89–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–1034

FAIRNESS IN SECURITIES TRANSACTIONS ACT

DECEMBER 15, 2000.—Committed to the Committee of the Whole House on the State

of the Union and ordered to be printed

Mr. BLILEY, from the Committee on Commerce,

submitted the following

REPORT

together with

MINORITY VIEWS

[To accompany H.R. 2441]

[Including cost estimate of the Congressional Budget Office]

The Committee on Commerce, to whom was referred the bill

(H.R. 2441) to amend the Securities Exchange Act of 1934 to reduce fees on securities transactions, having considered the same,

report favorably thereon with an amendment and recommend that

the bill as amended do pass.

CONTENTS

Page

Amendment .............................................................................................................. 2

Purpose and Summary ............................................................................................ 2

Background and Need for Legislation .................................................................... 3

Hearings ................................................................................................................... 5

Committee Consideration ........................................................................................ 5

Committee Votes ...................................................................................................... 5

Committee Oversight Findings ............................................................................... 9

Committee on Government Reform Oversight Findings ...................................... 9

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 9

Committee Cost Estimate ....................................................................................... 9

Congressional Budget Office Estimate ................................................................... 9

Federal Mandates Statement ................................................................................. 12

Advisory Committee Statement .............................................................................. 12

Constitutional Authority Statement ...................................................................... 12

Applicability to Legislative Branch ........................................................................ 12

Section-by-Section Analysis of the Legislation ...................................................... 12

Changes in Existing Law Made by the Bill, as Reported ..................................... 13

Minority Views ......................................................................................................... 15

2

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Fairness in Securities Transactions Act’’.

SEC. 2. FEE REDUCTION.

(a) REDUCTIONS OF FEES.—Section 31 of the Securities Exchange Act of 1934 (15

U.S.C. 78ee) is amended by striking ‘‘1⁄300 of one percent’’ each place it appears and

inserting ‘‘1⁄500 of one percent’’.

(b) PREVENTION OF SHORTFALLS IN COMMISSION APPROPRIATIONS.—Section 31 of

the Securities Exchange Act of 1934 is further amended by adding at the end the

following new subsection:

‘‘(h) INSUFFICIENT FEES.—In any year in which the total amount of fees collected

under this section and section 6(b) of the Securities Act of 1933 (including any balance in the account providing appropriations to the Commission) are insufficient to

provide for the Commission’s budget authority as provided by an appropriation Act,

such appropriation Act may provide that the fee under this section shall be increased, with all such increased amounts deposited and credited as offsetting collections to the account providing appropriations to the Commission.’’.

SEC. 3. REVISION OF SECURITIES TRANSACTION FEE PROVISIONS.

Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is further

amended—

(1) in subsection (b), by striking the last sentence;

(2) in subsection (c), by striking the last sentence;

(3) in subsection (d)—

(A) by striking paragraphs (2) and (3); and

(B) by striking the following:

‘‘(d) OFF-EXCHANGE TRADES OF LAST-SALE-REPORTED SECURITIES.—

‘‘(1) COVERED TRANSACTIONS.—Each national securities’’ and adding the following:

‘‘(d) OFF-EXCHANGE TRADES OF LAST-SALE-REPORTED SECURITIES.—Each national

securities’’; and

(4) by adding after subsection (h) (as added by section 2(b) of this Act) the

following new subsections:

‘‘(i) DEPOSIT OF FEES.—

‘‘(1) GENERAL REVENUES.—Fees collected pursuant to subsections (b), (c), and

(d) shall be deposited and collected as general revenue of the Treasury, except

that the amount deposited and collected as general revenues for any fiscal year

shall not exceed the baseline amount for such fiscal year.

‘‘(2) OFFSETTING COLLECTIONS.—Fees collected pursuant to subsections (b), (c)

and (d) for any fiscal year in excess of the baseline amount for such fiscal

year—

‘‘(A) shall not be collected or spent for any fiscal year except to the extent

provided in advance in appropriation Acts; and

‘‘(B) shall be deposited and credited as offsetting collections to the account

providing appropriations to the Commission.

