Government securities oversight bill is hustled through House; next step is conference.

WASHINGTON - The House yesterday quickly approved legislation to stiffen federal rules for dealers operating in the government securities market.

House members hailed the bill, which passed by voice vote under expedited procedures, as a major step toward opening up the government market to investors and preventing any future auction abuses like the ones that came to light at Salomon Brothers in 1990.

Rep. Edward J. Markey, D-Mass., chairman of the House Energy and Commerce subcommittee on telecommunications and finance, called the bill "a truly bipartisan reform package."

The bill now goes to conference with the Senate, which has passed a milder measure that gives less power to the SEC. Among other things, the Senate bill would allow the Treasury Department to veto any, sales practice rules issued for registered dealers by the National Association of Securities Dealers. The House bill has no such veto authority for any sales practice rules.

Backers of the House bill are hoping that changes made by Markey to the original bill can win support in conference with the Senate. They also said that the Treasury and the Securities and Exchange Commission support the House bill.

"I think the prospects of this bill to become law are quite good," said one House aide. "The early indications we've gotten from the Senate are very positive. and we don't expect significant opposition either from the dealer side or the investor side."

Markey said the House bill is supported by numerous organizations including the Public Securities Association, NASD, the Government Finance Officers Association, the Investment Company Institute, the National Association of Counties, the National League of Cities, and the National Association of State Retirement Administrators.

However, a PSA spokesman said yesterday that while the association welcomes the changes that Markey has made to the House bill, the group favors the Senate bill. Many dealers contend that the Senate version is preferable because it has fewer regulatory controls.

House approval of the bill became a sure bet after Markey worked out a compromise on behalf of the Energy and Commerce Committee with Banking Committee Chairman Henry Gonzalez, D-Tex. That deal would give authority to bank regulatory agencies to oversee bank dealers in setting up internal controls against fraud while the SEC would have authority over other dealers.

Both the House and Senate bills would permanently extend the Treasury's authority to issue rules for government dealers under the Government Securities Act of 1986. That authority lapsed on Oct. 1, 1991, and Treasury officials have indicated they are interested in issuing new rules that set capital standards and other rules for government securities dealers.

The House bill would require all dealers to keep electronic records of their trades and make them available upon request to the SEC in the event of an inquiry or investigation.

The measure would also authorize the Treasury to issue rules requiring dealers and other investors to file reports when they have a large position in the market, to facilitate government surveillance of trading activity.

As expected, supporters of the House bill agreed to amendments offered by Gonzalez that he called "important long-term reforms" that "break the stranglehold of the primary dealer cartel and bring equitable bidding to the governments securities auction process."

The Gonzalez reforms would require the Treasury to allow all credit-worthy bidders to participate in the new automated auction system by the end of 1995 and prohibit special favors to any dealer. Minutes of the meetings of the Treasury Borrowing Advisory Committee, a private group of regular debt management advisers, would be released to the public within three business days. Currently, the minutes are made public after about two weeks.

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