.B 22.13

Se 2/12- SEC REGISTRATION

GOVERNMEN, 

StorageKSU LIBRARIES 

HEARING

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON BANKING AND CURRENCY

UNITED STATES SENATE

EIGHTY-NINTH CONGRESS

FIRST SESSION

ON

S. 1707

A BILL TO AMEND SECTION 6(b) OF THE

SECURITIES ACT OF 1933

SEPTEMBER 22, 1965

Printed for the use of the

Committee on Banking and Currency

IJ.S. GOVERNMENT PRINTING OFFICE

53-919 WASHINGTON : 1965

04i

FEES•k•-e. LAI
COMMITTEE ON BANKING AND CURRENCY

A. WILLIS ROBERTSON, Virginia, Chairman

JOHN SPARKMAN, Alabama

PAUL H. DOUGLAS, Illinois

WILLIAM PROXMIRE, Wisconsin

HARRISON A. WILLIAMS, JR., New Jersey

EDMUND S. MUSKIE, Maine

EDWARD V. LONG, Missouri

MAURINE B. NEUBERGER, Oregon

THOMAS J. McINTYRE, New Hampshire

WALTER F. MONDALE, Minnesota

MATTHEW HALE, Chief of Staff

WOODLIEF THOMAS, Chief Economist

JOHN R. EVANS, Minority Clerk

WALLACE4‘. BENNETT, Utah

JOHN G. TOWER, Texas

STROM THURMOND, South Carolina

BOURKE B,HICKENLOOPER, Iowa

SUBCOMMITTEE ON SECURITIES

HARRISON A. WILLIAMS, JR., New Jersey, Chairman

A. WILLIS ROBERTSON Virginia

EDMUND S. MUSKIE, Maine

EDWARD V. LONG, Missouri

MAURINE B. NEUBERGER, Oregon

THOMAS I. McINTYRE, New Hampshire

WALTER F. MONDALE, Minnesota

II

STROM THURMOND, South Carolina

WALLACE F. BENNETT, Utah

BOURKE B. HICKENLOOPER, Iowa
CONTENTS

Page

S. 1707 2

H.R. 7169 3

WITNESSES

Manuel F. Cohen, Chairman, Securities and Exchange Commission__ 6

Dorsey Richardson, president, Investment Company Institute 11

III
N.
SEC REGISTRATION FEES

WEDNESDAY, SEPTEMBER 22, 1965

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON SECURITIES,

Washington, D.C.

The subcommittee met at 10:05 a.m., in room 5302, New Senate

Office Building, Hon. Harrison A. Williams, Jr. (chairman of the subcommittee) presiding.

Senator WILLIAMS. Our committee hearing will come to order.

The Subcommittee on Securities is meeting this morning to hear

testimony on S. 1707. This bill would amend the Securities Act of

1933 by increasing the fee paid in connection with the filing of registration statements for securities offering from one-hundredth of

1 percent to one-fiftieth of 1 percent of the maximum aggregate

offering price of the securities involved, and increasing the'inimmum

fee from $25 to $100.

At this point, I would like to insert into the record both the Senate

and House bills, and a letter from Mr. Cohen recommending and giving

reasons why we should act on this bill. I would also like to insert

the changes that would be made in the statute by this bill.

(The material submitted begins on p. 2.)

1
2

89Th CONGRESS

1ST SESSION '

SEC REGISTRATION FEES

S. 1707

IN THE SENATE OF THE UNITED STATES

APRIL 6, 1965

Mr. ROBERTSON (by request) introduced the following bill; which was read

twice and referred to the Committee on Banking and Currency

A BILL

To amend section 6 (b) of the Securities Act of 1933.

1 Be it enacted by the Senate and House of 1?epresenta2 tives of the United States of America in Congress assembled,

3 That section 6 (b) of the Securities Act of 1933 is amended

4 to read as follows:

5 "(Ii) At the time of filing a registration statement the

6 applicant shall pay to the Commission a fee of one-fiftieth of

7 1 per centum of the maximum aggregate price at which

8 such securities are proposed to be offered, but in no case

9 shall such fee be less than $100."

