLIANCE COMMITTEE NO. 11-93
OPERATIONS COMMITTEE NO. 21-93
SEC RULES COMMITTEE NO. 51-93
TRANSFER AGENT ADVISORY COMMITTEE NO. 35-93
UNIT INVESTMENT TRUST COMMITTEE NO. 27-93
RE: PROPOSED FEDERAL TELEMARKETING LEGISLATION
__________________________________________________________
Attached for your information and review are three bills
currently pending in Congress that are designed to curb
telemarketing fraud. It is likely that telemarketing fraud
legislation in some form will be passed this year. The attached
bills are described briefly below.
S. 568, the "Telemarketing and Consumer Fraud and Abuse
Prevention Act," requires the Federal Trade Commission to
prescribe rules governing telemarketing practices and also to
prescribe rules prohibiting "fraudulent telemarketing acts or
practices," which are to be defined in those rules. The bill
contains a complete exemption for securities industry
participants including, among others, a broker, dealer or
investment company, in connection with the offer, sale or
purchase of any security, or an investment adviser providing
investment advice relating to any security. (See Section
12(c)(2)(A) on page 15 of the bill.) S. 568 was recently passed
by the Senate Commerce Committee, and it is expected to come
before the full Senate in the near future and eventually to go to
conference with H.R. 868, described below.
H.R. 868, the "Consumer Protection Telemarketing Act," is
similar to S. 568, in that it directs the FTC to promulgate rules
prohibiting deceptive and abusive telemarketing activities.
Although the bill provides that securities industry participants
would not be subject to such FTC rules, it requires the
Securities and Exchange Commission to promulgate "substantially
similar" rules within six months after the effective date of any
rules adopted by the FTC (subject to certain exceptions). (See
Section 3(d) on page 4 of the bill.) H.R. 868 was passed by the
House earlier this year.
S. 557, the "Senior Citizens Against Marketing Scams Act of
1993," is aimed primarily at fraudulent telemarketing practices
targeting senior citizens. It imposes criminal penalties for
violations, and does not contain a securities industry exemption.
Although the bill does not appear to be moving at this time, it
is possible that it will become part of a telemarketing fraud
legislative package.
Please review these bills and contact me as soon as
possible if you have any comments or concerns about their impact
on your business.
Frances M. Stadler
Assistant Counsel
Attachments