‘‘(3) BASELINE AMOUNT.—For purposes of this subsection, the baseline amount

for any fiscal year is the amount projected by the Congressional Budget Office

pursuant to section 257 the Balanced Budget and Emergency Deficit Control

Act of 1985, in its most recently published report of its baseline projection before the date of enactment of the Fairness in Securities Transactions Act, to be

collected and deposited as general revenues pursuant to subsections (b) and (c)

of this section as in effect on the day before the date of enactment of such Act.

‘‘(j) LAPSE OF APPROPRIATION.—If on the first day of a fiscal year a regular appropriation to the Commission has not been enacted, the Commission shall continue

to collect fees under subsections (b), (c), and (d) at the rate in effect during the preceding fiscal year, until such a regular appropriation is enacted.’’.

SEC. 4. EFFECTIVE DATE.

The amendments made by this Act—

(1) shall take effect on October 1, 2000; and

(2) shall cease to be effective on October 1, 2006.

PURPOSE AND SUMMARY

The purpose of H.R. 2441 is to provide monetary relief to investors and market participants that pay the section 31 transaction

3

fee. The legislation provides an interim rate reduction until a

statutorily mandated reduction becomes effective in fiscal year

2007.

H.R. 2441, as reported, lowers the transaction fee rate from 1⁄300th of one percent to 1⁄500th of one percent through the end of

fiscal year 2006. Because the current budgetary treatment is different for exchange-traded securities than for off-exchange-traded

securities (transaction fees from exchange traded securities are deposited as general revenue; all other transaction revenue is deposited as offsetting collections), a rate reduction applied equally

under current law would result in a decrease to general revenue to

the Treasury because of the resultant decrease in revenue from exchange traded securities. In order to remain revenue neutral, the

legislation makes changes to the fee structure. Under H.R.2441, all

transaction fee revenue collected is deposited as general revenue,

except that any amount collected in excess of the most recently

published Congressional Budget Office (CBO) baseline at the time

of enactment is deposited as offsetting collections.

Based on the March 2000 CBO baseline, preliminary estimates

indicate that the legislation will provide over $460 million in offsetting collections in fiscal year 2001. This will ensure that the appropriators will have the funds necessary to meet the Security and Exchange Commission’s (SEC’s) budget request of $423 million.

The legislation also addresses a concern regarding the conversion

of the NASDAQ market to an exchange. Currently, transaction revenue collected from securities traded through the NASDAQ is deposited as offsetting collections. However, the NASDAQ has filed

an application to become an exchange, at which point the fees collected from securities traded on the NASDAQ would be deposited

as general revenue under current law. Because H.R. 2441 does not

differentiate between where the securities are traded for purposes

of depositing and crediting section 31 transaction fees, the conversion of NASDAQ to an exchange will not affect the funding structure put in place for the SEC by the legislation.

BACKGROUND AND NEED FOR LEGISLATION

The Federal Securities laws provide for several types of fees to

be charged for various securities activities. These fees, which include registration, transaction, and merger and tender offer fees,

are ‘‘user’’ fees intended to recover the government’s cost of providing Federal securities regulation through the Securities and Exchange Commission.

Beginning in the early 1980’s, the total revenue collected by the

government from these fees began to exceed the cost of funding the

SEC.

Notwithstanding the surplus being generated by the fees, Congress authorized increases to the fee rate for securities registration

(which is authorized under section 6 of the Securities Act of 1933,

and is thus sometimes referred to as the ‘‘section 6(b) fee’’) annually beginning in 1990. The revenue collected above the statutory

registration rate was deposited and credited as ‘‘offsetting collections’’ to the account that provided for appropriations for the SEC.

This eased the budgetary pressure on discretionary spending for

Congressional appropriators by providing them with funds that

4

they could use outside the limits (caps) imposed by the Budget Enforcement Act.

As the surplus from the fees began to grow dramatically, concerns were raised that the user fees had become a revenue-generating tax—as opposed to being merely a cost recovery mechanism

for SEC regulation—and an unnecessary burden on capital formation. In 1995, the revenue collected from these fees was more than

double the SEC budget. Because the appropriations committees

were relying on the offsetting collections to provide a substantial

percentage of the revenue needed to fund the SEC budget each

year, and the level of offsetting collections was never predictable,

there were concerns about the resulting uncertainty in funding the

SEC.