10 SEC. 2. The effective date of section 6 (b) of the Securi11 ties Act of 1933, as amended by this Act, shall be July 1,

12 1965.
89TH CONGRESS

1ST SESSION

SEC REGISTRATION FEES

Union Calendar No.440

H. R. 7169

[Report No. 1015]

IN THE HOUSE OF REPRESENTATIVES

APRIL 6, 1965

Mr. HARRis introduced the following bill; which was referred to the Committee on Interstate and Foreign Commerce

SEPTEMBER 16, 1965

Reported with amendments, committed to the Committee of the Whole House

on the State of the Union, and ordered to be printed

[Omit the part struck through and insert the part printed in italic]

A BILL

To amend the Securities Act of 1933 With respect to certain

registration fees.

1 Be it enacted by the Senate and House of Represent a2 tives of the United States of America in Congress assembled,

3 That section 6 (b) of the Securities Act of 1933 (15 U.S.C.

4 77 (1) 77f (b)) is amended by striking out "one one-hun5 dredth" and inserting in lieu thereof "one-fiftieth", and by

6 striking out "$25." and inserting in lieu thereof "$100."

7 SEC. 2. The amendments made by the first section of

8 this Act shall take effect J-Efly 4-3 1965 January 1, 1966.
4 SEC REGISTRATION FEES

SECURITIES AND EXCHANGE COMMISSION,

Washington, D.C., March 26, 1965.

Re fee legislation.

Hon. HUBERT H. HUMPHREY,

President of the Senate,

Washington, D.C.

DEAR MR. PRESIDENT: I have the honor to transmit legislative proposals of the

Securities and Exchange Commission with respect to fees charged for the filing of

registration statements under the Securities Act of 1933.

In his budget message last month President Johnson stated: "Fairness to all

taxpayers demands that those who enjoy special benefits should bear a greater

share of the costs." This Commission has given considerable thought to the

application of this principle with respect to the laws it administers and has concluded that it would be appropriate to amend section 6(b) of the Securities Act

of 1933 by increasing the fee paid in connection with registration statements for

securities from one-hundredth of 1 percent of the maximum aggregate offering

price and increasing the minimum fee from $25 to $100. A proposed bill that

would effectuate these changes is attached.

In addition to the provision for fees for securities registrations, which in fiscal

1964 totaled $1,780,697, there are statutory provisions for an annual registration

fee for national securities exchanges and for filing fees for applications for qualifications of trust indentures relating to securities not required to be registered

under the Securities Act of 1933. These are the only statutory provisions whereunder fees are collected in connection with the Federal securities laws, except for

provisions permitting the Commission to make reasonable charges for copies of

information filed with it. The registration fee for national securities exchanges

is provided for by section 31 of the Securities Exchange Act of 1934 and amounts

to one five-hundredths of 1 percent of the aggregate dollar amount (2 cents per

$1,000) of sales of securities on such exchanges in the preceding year. In fiscal

1964 these fees totaled $1,323,150. The filing fee with respect to trust indentures

is provided in section 307(b) of the Trust Indenture Act of 1939 and the amount

collected pursuant thereto in fiscal 1964 was $1,500. All fees collected pursuant

to these sections are deposited into the general fund of the Treasury.

At the time of the passage of the first two securities acts there were indications

that the registration fees provided therein were intended to cover the anticipated

costs of administration. In fact, the amounts collected have fallen far short of

this. There have been no amendments of the securities acts with respect to fees,

except for the 1964 amendment to section 15(b) (8) of the Securities Exchange Act

relating to fees to defray the cost of examinations and other expenses in regulating

broker-dealers who are not members of a registered securities association.

Over the years there have been numerous suggestions or proposals for increased

or additional fees. In 1951 title V of the Independent Offices Appropriation Act,

1952, 5 U.S.C. 140, authorized agencies to adopt fees to cover the cost of agency

activities where fees were not fixed by statute. Pursuant thereto in 1952 the Commission submitted for comment proposed rules which sought to impose substantial

fees on various segments of the securities industry. These proposals resulted in

considerable controversy and a subcommittee of the House Committee on Interstate and Foreign Commerce, which was studying the activities of this Commission,

reported its view that any fees in this area should be "spelled out in specific legislation which has been submitted to and passed by the Congress, rather than through

any delegation of authority to any agency to pass upon the need for or amount

thereof.' I Thereafter the Commission abandoned its proposal and has never since

proposed fixing fees by rule.

