[Federal Register Volume 61, Number 100 (Wednesday, May 22, 1996)]
[Proposed Rules]
[Pages 25601-25604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12777]



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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 240, 250, 270, and 275

[Release Nos. 33-7293; 34-37220; 35-26517; IC-21961; IA-1563; File No. 
S7-14-96]
RIN 3235-AG79


Proposal To Eliminate Fees Previously Adopted by the Commission 
Pursuant to the Independent Offices Appropriations Act of 1952

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (Commission) is 
proposing to eliminate each of the user fees currently adopted under 
the Independent Offices Appropriations Act of 1952, in conjunction with 
rules under the Securities Act of 1933, the Securities Exchange Act of 
1934, the Public Utility Holding Company Act of 1935, the Investment 
Company Act of 1940, and the Investment Advisers Act of 1940. These 
fees were first adopted in 1972 to contribute towards the cost of 
agency operations. However, since that time, the amount of fees 
collected by the Commission has increased dramatically. In 1995, the 
Commission collected nearly double the amount of fees required to fund 
the agency's operations.

DATES: Comments must be received on or before July 8, 1996.

ADDRESSES: All interested persons are invited to submit their views and 
comments concerning the rule proposal should be submitted in triplicate 
to Jonathan G. Katz, Secretary, U.S. Securities and Exchange 
Commission, Mail Stop 6-9, 450 Fifth Street, N.W., Washington, D.C. 
20549. Comments also may be submitted electronically at the following 
E-mail address: <a href="/cdn-cgi/l/email-protection#a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3"><span class="__cf_email__" data-cfemail="1d6f687178307e7270707873696e5d6e787e337a726b">[email protected]</span></a>. All comment letters should refer 
to File Number S7-14-96; this file number should be included in the 
subject line if E-mail is used. Comment letters will be available for 
inspection and copying in the public reference room at the same 
address. Electronically submitted comments will be posted on the 
Commission's Internet web site (http://www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Henry I. Hoffman, Office of the 
Comptroller, at (202) 942-0343.

SUPPLEMENTARY INFORMATION: Each fee identified for elimination is 
listed on the attached table labeled TABLE OF IOAA FEES PROPOSED FOR 
ELIMINATION.

Proposal

    In 1972, to offset the cost to the government of related Commission 
operations, the Securities and Exchange Commission established through 
rulemaking a fee schedule for numerous types of applications, 
statements and reports.<SUP>1 These regulatory fees, authorized under 
Title V of the Independent Offices Appropriations Act of 1952 (31 
U.S.C.A. 9701), are commonly referred to as IOAA fees.<SUP>2
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    \1\ Securities Act of 1933, Release No. 5229, January 25, 1972.
    \2\ The Independent Offices Appropriations Act of 1952, 
specifically 31 U.S.C. 9701, authorizes independent agencies of the 
federal government to prescribe fees and charges for activities that 
provide benefits to individuals and businesses. This statute states 
that ``It is the sense of Congress that each service * * * provided 
by an agency * * * to a person * * * is to be self-sustaining to the 
extent possible.'' The statute also authorizes the head of each 
agency to prescribe regulations establishing the charge for a 
service. Notably, a separate provision of the Securities Exchange 
Act of 1934 (Exchange Act) specifically authorizes the Commission to 
impose fees authorized by this act. 15 U.S.C. 14(g)(4).
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    Today, the Commission is proposing the elimination of each of its 
current IOAA fees.<SUP>3 The collection of these fees