Congress addressed this problem by changing the fee and SEC

funding structure in the National Securities Markets Improvement

Act of 1996 (P.L. 104–290) (NSMIA). The fee provisions in that Act

were intended to reduce the total revenue collected from the fees

over time to approximate the cost to the government of securities

market regulation, and to provide a more stable long-term funding

structure for the SEC by reducing the reliance of the appropriators

on fee collections as a funding mechanism.

NSMIA decreased the registration fee rate incrementally each

year until it returned to the level that existed prior to the yearly

increases in the rate that Congress began to authorize in 1990. Additionally, the Act authorized the transaction fee (which is authorized under section 31 of the Exchange Act, and hence is also called

a ‘‘section 31 fee’’) to be extended to off-exchange traded securities.

This was done to eliminate any competitive disparities between exchange-traded securities, which had always been assessed the fee,

and non-exchange-traded securities, which were not subject to

transaction fees.

Based on the Congressional Budget Office estimates at the time,

it was anticipated the revenue collected and deposited as offsetting

collections, pursuant to the changes under the Act, would decline

and therefore require Congressional appropriators to gradually increase their appropriation to fully fund the SEC. The combination

of the decreasing 6(b) registration fee rate and the new application

of the section 31 transaction fee to off-exchange traded securities

was estimated to provide total offsetting collections of $244 million

in 1997, decreasing annually to $141 million in 2006.

In adopting NSMIA, Congress relied upon 1996 CBO baseline

projections for market volume. In fact, actual registration and

transaction volume has exceeded the CBO’s estimates by multiples.

For example, in 2000, total fee revenue collected was $2 billion,

while the SEC budget was $377 million. The 1996 projections estimated total collections of $778 million. Although registration volume increased significantly, the bulk of the unexpected revenue

was derived from the section 31 fee. The fiscal year 2000 revenue

collected from the transaction fee has more than quadrupled, totaling more than $1 billion; the 1996 estimates predicted $273 million. The CBO’s March 2000 baseline estimates predict that transaction volume will continue to escalate and generate over $3 billion

in 2006. Revenue from registration fees is estimated to produce an

additional $876 million in 2006.

5

Many Members of Congress agree that the section 31 transaction

fee rate, as amended in 1996, was never envisioned to generate the

level of revenue being collected. In 1998, legislation (H.R. 4213)

was introduced to address the problem. No action was taken on

that legislation.

Transaction volume is expected to continue to increase, and concerns were again raised in the 106th Congress that the section 31

transaction fees do not reflect their statutory purpose of a cost recovery fee. Legislation was introduced in the House to address the

problem.

HEARINGS

The Subcommittee on Finance and Hazardous Materials held two

hearings on H.R. 2441, the Fairness in Securities Transactions Act

on July 27, 1999 and September 28, 1999. The July 27, 1999 hearing examined the impact of the growth in the securities markets

on transaction fee revenue. The Subcommittee received testimony

from: Mr. William J. Brodsky, Chairman and C.E.O., Chicago

Board Options Exchange; Mr. Andrew Cader, Senior Managing Director, Spear, Leeds & Kellogg, representing the Specialist Association of the New York Stock Exchange; Mr. Steve Nelson, Vice

President of Special Projects, Herzog Heine Geduld, representing

the Securities Industry Association; and Mr. Art Kearney, Director

of Equity Capital, John G. Kinnard & Co., representing the Security Traders Association.

On September 28, 1999, the Subcommittee received testimony on

H.R. 2441 from the following witnesses: The Honorable Rick Lazio,

United States House of Representatives; The Honorable Robert

Menendez, United States House of Representatives; and Mr. James

M. McConnell, Executive Director, Securities and Exchange Commission.

COMMITTEE CONSIDERATION

On February 15, 2000, the Subcommittee on Finance and Hazardous Materials met in open markup session and approved H.R.

2441 for Full Committee consideration, as amended by a voice vote.

On October 6, 2000, the Full Committee met in open markup session and ordered H.R. 2441 reported to the House, amended, by a

record vote of 24 yeas and 16 nays, a quorum being present.