In subsequent years the Commission has expressed the view that any fair fee

proposal should include an increase in at least one of the existing fees. Thus in

1957 we submitted to the House Committee on Interstate and Foreign Commerce

a legislative proposal that would have increased the stock exchange registration

fee from 2 cents per $1,000 of the aggregate dollar amount of each transaction to

5 cents per $1,000 and would have imposed a similar fee upon broker-dealers

effecting transactions otherwise than on a national securities exchange. This

proposal resulted in the introduction of bits in both the House and Senate 2 but,

although the Senate passed its bill, no action was taken in the House. Substantially similar bills were reintroduced but not passed in 1959 and 1961.3 In

1 "Report of Committee on Interstate and Foreign Commerce on Securities and Exchange Commission,"

H. Rept. No. 2508, 82d Cong., 2d sess. (1952), p. 138.

2 S. 2520, 85th 

Cong.' '

1st sess.; H.R. 7778, 85th Cong., 1st sess.

'S. 737, 86th Cong.,1st sess.; S. 755, 87th Cong., 1st sess.
SEC REGISTRATION FEES 5

1962 a bill increasing the stock exchange registration fee to 5 cents per $1,000,

but containing no provision for over-the-counter transactions was introduced but

not passed.4

While we have again considered the possibility of amendments such as those

referred to above, we feel that the proposal to increase the Securities Act registration fee at this time would be more suitable. To increase the cost of the stock

exchange fees alone without assessing a similar fee with respect to over-thecounter transactions might be considered unfair, particularly in the light of the

growth of the "third market" for listed securities. On the other hand, it appears

to be most untimely to assess fees on over-the-counter transactions now, when

the NASD has recently increased its fee assessment on over-the-counter dealers

to defray costs of the additional self-regulation imposed following the Commission's Special Study of the Securities Markets.

The Securities Act registration fee is necessarily passed on to investors. Since

the increase would result indirectly in investors paying a larger proportion of the

overall cost of this Commission, which operates to protect investors, it appears to

us to be fair and in accordance with the principle stated by the President that

"those who enjoy * * * benefits should bear a greatter share of the costs." In

this connection, the larger the public offering, and hence the fee, the larger normally

would be the segment of the investing public purchasing the registered securities.

During the last fiscal year, had the proposed fee been in effect, the Commission

would have collected approximately $3,561,400 under the -Securities Act. This,

together with the amounts collected under the stock exchange registration fee

and trust indenture fee would have totaled $4,886,050. While this is slightly

more than the total costs of the Commission's Divisions of Corporation Finance

and Trading and Markets,5 which processed the registrations involved, a substantial portion of the work of other divisions, particularly the Office of Records

and Service and the Office of the Chief Accountant, was also spent in connection

with the filings.

The Bureau of the Budget has advised us that the draft bill submitted herewith

would be consistent with the administration's objectives.

By direction of the Commission:

MANHEL F. COHEN, Chairman.

A BILL To amend section 6(b) of the Securities Act of 1933

Be it enacted by the Senate and the House of Representatives of the United States

of America in Congress assembled, That Section 6(b) of the Securities Act of 1933

is amended to read as follows:

"(b) At the time of filing a registration statement the applicant shall pay to

the Commission a fee of one-fiftieth of 1 per centum of the maximum aggregate

price at which such securities are proposed to be offered, but in no case shall such

fee be less than $100."

SEC. 2. The effective date of section 6(b) of the Securities Act of 1933, as

amended by this Act, shall be July 1, 1965.

'HR. 10167, 87th Cong., 2d sess.

5 See "Statement of cost by organization, fiscal year 1964," attached hereto.

53-919-65 2
6 SEC REGISTRATION FEES

SECURITIES AND EXCHANGE COMMISSION

Statement of cost by organization, fiscal year 1964

Office

Executive Offices $341,793

Office of Program Planning 179,337

Office of the Secretary 73, 178

Office of Hearing Examiners 173,006

Office of Opinions and Review 166,942

Office of the General Counsel 347, 185

Office of the Chief Accountant 147,095

Division of Corporation Finance 2, 942,084

Division of Trading and Markets 1, 738,224

Division of Corporate Regulation 1, 083,682

Office of the Comptroller 143,914

Office of Personnel 130,083

Office of Records and Service 739,271

Subtotal, departmental 8, 205,794

Regional offices 5, 728,154

Grand total 13, 933,948

SECTION 6(b) OF THE SECURITIES ACT OF 1933 (15 U.S.C. 77f(b))

(b) At the time of filing a registration statement the applicant shall pay to the

Commission a fee of [one one-hundredth] one-fiftieth of 1 per centum of the

maximum aggregate price at which such securities are proposed to be offered, but

in no case shall such fee be less than [$25.] $100.

