House Subcommittee Chairman Jack Fields (R-Tex.) reached agreement with other members of his Telecommunications and Finance Subcommittee to strip provisions from his securities deregulation bill which would have undercut the safety and security of municipal investments, including pensions. The committee also voted to drop most provisions which would have preempted states, securities protection laws. However, the Public Securities Association and some subcommittee members promised they would seek to restore these provisions when the full committee meets shortly to act on the bill.

After a week of efforts by state and local leaders to achieve major changes in the legislation, the renumbered H.R. 3005, the Securities Amendments of 1996, Fields met with Ranking Democrat Rep. Ed Markey (D Mass.) to reach bipartisan consensus. As rewritten, the bill would reform and update federal regulation of the mutual funds industry.

The bill was altered to drop the proposed repeal of the so-called suitability provisions, which require broker-dealers to be responsible for making suite able investment decisions on behalf of institutional investors, including cities. The bill would move toward uniformity instead of preemption of state laws. States would continue to be able to enforce their own laws against securities fraud; the subcommittee eliminated the proposed preemption.

NLC had led an effort over the past week, working with the National Conference of State Legislatures, the U.S. Conference of Mayors, the National Association of Counties, the Government Finance Officers Association, and the International City/County Management Association to oppose the provisions of the bill that would have eliminated the recently enacted suitability obligations of brokerdealers to state and local government investors and preempted state securities laws.

In a letter to Chairman Fields, the executive directors of the state and local organizations wrote: "Our opposition to H.R. 2131 stems from the adverse impact we expect it to have on government investors, taxpayers, and pension beneficiaries as well as on individual investors and businesses.

"A number of state and local governments have experienced investment losses, not only recently, but over the past decade. Because of these losses, and the fact that many of them could be traced to the egregious actions of broker-dealers, Congress enacted the Government Securities Act Amendments of 1993. …