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion

to report legislation and amendments thereto. A motion by Mr. Bliley to order H.R. 2441 reported to the House, with an amendment,

was agreed to by a record vote of 24 yeas and 16 nays (Record Vote

No. 37). The names of Members voting for and against follow.

The following amendment was ruled nongermane by the chair—

An amendment in the nature of a substitute by Mr.

Towns, No. 1, crediting all securities transaction fees collected to the account of the appropriators and providing

the SEC with an exemption from the civil service pay code.

6

An appeal of the ruling of the Chair was tabled by a record vote

of 25 yeas and 16 nays (Record Vote No. 36). The names of Members voting for and against follow.

7

8

9

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House

of Representatives, the Committee held legislative and oversight

hearings and made findings that are reflected in this report.

COMMITTEE ON GOVERNMENT REFORM OVERSIGHT FINDINGS

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House

of Representatives, no oversight findings have been submitted to

the Committee by the Committee on Government Reform.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee finds that H.R. 2441, the

Fairness in Securities Transactions Act, would result in no new or

increased budget authority, entitlement authority, or tax expenditures or revenues.

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by

the Director of the Congressional Budget Office pursuant to section

402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House

of Representatives, the following is the cost estimate provided by

the Congressional Budget Office pursuant to section 402 of the

Congressional Budget Act of 1974:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, October 24, 2000.

Hon. TOM BLILEY,

Chairman, Committee on Commerce, House of Representatives,

Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2441, the Fairness in Securities Transactions Act.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Ken Johnson.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 2441—Fairness in Securities Transactions Act

Summary: H.R. 2441 would reduce the fees the Securities and

Exchange Commission (SEC) is authorized to collect on securities

transactions conducted through national securities exchanges, associations, brokers, and dealers. The rate would be cut from 1⁄300th

of 1 percent of the aggregate dollars traded to 1⁄500th of 1 percent

of the aggregate dollars traded. Under the bill, all transaction fees

10

collected up to a certain threshold would be classified as governmental receipts (that is, revenues). Any transaction fees above this

threshold would be authorized to be collected only to the extent

provided in appropriation acts and would be classified as offsetting

collections (that is, offsets to discretionary spending). The provisions of H.R. 2441 would be effective from October 1, 2000, through

October 1, 2006.

CBO estimates that enacting H.R. 2441 would reduce the SEC’s transaction fees by $478 million in fiscal year 2001 and by a total

of $4 billion over the 2001–2005 period (from $10 billion to about

$6 billion).

Table 1 shows the estimated impact of H.R. 2441 on the SEC’s

transaction fees, assuming that future appropriation actions would

continue to allow the collection of these fees consistent with the authorizing statute.

Because the collection of fees from 2002 through 2005 would be

subject to future appropriation action, the reduction mandated by

this bill would be reflected as a loss of offsetting collections credited

against future appropriations ($3.5 billion over the four-year period).

For 2001, the nature of the budgetary impact of this bill would

depend on whether the SEC appropriation would be enacted before

H.R. 2441. If it is, then this bill would affect outlays from an already-enacted appropriation, which would be considered a direct

spending impact (of $478 million). Alternatively, if the SEC appropriation were not enacted before H.R. 2441, the effect of this bill

in 2001 would be like that in the subsequent years—a loss of offsetting collections credited against future discretionary appropriations.

Millions of dollars, by fiscal year—

2001 2002 2003 2004 2005

CBO Baseline Estimate of SEC Transaction Fees 1 ............................ 1,303 1,593 1,938 2,346 2,836

SEC Transaction Fees Under H.R. 2441 ............................................. 825 956 1,163 1,408 1,701

Estimated Change in SEC Transaction Fees ...................................... ¥478 ¥637 ¥775 ¥938 ¥1,135

1 These estimates are sums of the transaction fees that are classified as governmental receipts and the transaction fees that are classi- fied as offsetting collections.

For this estimate, we assume H.R. 2441 will be enacted after a

regular 2001 appropriation is in place for the SEC (see Table 2).

H.R. 2441 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA)

and would impose no costs on state, local, or tribal governments.

Estimated cost to the Federal Government: Table 2 shows the estimated budgetary impact of H.R. 2441, assuming that the SEC’s

appropriation for 2001 is enacted before this bill. The costs of this

legislation fall within budget function 370 (commerce and housing

credit).