Senator WILLIAMS. We have two witnesses this morning, and we

are pleased indeed that the very distinguished Chairman of the

Securities and Exchange Commission, Manuel Cohen, will lead off.

Mr. COHEN. Thank you, Mr. Chairman.

Senator WILLIAMS. This bill has been reported in the House of

Representatives?

Mr. COHEN. Yes; the bill has been reported favorably by the House

Interstate and Foreign Commerce Committee with one minor amendment. The House bill would make the same changes S. 1707 does.

It was amended to change the effective date from July 1, 1965, to

January 1, 1966. Otherwise it is in substance the same.

Senator WILLIAMS. July 1, 1966?

Mr. COHEN. No; the new effective date is January 1, 1966. •

STATEMENT OF MANUEL F. COHEN, CHAIRMAN OF THE

SECURITIES AND EXCHANGE COMMISSION

Mr. COHEN. Mr. Chairman, as you have already pointed out, I

am Manuel F. Cohen, Chairman of the Securities and Exchange

Commission. I have with me a number of staff people who have

been interested in this matter over a number of years.

Senator WILLIAMS. I have read your statement with the appendix

material and it certainly justifies, in my judgment, the measure that

is before us. If you would rather summarize it or read it, we shall

be glad to hear you either way.

Mr. COHEN. After hearing the chairman, I am content to rest.

(The prepared statement of Mr. Cohen follows:)
SEC REGISTRATION FEES 7

PREPARED STATEMENT OF MANUEL F. COHEN, CHAIRMAN OF THE SECURITIES

AND EXCHANGE COMMISSION

Mr. Chairman and members of the committee, I am Manuel F. Cohen, Chairman of the Securities and Exchange Commission.

We are here today to testify on S. 1707, a bill which was proposed by the

Commission. H.R. 7169, a companion bill which was also proposed by the

Commission, was reported out of the Interstate and Foreign Commerce Committee

of the House of Representatives in House Report 1015 on September 16, 1965,

and is now awaiting passage on the floor of the House. It varies from the Senate

bill only as to effective date. These bills would amend section 6(b) of the Securities Act of 1933, governing the fee paid on the filing under that act of a registration statement in connection with a public offering of securities. The present

fee is one one-hundredth of 1 percent of the maximum aggregate offering price,

or 10 cents per $1,000, with a minimum fee payable of $25. The amendment

would increase this fee to one-fiftieth of 1 percent of the maximum aggregate

offering price, or 20 cents per $1,000, and the minimum fee would be $100. Thus,

in the case of a public offering of $2 million of securities, enactment of this bill

would increase the registration fee from $200 to $400. Had the proposed fee

been in effect during fiscal 1965, an additional $1,790,000 would have been

collected by the Commission.

As a practical matter, the Securities Act registration fee is probably passed on

to investors. Since the increase would result indirectly in investors paying a

larger proportion of the overall cost of the Commission, which operates to protect investors, it appears to us to be fair and in accordance with the principle

stated by President Johnson in his budget message in January of this year that:

"Fairness to all taxpayers demands that those who enjoy special benefits should

bear a greater share of the costs."

The Securities Act registration fee is simple and familiar, and it is in most

instances only a relatively insignificant part of the total cost of floating an issue

of securities. Thus, as just noted, on an offering of $2 million, enactment of

this bill would increase the registration fee from $200 to $400, while the total

expenses of such an issue, exclusive of underwriting discounts or commissions,

but including such items as legal and accounting fees and printing costs, would

probably be $30,000 or more, and underwriting discounts and commissions would

probably exceed that figure.

In addition to registration fees under section 6(b) of the Securities Act, the

Federal securities laws also provide for several other fees in connection with the

work of the Commission. Thus, an annual registration fee is payable by national

stock exchanges, there is a filing fee for applications for qualifications of trust

indentures relating to securities not required to be registered under the Securities

Act of 1933, and the Commission may make reasonable charges for copies of

information. As amended in 1964, the Securities Exchange Act also allows

charges to be assessed against broker-dealers who are not members of a registered

securities association.

During fiscal 1965, registration fees under the Securities Act of 1933 were

$1,790,349. Fees paid by the stock exchanges were $1,506,353, and other fees

collected were $3,463. Thus, a total of $3,300,165 was received by the Commission

and deposited into the general fund of the Treasury for fiscal 1965. This represented 21.4 percent of our appropriation for that year. Had the fees proposed

in the pending bill been in effect, the additional $1,790,000 which would have been

received would bring the total to $5,090,165, representing 33 percent of the 1965

appropriation.