[[Page 25602]]

is no longer appropriate since the amount of revenue currently 
generated by statutory fees imposed under the securities laws far 
exceeds the annual cost of Commission operations. The additional 
revenue added by the IOAA fees is an insignificant portion of the total 
revenue received. In fiscal 1972, the Commission collected $19 million 
in fees and cost $27 million to operate. IOAA fees represented 12 
percent of the total 1972 revenue. In fiscal 1995, the Commission 
collected $559 million in fees and was appropriated $297 million for 
operating costs. IOAA fees represented just 2 percent of the total 1995 
revenue.<SUP>4
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    \3\ See attached table of IOAA fees. Note that the Commission's 
proposal would only eliminate the collection of regulatory fees 
imposed under the IOAA; it would not affect other fees imposed by 
statute that are also collected by the Commission. These statutory 
fees include registration fees collected pursuant to Section 6(b) of 
the Securities Act of 1933 (Securities Act) and Section 307(b) of 
the Trust Indenture Act of 1939, going private fees collected 
pursuant to Section 13 of the Exchange Act, proxy and tender offer 
fees collected pursuant to Section 14 of the Exchange Act, and 
transaction fees collected pursuant to Section 31 of the Exchange 
Act.
    \4\ The vast increase in Commission fee revenue between 1972 and 
1995 has developed from two basic sources. First is a significant 
increase in the underlying value of the securities on which the 
statutory fees are based. The underlying value of securities 
registered with the Commission under Section 6(b) of the Securities 
Act increased from $62 billion to $1.2 trillion from 1972 to 1995. 
Further, during the same period, the value of shares transacted on 
the U.S. securities exchanges and subject to a fee under Section 31 
of the Exchange Act increased from $196 billion to $3 trillion. 
Second is the increased use of offsetting collections under Section 
6(b) of the Securities Act to fund agency operations since 1990. The 
amount of offsetting revenue collected under Section 6(b) in 1991, 
the first year fee revenue was used to directly offset Commission 
funding, was $37 million at a fee rate of \1/40\ of one percent, and 
in 1995 was $157 million at an increased fee rate of \1/29\ of one 
percent.
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    This significant difference between the amount of fee revenue 
collected by the Commission and the amount of its annual funding level 
has been of continuing concern to Congress. In 1988, the Securities 
Subcommittee of the Senate Committee on Banking, Housing and Urban 
Affairs directed the Commission to study its fee structure and funding 
status (Commission Fee Study).<SUP>5
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    \5\ Senate Report 100-105, 100th Cong., 1st Session, and, in 
response, Commission issued findings in a U.S. Securities and 
Exchange Commission ``Self Funding Study'' (January 1989) and 
accompanying ``Legislative Proposals and Fee Options'' (January 
1989).
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    As a result of the Commission Fee Study and continuing 
Congressional concerns about the level of the Commission's fees, in 
1993 the House passed H.R. 2239, the Securities and Exchange Commission 
Authorization Act of 1993. One of the stated purposes of this bill was 
to ``establish a system for the annual adjustment of fees collected by 
the Commission so that the total amount appropriated to the Commission 
for any fiscal year will be offset by the amount collected during such 
fiscal year * * *'' <SUP>6
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    \6\ H.R. 2239, Section 31A.(a).
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    Although Congress did not enact H.R. 2239, in 1995 members of the 
Commission's authorization committee in the Senate stated that the 
total amount of fees collected annually by the agency far exceed the 
cost of its regulation and, therefore, should be reduced.<SUP>7
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    \7\ Letter dated April 6, 1995, from Senator D'Amato, Chairman 
of the Senate Banking Committee, to Senators Domenici and Exon, 
respectively Chairman and Ranking Member of the Senate Committee on 
the Budget.
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    On March 12, 1996, the House passed H.R. 2972, the ``Securities and 
Exchange Commission Authorization Act of 1996.'' This bill has as a 
major purpose, ``to reduce over time the rates of fees charged under 
the Federal securities laws.'' <SUP>8 Notably, H.R. 2972 contains a 
sense of the Congress resolution that the Commission should eliminate 
its fees imposed under the IOAA.<SUP>9
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    \8\ H.R. 2972, Section 2(2).
    \9\ Ibid, Section 7(1) states that ``the fees authorized by the 
amendments made by this Act are in lieu of, and not in addition to, 
any fees that the Securities and Exchange Commission is authorized 
to impose or collect pursuant to Section 9701 of title 31, United 
States Code * * *''.
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    The Commission is proposing to eliminate IOAA fees for two 
additional reasons. First, the Commission is committed, consistent with 
its mission of investor protection, to eliminate unnecessary 
regulations imposed on the capital formation process. The Commission 
has determined that eliminating these IOAA fees will reduce such 
burdens but neither harm investors nor the Commission's mission to 
protect them. Second, the collection of these IOAA fees imposes a 
disproportionate cost on the Commission. In 1995, IOAA fees represented 
less than 2% of the total fee revenue collected by the Commission, but 
more than one-half of the total number of fee payments processed by 
Commission staff, making recordkeeping for these fees 
disproportionately costly.