Millions of dollars, by fiscal year—

2001 2002 2003 2004 2005

CHANGES IN DIRECT SPENDING

Estimated Budget Authority ................................................................ 478 0 0 0 0

Estimated Outlays ............................................................................... 478 0 0 0 0

CHANGES SUBJECT TO APPROPRIATION

Estimated Budget Authority ................................................................ 0 637 775 938 1,135

11

Millions of dollars, by fiscal year—

2001 2002 2003 2004 2005

Estimated Outlays ............................................................................... 0 637 775 938 1,135

Basis of estimate: Under current law, the SEC collects 1⁄300th of

a percent of the aggregate dollar value of securities traded through

national securities exchanges, national securities associations, brokers, and dealers. The fee rate will decline to 1⁄800th of a percent

for 2007 and thereafter. Fees collected from national securities associations are subject to appropriation action and are recorded as

offsetting collections, while fees from other sources are recorded as

revenues.

H.R. 2441 would reduce the transaction fees to 1⁄500th of 1 percent of the aggregate dollar value of securities traded during the

period between October 1, 2000, and October 1, 2006. Based on historical data on the dollar volume of securities traded on the major

national securities associations and exchanges, CBO estimates that

the aggregate dollar volume of securities traded will amount to

about $39 trillion in 2001 and about $300 trillion over the 2001–

2005 period. On this basis, CBO estimates that implementing H.R.

2441 would reduce SEC transaction fees by a total of $4 billion

over the 2001–2005 period, relative to the CBO’s most recent baseline estimates.

The bill would classify all transaction fees collected up to a certain threshold as revenues. H.R. 2441 would define that threshold

as the most recent CBO baseline estimate of revenues from transaction fees. (CBO currently estimates that such revenues will total

$486 million in fiscal year 2001 and $3.5 billion over the 2001-2005

period.) Under the bill, any transaction fees collected above that

threshold would be recorded as offsetting collections, to the extent

provided in appropriation acts.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in outlays that are subject to pay-as-you-go procedures are shown in the

following table, assuming the SEC appropriation for 2001 is enacted before H.R. 2441. If not, this bill would have no pay-as-yougo impact.

By fiscal year, in millions of dollars—

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Changes in outlays ....................... 478 0 0 0 0 0 0 0 0 0

Changes in receipts ...................... Not applicable

Intergovernmental and private sector mandates statement: H.R.

2441 contains no intergovernmental and private-sector mandates

as defined in UMRA, and would impose no costs on state, local, or

tribal governments.

Estimate prepared by: Federal Costs: Ken Johnson and Mark

Hadley. Revenues: Erin Whitaker. Impact on State, Local, and

Tribal Governments: Shelley Finlayson. Impact on the Private Sector: Jean Wooster.

Estimate approved by: Robert A. Sunshine, Assistant Director for

Budget Analysis.

12

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office

pursuant to section 423 of the Unfunded Mandates Reform Act.

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds that the Constitutional authority for this legislation is provided in Article I, section 8, clause

3, which grants Congress the power to regulate commerce with foreign nations, among the several States, and with the Indian tribes.

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

This section provides the short title of the legislation, the ‘‘Fairness in Securities Transactions Act.’’

Section 2. Fee reduction

Subsection (a) of section 2 of the legislation provides that section

31 of the Securities and Exchange Act of 1934 (Exchange Act) is

amended to reduce the fee rate from 1⁄300th of one percent to 1⁄500th

of one percent. This change reduces the rate until further reductions mandated by statute occur in fiscal year 2007.

Subsection (b) provides that in any year when total revenue collected from both registration and transaction fees is insufficient to

provide the Commission’s budget authority, the transaction fee rate

under section 31 may be increased through an appropriation Act.

Section 3. Revision of securities transaction fee provisions

This section amends section 31 of the Exchange Act. The section

adds new subsection (i) which stipulates that revenue collected pursuant to section 31 be deposited as general revenue to the Treasury, except that no such amount may exceed the baseline amount

(as defined by H.R. 2441). Fees collected in excess of the baseline

amount will be deposited and credited as offsetting collection to the

account providing appropriations to the Commission.