During the fiscal year which ended June 30, 1965, the direct cost of operating

our Division of Corporation Finance, the Division which is chiefly involved in

processing registration statements and trust indentures, was $3,129,589 for fiscal

1965. While this figure is less than the total fees which would have been collected

had the increased registration fee been in effect during 1965, and this Division

also processes material filed under the Securities Exchange Act of 1934, it must be

remembered that substantial work effort of other divisions and offices of the Commission is concerned from time to time with registration statements and other

matters relating to issuers which file such statements with the Commission.

It may accordingly be said that the total amount which would be paid under the

proposed bill would by no means exceed the Commission's entire costs involved

in administering those provisions of the Federal securities laws which are related

to the registration of securities under the 1933 act.

At the time of the passage of the first two securities acts there were indications

that the registration fees provided therein were intended to cover the anticipated
8 SEC REGISTRATION FEES

costs of administration. Thus, in the hearings before this committee on H.R.

4314, 73d Congress, 1st session, page 21, the Honorable Huston Thompson

stated with regard to the provision which was later enacted as section 6(b) :

"We have estimated * * * that if we take one one-hundredth of 1 percent of the

securities that are sold * * * [the amount realized] should be enough to carry

on the proper administration of this act." In fact, the amounts collected have

fallen far short of the entire cost of the Commission's work, but it must be remembered that a considerable part of these costs is attributable to enforecement

activities, which are probably not an appropriate basis for the imposition of fees.

There have been no amendments of the securities acts with respect to fees, except

for the 1964 amendment to section 15(b) (8) of the Securities Exchange Act relating

to fees to defray the cost of examinations and other expenses in regulating brokerdealers who are not members of a registered securities association.

Over the years there have been numerous suggestions or proposals for increased

or additional fees. In 1951 the Congress in title V of the Independent Offices

Appropriation Act, 1952, 5 U.S.C. 140, stated that "It is the sense of the Congress

that any work, service [etc.] * * * provided * * * by any Federal agency * * *

shall be self-sustaining to the full extent possible" and authorized agencies to

adopt fees to cover the cost of agency activities where fees were not fixed by

statute. Pursuant to the statute in 1952 the Commission submitted for comment

proposed rules which sought to impose substantial fees on various segments of

the securities industry. These proposals resulted in considerable controversy,

and a subcommittee of the House Committee on Interstate and Foreign Commerce, which was studying the activities of the Commission, reported its view that

any fees in this area should be "spelled out in specific legislation which has been

submitted to and passed by the Congress, rather than through any delegation of

authority to any agency to pass upon the need for or amount thereof." ("Report

of Committee on Interstate and Foreign Commerce on Securities and Exchange

Commission," H. Rept. No. 2508, 82d Cong., 2d sess. (1952), p. 138.) Thereafter

the Commission abandoned its proposal.

In subsequent years the Commission has expressed the view that any fair

fee proposal should include an increase in at least one of the existing fees. Thus

in 1957 we submitted a legislative proposal that would have increased the stock

exchange registration fee from 2 cents per $1,000 of the aggregate dollar amount

of each transaction to 5 cents per $1,000 and would have imposed a similar fee

upon broker-dealers effecting transactions otherwise than on a national securities

exchange. This proposal resulted in the introduction of bills in both the House

and Senate (S. 2520, 85th Cong., 1st sess.; H.R. 7778, 85th Cong., 1st sess.) but,

although the Senate passed its bill, no action was taken in the House. Substantially similar bills were reintroduced but not passed in 1959 and 1961. (S. 737,

86th Cong., 1st sess.; S. 755, 87th Cong., 1st sess.) In 1962, a bill increasing the

stock exchange registration fee to 5 cents per $1,000, but containing no provision

for over-the-counter transactions, was introduced but not passed. (H.R. 10167,

87th Cong., 2d sess.)

We have carefully reconsidered these proposals, and other possible bases for

fees, and have concluded that the proposal to increase the Securities Act registration fee is, at this time, the simplest and fairest. To raise the stock exchange

fees alone, at the present time, without assessing any fee for over-the-counter

transactions might appear inequitable, particularly in view of the growth of the

so-called third market, that is, over-the-counter trading in listed securities. On

the other hand, we believe it would be untimely to establish now a fee for overthe-counter transactions because of the fact that the National Association of

Securities Dealers has substantially increased the assessments which it levies

on the over-the-counter dealers in order to cover the cost of the increased selfregulatory activity undertaken by the association following the Commission's

Special Study of Securities Markets. Thus, the expenses of the association

increased from approximately $1,600,000 in its fiscal year 1960 to approximately

$2,700,000 in its fiscal year 1964, or an increase of approximately 40 percent.

