Bill Gives Treasury Greater Role in Policing Securities Market

A bill that imposes stricter rules on sales practices and record-keeping of government securities brokers and dealers was approved Tuesday by the House after passing the Senate on Monday.

The votes clear the way for President Clinton to sign the bill into law after the Thanksgiving recess. The legislation will give the Treasury power to write permanent record-keeping rules for government securities dealers, including banks. A bill passed last year extended that oversight for only five years.

In addition, the bill provides new protection for investors affected by the mergers and reorganizations of limited partnerships.

Rep. Edward J. Markey (D-Mass.), who spearheaded the Government Securities Act Amendments of 1993 in the House, said the law “will enhance market surveillance and enforcement and provide important new protections for investors through large-position reporting, new sales practice rules, better transaction records and new SEC anti-fraud and anti-manipulation authority.”

At its core, the bill gives the Treasury authority to adopt rules requiring broker-dealers and their customers who hold large positions in the $4-trillion government securities market to report their positions and keep records necessary for compliance.

And, in response to the Salomon Bros. bidding scandal, the bill makes it an “explicit violation of the securities laws for any person to make false or misleading statements in connection with any bid for or purchase of a government security.”

The legislation gives the Securities and Exchange Commission authority to demand records of transactions from all government securities dealers to help the regulatory agency reconstruct trading records for surveillance or enforcement purposes.

However, the bill also calls for the SEC to notify banking regulators when it makes such requests of banks. SEC and other bank regulators will meet each year to determine what documents the agency can obtain from banking regulators.