Cost/Benefit Analysis

    Comments are requested related to any costs or benefits associated 
with the elimination of the Commission's current IOAA fees. The 
elimination of IOAA fees will provide an obvious benefit to persons 
obligated to pay such fees, i.e., they will no longer have to pay the 
fees. In addition, the Commission will avoid the costs associated with 
processing and auditing the collection of such fees; Commission 
resources spent on those tasks will be reallocated to other mandated 
tasks. Other costs and benefits are expected to be de minimis.

Summary of Regulatory Flexibility Analysis
    The Commission has prepared an Initial Regulatory Flexibility 
Analysis in accordance with 5 U.S.C. 603 regarding the proposed rule 
changes. The analysis reiterates the reasons and objectives for the 
proposed rule changes discussed above in this release. The analysis 
also describes the legal basis for the proposal and discusses its 
effect on small entities as defined by the Securities Act, the Exchange 
Act, the Public Utility Holding Company Act of 1935, the Investment 
Company Act of 1940, and the Investment Advisers Act of 1940. This 
proposed rule imposes no additional reporting, recordkeeping or other 
compliance requirements on small businesses, and the Commission 
believes that there are no overlapping or conflicting federal rules. In 
addition, the Commission does not believe that any significant 
alternative to the proposal would both accomplish the stated objectives 
and minimize any significant impact on small companies. In fact, the 
alternatives to eliminating the fee would be to maintain or increase 
the current fees. Neither alternative provides any increased benefit 
nor is appropriate in the public interest. The Commission encourages 
the submission of written comments with respect to the Initial 
Regulatory Flexibility Analysis. A copy of the Initial Regulatory 
Flexibility Analysis may be obtained by contacting Henry I. Hoffman, 
Securities and Exchange Commission, Office of the Comptroller, Room 
2080, Washington, D.C. 20549.
Paperwork Reduction Act
     The Paperwork Reduction Act does not apply because the proposed 
elimination of IOAA fees does not impose recordkeeping or information 
collection requirements, or other collections of information which 
require the approval of the Office of Management and Budget under 44 
U.S.C. 3501 et seq.

    Statutory Basis: The Commission's authority for this action is 
31 U.S.C. 9701 and 15 U.S.C. 14(g)(4).

[[Page 25603]]



                 Securities and Exchange Commission Table of IOAA Fees Proposed for Elimination                 
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                Fee cite                     Rule/form/schedule         Amount              Description         
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                                             Securities Act of 1933                                             
                                                                                                                
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17 CFR 230.236(a),(c)..................  Rule 236..................         $100  Exemption of shares offered in
                                                                                   connection with certain      
                                                                                   transactions.                
17 CFR 230.252(f)......................  Form 1-A..................          500  Offering statement under      
                                                                                   Regulation A.                
17 CFR 230.310(a)......................  Schedules A, B, C or D....          100  Offering sheet under          
                                                                                   Regulation B.                
17 CFR 230.604(a)......................  Form 1-E..................          100  Notification of offering under
                                                                                   Regulation E by a small      
                                                                                   business investment company. 
17 CFR 230.652.........................  Form 1-F..................          100  Notification under Regulation 
                                                                                   F.                           
                                                                                                                
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                                         Securities Exchange Act of 1934                                        
                                                                                                                