Comparable charges are expected to be assessed by the Commission against

broker-dealers who are not members of the NASD, under authority granted by

the Securities Acts Amendments of 1964.

I am attaching to this statement and submitting for the record a cost statement

for fiscal 1965 itemized by offices and divisions of the Commission and a table

setting forth comparative figures over the years on amounts appropriated by

Congress for the Commission, total fees collected and the ratio of fees to appropriations.
4

SEC REGISTRATION FEES

Statement of cost by organization, fiscal year 1965

Office

9

Executive Offices $408,427

Office of Policy Research 197,271

Office of the Secretary 80,496

Office of Hearing Examiners 208,523

Office of Opinions and Review 175,289

Office of the General Counsel 382,606

Office of the Chief Accountant 154,450

Division of Corporation Finance 3, 129,589

Division of Trading and Markets 1, 906,648

Division of Corporate Regulation 1, 209,387

Office of the Comptroller 151, 110

Office of Personnel 136,587

Office of Records and Service 776,234

Subtotal, departmental 8, 916,617

Regional offices 6, 534,960

Grand total 15, 451,577

Statement of appropriations and fees collected, fiscal years 1935 to 1965, inclusive

Amount appropriated by Congress

Total fees collected

Percent of fees collected to total ap- propriation

935 936 937_ 938 939_ 940 941_ 942 943 944_ 945 946_ 947_ 948_ 949 950 95E 952 953_ 954 955_ 956_ 957 958 _ 959 960_ 96E 962 _ 963_ 964_ 965_ 

Total 

$1, 545, 337 3, 029, 494 4,245, 000 3, 895, 000 4,872, 000 5, 470, 000 5, 400, 000 5,440, 000 4, 910, 000

, 4, 602, 500 4, 696, 704 4, 694, 200 5, 533, 700 5, 738, 700 6, 121, 140 5, 878, 250 6, 230, 000 5, 813, 480 5, 245, 080 5, 000, 000 4,843, 180 5, 278, 000 5, 749, 000 6, 935, 000 7,705, 000 8, 100,000 9, 517, 500 11, 412, 500 13, 261, 700 13,937, 500 15, 442, 000

$227, 699 900, 400 1, 103, 780 716, 456 575, 399 492, 640 517, 772 312, 922 193, 366 407, 645 654, 176 1, 093, 432 1, 111, 416 946, 295 787, 545 790, 043 1, 087, 022 1, 364, 447 1, 199,370 1,215, 749 1, 703, 290 2, 074, 211 2, 243, 580 2, 334,370 2, 407,706 2, 631, 498 2,927, 407 3, 422, 403 2, 533, 986 3, 108,213

1 3,300, 165

14. 7

29. 7

26. 0

18. 4

11. 8

9. 0

9. 6

5.8 3. 9

8. 8

13. 7

23. 2

20.0 16. 5

12.8 13. 4

17.4 23. 5

22.8 34.3 35. 2

39. 3

39. 0

33. 6

31. 2

32.5 30. 7

29.9 19. 1

22.3

1 21. 4

200, 514,965 44, 382, 403 22. 13

1 Had the proposed fee been in effect in fiscal 1965, the Commission would have collected approximately

$1,790,000 additional, for a total of $5, 090,165, representing33 percent of the total appropriations for that year.

Senator WILLIAMS. On a matter like this, which we know is justified and has a great deal of merit, when you have all your men of high

talent from your Department, I'm a little uncomfortable about keeping them here too long because I know what they have waiting for

them back at the shop.

Mr. COHEN. They are busy, Mr. Chairman.

•
10 SEC REGISTRATION FEES

I might say this bill was reported in the House without any controversy, and I know of no opposition to the bill. It is very much in

line with the program of the administration, and it conforms to the

suggestion the President made earlier this year, that those who have

the benefit of statutes of this kind should bear a fair proportion of the

cost involved.

The bill is very simple. It was arrived at after considering a

number of possibilities, some of which have been presented to the

Congress before. It is simple in that it amends only the Securities

Act of 1933 and has the effect of doubling the registration fee under

that statute.