The section also defines the baseline amount to be the amount

projected by the Congressional Budget Office in its most recently

published report of the baseline amount before the date of enactment of the legislation.

Section 3 also modifies section 31(d)(3) to conform to the new

funding scheme. A new subsection (j) provides that, in the case of

13

a lapse of regular appropriation, the Commission must continue to

collect fees under subsections (b), (c), and (d) of section 31 at the

rate in effect during the preceding fiscal year until such regular appropriation is enacted.

Section 4. Effective date

Section 4 provides that the changes made by this bill take effect

October 1, 2000 and cease to be effective October 1, 2006.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

SECTION 31 OF THE SECURITIES EXCHANGE ACT OF

1934

SEC. 31. TRANSACTION FEES.

(a) * * *

(b) EXCHANGE-TRADED SECURITIES.—Every national securities exchange shall pay to the Commission a fee at a rate equal to ø1⁄300

of one percent¿ 1⁄500 of one percent of the aggregate dollar amount

of sales of securities (other than bonds, debentures, and other evidences of indebtedness) transacted on such national securities exchange, except that for fiscal year 2007 or any succeeding fiscal

year such rate shall be equal to 1⁄800 of one percent of such aggregate dollar amount of sales. øFees collected pursuant to this subsection shall be deposited and collected as general revenue of the

Treasury.¿

(c) OFF-EXCHANGE TRADES OF EXCHANGE REGISTERED SECURITIES.—Each national securities association shall pay to the Commission a fee at a rate equal to ø1⁄300 of one percent¿ 1⁄500 of one

percent of the aggregate dollar amount of sales transacted by or

through any member of such association otherwise than on a national securities exchange of securities registered on such an exchange (other than bonds, debentures, and other evidences of indebtedness), except that for fiscal year 2007 or any succeeding fiscal year such rate shall be equal to 1⁄800 of one percent of such aggregate dollar amount of sales. øFees collected pursuant to this

subsection shall be deposited and collected as general revenue of

the Treasury.¿

ø(d) OFF-EXCHANGE TRADES OF LAST-SALE-REPORTED SECURITIES.—

ø(1) COVERED TRANSACTIONS.—Each national securities¿

(d) OFF-EXCHANGE TRADES OF LAST-SALE-REPORTED SECURITIES.—Each national securities association shall pay to the Commission a fee at a rate equal to ø1⁄300 of one percent¿ 1⁄500 of one

percent of the aggregate dollar amount of sales transacted by or

through any member of such association otherwise than on a national securities exchange of securities (other than bonds, debentures, and other evidences of indebtedness) subject to prompt last

sale reporting pursuant to the rules of the Commission or a registered national securities association, excluding any sales for

14

which a fee is paid under subsection (c), except that for fiscal year

2007, or any succeeding fiscal year, such rate shall be equal to 1⁄800

of one percent of such aggregate dollar amount of sale.

ø(2) LIMITATION; DEPOSIT OF FEES.—Except as provided in

paragraph (3), no amounts shall be collected pursuant to subsection (d) for any fiscal year, except to the extent provided in

advance in appropriations Acts. Fees collected during any such

fiscal year pursuant to this subsection shall be deposited and

credited as offsetting collections to the account providing appropriations to the Commission.

ø(3) LAPSE OF APPROPRIATIONS.—If on the first day of a fiscal

year a regular appropriation to the Commission has not been

enacted, the Commission shall continue to collect fees (as offsetting collections) under this subsection at the rate in effect

during the preceding fiscal year, until such a regular appropriation is enacted.¿

* * * * * * *

(h) INSUFFICIENT FEES.—In any year in which the total amount

of fees collected under this section and section 6(b) of the Securities

Act of 1933 (including any balance in the account providing appropriations to the Commission) are insufficient to provide for the Commission’s budget authority as provided by an appropriation Act,

such appropriation Act may provide that the fee under this section

shall be increased, with all such increased amounts deposited and

credited as offsetting collections to the account providing appropriations to the Commission.

(i) DEPOSIT OF FEES.— (1) GENERAL REVENUES.—Fees collected pursuant to subsections (b), (c), and (d) shall be deposited and collected as general revenue of the Treasury, except that the amount deposited

and collected as general revenues for any fiscal year shall not

exceed the baseline amount for such fiscal year.