Had the proposed bill been in effect during the last fiscal year, we

estimate an additional $1.8 million would have been collected by the

U.S. Treasury. And I wish to emphasize that the Commission does

not receive any portion of the funds, certainly not directly, because it

goes to the U.S. Treasury. It would increase the overall relationship

of fees collected by the Commission under this provision and certain

other provisions of the statutes administered by the Commission from

approximately 21 percent to approximately 33 percent. We would

still not be completely self-supporting but it would increase substantially the amount the Treasury receives.

I should say we have given consideration to increasing other forms

of fees, including the fee that is paid by the Stock Exchanges each

year, and we concluded that, as an element of fairness, such an increase would raise a question whether similar fees should not be levied

on over-the-counter securities transactions. Not only would that

produce administrative problems but both the stock exchanges and

the National Association of Securities Dealers, Inc., at the instigation

of and in cooperation with the Commission, have stepped up vigorously their activities of recent years, and that has resulted in an

increase in expenses to them and fees levied on their members. We

therefore thought it would not be an appropriate way of dealing with

the problem at this time.

Senator WILLIAMS. Would you consider or recommend a fee structure that would make the fees provide full support for the Commission's activities?

Mr. COHEN. We have thought about this. Of course, a good deal

of the Commission's activity is in the enforcement area. That is,,

we go after people who have violated the law and also assist in

prosecution of those who violate the law. It is difficult to find a basis

for recovering the costs of these enforcement activities.

We have given a great deal of consideration to that problem from

time to time and have determined that there might be some serioius

question if we attempted to raise the fees to a point which would

equal the expense of the Commission. We are therefore making a first

step in this area and we hope that it will improve the situation considerably. We will have to review the situation from time to time,

because, as you know, the President's program and the entreaties of

the Budget Bureau have always been in the direction of the suggestion

you have just made, to make more of the Federal agencies self-supportmg. We will reconsider this from time to time and we may come back

with further suggestions.

Senator WILLIAMS. Your cost of operating the Commission, the

moneys appropriated for that, has steadily increased for the last 10
SEC REGISTRATION FEES 11

years. Each year has shown an increase. And I just wonder when

this fee structure was last amended or changed or increased.

Mr. COHEN. The fee structure really hasn't been changed in any

essential way since these statutes were first adopted in 1933 and

1934. Some of the later statutes, to one of which Mr. Richardson

will refer this morning, have no specific provision for a fee.

However, in 1951 Congress passed title V, the Independent Offices

Appropriation Act which was designed to empower those agencies

which may have had some question about their authority to impose

fees. This was intended to achieve a purpose similar to a bill now

pending in the Congress which has as its purpose providing for user

charges. The Budget Bureau persuaded the Commission to take the

first step in this direction. In a sense I guess we were the guinea pig.

We did submit for public comment and consideration a number of

fee proposals, including fees to be levied on investment companies.

At the time there was a subcommittee of the House Interstate and

Foreign Commerce Committee reviewing certain activities of the

Commission and in a report issued by that committee, as a result of

considerable complaint made to members of the committee and to

other Members of the Congress, that committee reported that any

increase in fees to be exacted by the Commission directly or indirectly

should be spelled out in specific legislation which had been submitted

to and passed by the Congress, rather than through any delegation

of authority to any agency to determine the need for or amount

of fees.

We therefore abandoned our rules proposal at that time and, as

I indicated earlier, from time to time we hasve submitted legislative

proposals of a slightly different character. None of those received

favorable recognition in the Congress, although I believe it is fair

to -say that this committee did in fact recognize the problem and acted

favorably on a number of those bills. Those bills did not survive

House scrutiny.

Senator WILLIAMS. I don't have anything further. Thank you very

much, Mr. Chairman.

Mr. COHEN. Thank you.

Senator WILLIAMS. Mr. Richardson. Mr. Dorsey Richardson has

been helpful to this committee on many, many occasions.

STATEMENT OF DORSEY RICHARDSON, PRESIDENT, INVESTMENT

COMPANY INSTITUTE

Mr. RICHARDSON. It is a great privilege to be here.

Senator WILLIAMS. Are you speaking institutionally or individually

today here?

Mr. RICHARDSON. Institutionally.

My name is Dorsey Richardson. I am appearing on behalf of the

Investment Company Institute of which I am president. The institute is a voluntary association of what is popularly known as the

mutual fund industry. The member funds have assets of close to

$32 billion with approximately 3.4 million stockholders.