(2) OFFSETTING COLLECTIONS.—Fees collected pursuant subsections (b), (c) and (d) for any fiscal year in excess of the baseline amount for such fiscal year—

(A) shall not be collected or spent for any fiscal year except to the extent provided in advance in appropriation

Acts; and

(B) shall be deposited and credited as offsetting collections to the account providing appropriations to the Commission.

(3) BASELINE AMOUNT.—For purposes of this subsection, the

baseline amount for any fiscal year is the amount projected by

the Congressional Budget Office pursuant to section 257 the

Balanced Budget and Emergency Deficit Control Act of 1985, in

its most recently published report of its baseline projection before the date of enactment of the Fairness in Securities Transactions Act, to be collected and deposited as general revenues

pursuant to subsections (b) and (c) of this section as in effect

on the day before the date of enactment of such Act.

(j) LAPSE OF APPROPRIATION.—If on the first day of a fiscal year

a regular appropriation to the Commission has not been enacted,

the Commission shall continue to collect fees under subsections (b),

(c), and (d) at the rate in effect during the preceding fiscal year,

until such a regular appropriation is enacted.

(15)

MINORITY VIEWS

Given a flawed process and a flawed bill, all of the Commerce

Committee Democrats opposed this legislation at full Committee

markup. I enthusiastically joined that opposition.

I am a strong supporter of eliminating the excess fees collected

by the SEC over and above its funding needs. Twice under my

leadership, with the cooperation and support of the Appropriations,

Budget, and Ways and Means Committees, the House passed legislation to provide the SEC with a stable and assured funding mechanism while also gradually reducing surplus fee collections to zero.

Twice the Senate refused to act on that legislation or even negotiate with the House. Had that legislation passed, we would not be

having this debate now.

I am a strong supporter of a fully-funded SEC. It would be foolish to be otherwise, given the large number of American households invested in the stock market, the dramatic changes in the

structure and functions of the nation’s securities markets, the role

the stock market currently plays in our economic growth, and last

but not least, the need to maintain a strong law enforcement presence to combat the increase in securities fraud, especially on the

Internet.

H.R. 2441, as reported by the Commerce Committee on a 24–16

partisan vote, was opposed by Democrats because it achieves reductions in fee collections by targeting only the offsetting collections

used by the SEC’s appropriators to fund SEC operations. It makes

no attempt to reduce the general revenue portion of fee collections,

which represent approximately 70 percent of total fee collections.

The bill increases the risk that the SEC will face a funding shortfall by giving general revenue first claim on any fee collections.

Under this bill general revenue is credited with all fee collections

until a general revenue cap is reached. Any collections over the

general revenue cap go to offsetting collections. This provision has

the effect of shifting the risk of any collection shortfall to offsetting

collections. The SEC would thus bear the brunt of any shortfall, exposing the SEC to the possibility of an emergency budget situation

that could severely affect its operations.

The House should reject this not-so-veiled Republican attempt to

cripple the SEC by potentially shutting off its funding.

I also would express disappointment in the Republicans for

blocking consideration of the responsible amendment authored by

Representative Towns, who joins me in these views. The Towns

amendment offered the securities industry the potential of more fee

relief than H.R. 2441, without jeopardizing the SEC’s budget. It

also would have given the SEC pay parity with the federal banking

regulatory authorities to address the serious problems that the

SEC is having with recruiting and retaining highly-qualified staff.

Recent press reports indicate that the Division of Investment ManVerDate 11-MAY-2000 19:18 Dec 22, 2000 Jkt 089006 PO 00000 Frm 00015 Fmt 6604 Sfmt 6604 E:\HR\OC\HR1034.XXX pfrm08 PsN: HR1034
16

agement has lost one-third of its attorneys. This is an outrageous

situation that needs to be remedied: it undermines both the protection of investors and the ability of business to get timely response

to its filings with the agency.

I am filing with these views a copy of the letter that Representatives Towns, Markey, and I wrote to the Democratic Leadership of

Appropriations on this matter and I commend it to our colleagues

on both sides of the aisle.

JOHN D. DINGELL.

17

18

Æ