My statement, Senator, will be very brief indeed. Mr. Cohen has

clearly stated the purpose and effect of this legislation. I wish to say

first that the Investment Company Institute is in agreement with the

purposes of the proposed legislation. In this connection, however, we
12 SEC REGISTRATION FEES

wish to call attention to the special characteristics of the registration

of the shares of open end investment companies—popularly called

"mutual funds"—which the institute represents. It is our belief

that the recurring registrations of such shares to permit their continuous offering through periodically amended registration statements

contrast sharply with the occasional registration of a new issue by

any other type of corporation. Consequently, we may wish at an.

appropriate future time to request the Securities and Exchange Commission to give consideration to proposing some reduction of the fees

payable with respect to the continuous issues of open end investment

company shares, subsequent to their original offerings. It is not our

intention to ask this committee to consider this matter at the present

time.

That is all I have to say, sir. I will be very glad to answer any

questions.

Senator WILLIAMS. It is your purpose, then, to be here to agree

with this legislation, but with the caveat in a sense that later on you

might want us to consider specially the continuous open end company

issues; is that it?

Mr. RICHARDSON. We regard it at least as a valid point to raise,

to discuss with the Securities and Exchange Commission. We might

hope to get their consent to come back to this committee at some time

in the future with a proposal.

Senator WILLIAMS. I would think from the Commission's standpoint there isn't the same expense on continuing issues as there is on

an initial issue; is that right?

Mr. RICHARDSON. That would be the basis of such a proposal, I

think.

Senator WILLIAMS. You were not raising that as a specific request

at this time, out of a spirit of cooperation with our endeavors here

to raise fees at this time; is that it?

Mr. RICHARDSON. That is it. We are in full sympathy with your

effort, and the Commission's, to raise fees. We think it is a proper

direction in which to move. We do think, however, that the thought

we have in mind is a valid subject for discussion later. on with the

Commission initially. If we can come to an agreement with the

Commission, I presume the appropriate thing would be to come back

to the committee here some time in the future.

Senator WILLIAMS. I think we all should thank you for your spirit

of cooperation at this time, with the pressure to get this measure

passed now.

Have Chairman Cohen and others of the Commission been advised

of your advanced planning here?

Mr. RICHARDSON. I would say they have been. We attempted to

advise them. Chairman Cohen had the opportunity to glance at

my statement just before I came on the stand and he didn't seem

to have any serious trouble with it.

Senator WILLIAMS. Well, Chairman Cohen is still with us in the

hearing room and has heard all this and has a smile on his face.

Mr. COHEN. At the conclusion of Mr. Richardson's testimony, if

the chairman will bear with me, I have a word or two I might add.

Senator WILLIAMS. Fine. Won't you come up?

Mr. COHEN. First, I should say the Commission joins the Chairman

in expressing appreciation for the attitude here expressed by the
SEC REGISTRATION FEES 13

Investment Company Institute, and more particularly by Mr.

Richardson, and we will, of course, be ready to sit with him and his

colleagues any time to discuss this problem.

I think in all fairness, however, I should point out that there are

some who believe that the investment companies have a special

problem in their dealings with the SEC. They are required to file

registration statements under the Investment Company Act and reports under that statute. They file applications. There are special

types of reports that are much more voluminous than those required

of ordinary industrial companies. We have almost an entire division

devoting its effort to dealing with and meeting the problems of investment companies. The amount of fees to be paid by investment companies is a complicated problem and I would agree with Mr. Richardson that it does deserve some further discussion. We will provide

that discussion at any time that Mr. Richardson deems it appropriate

so to do.

I might add further to my comments on the 1952 rulemaking effort

of the Commission in consequence of that 1951 statute. My recollection, although it is somewhat hazy, is that the investment companies were among those who objected the loudest. I would hope

that, with Mr. Richardson at the helm now, we will have a much

more congenial and understanding review of the situation.

Mr. RICHARDSON. Thank you for those very kind words, Mr.

Chairman. We may not agree, but I'm sure we can discuss this thing

on its merits and, if it has merit, you will take cognizance of that. In

the meantime, I don't want to take your time, sir.

Senator WILLIAMS. No; I think it has been made clear by the Commission and the industries that this increase in fees is reasonable and

proper. I wish all matters I have responsibility for had the benefit of

the cooperation and harmony that this matter has.

Thank you very much, gentlemen.

e will proceed with the committee meeting as soon as we can.

Mr. COHEN. Thank you.

Mr. RICHARDSON. Thank you.

(Whereupon, at 10:20 a.m., the subcommittee adjourned.)

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