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17 CFR 240.0-11(c)(1)(ii)..............  Schedule 14A..............          125  Proxy Statement.              
17 CFR 240.0-11(c)(1)(ii) 17 CFR         Schedule 14C..............          125  Information Statement.        
 240.14c-5(g).                                                                                                  
17 CFR 240.12b-7.......................  Form 8-A..................          250  Registration of certain       
                                                                                   classes of securities        
                                                                                   pursuant to Section 12(b) or 
                                                                                   (g).                         
17 CFR 240.12b-7.......................  Form 8-B..................          250  Registration of securities of 
                                                                                   certain successor issuers    
                                                                                   pursuant to Section 12(b) or 
                                                                                   (g).                         
17 CFR 240.12b-7.......................  Form 10...................          250  General form for registration 
                                                                                   of securities pursuant to    
                                                                                   Section 12(b) or (g).        
17 CFR 240.12b-7.......................  Form 10-SB................          250  Optional form for the         
                                                                                   registration of securities of
                                                                                   a small business issuer.     
17 CFR 240.12b-7.......................  Form 18...................          250  Application for registration  
                                                                                   of securities of foreign     
                                                                                   governments and political    
                                                                                   subdivisions thereof.        
17 CFR 240.12b-7, 17 CFR 240.13a-1, 17   Form 20-F.................          250  Registration of securities of 
 CFR 240.15d-1.                                                                    foreign private issuers      
                                                                                   pursuant to Section 12 (b) or
                                                                                   (g) and annual reports       
                                                                                   pursuant to Sections 13 and  
                                                                                   15(d)                        
17 CFR 240.12b-7, 17 CFR 240.13a-1, 17   Form 40-F.................          250  Registration of securities of 
 CFR 240.15d-1.                                                                    certain Canadian issuers     
                                                                                   pursuant to Section 12(b) or 
                                                                                   (g) and for reports pursuant 
                                                                                   to Section 15(d) and Rule 15d-
                                                                                   4.                           
17 CFR 240.13a-1, 17 CFR 240.15d-1.....  Form 10-K.................          250  Annual report pursuant to     
                                                                                   Sections 13 and 15(d).       
17 CFR 240.13a-1, 17 CFR 240.15d-1.....  Form 10-KSB...............          250  Optional form for annual      
                                                                                   report of small business     
                                                                                   issuers under Sections 13 and
                                                                                   15(d).                       
17 CFR 240.13a-1.......................  Form 18-K.................          250  Annual report for foreign     
                                                                                   governments and political    
                                                                                   subdivisions thereof.        
17 CFR 240.13d-7.......................  Schedule 13D, Schedule 13D/         100  Schedule for reporting        
                                          A (if amended to >5%).                   beneficial ownership of more 
                                                                                   than five percent in an      
                                                                                   equity security.             
17 CFR 240.13d-7.......................  Schedule 13G, Schedule 13G/         100  Short form schedule for       
                                          A (if amended to >5%).                   reporting beneficial         
                                                                                   ownership of more than five  
                                                                                   percent in an equity security
17 CFR 240.14a-6(i)....................  Schedule 14A..............      125/500  Proxy Statement.              
17 CFR 240.14a-101 (Item 22(a)(2)).....  Schedule 14A..............          125  Proxy filing fee for          
                                                                                   investment companies.        
17 CFR 240.15d-1.......................  Form 11-K.................          250  Annual report for employee    
                                                                                   stock purchase savings and   
                                                                                   similar plans.               
                                                                                                                
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                                    Public Utility Holding Company Act of 1935                                  
                                                                                                                
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17 CFR 250.1(d)........................  Form U5S..................          250  Annual report of registered   
                                                                                   holding company.             
17 CFR 250.94(b).......................  Form U-13-60..............          250  Annual report of mutual or    
                                                                                   subsidiary service company.  
17 CFR 250.106.........................  Form U-1..................        2,000  Application-declaration       
                                                                                   statement.                   
17 CFR 250.106.........................  Form U-3A-2...............    2,000/500  Annual holding company        
                                                                                   exemption statement.         
17 CFR 250.106.........................  Form U-3A3-1..............          500  Bank exemption statement.     
17 CFR 250.106.........................  Form U-13-1...............        2,000  Application for approval of   
                                                                                   mutual or subsidiary service 
                                                                                   company.                     
17 CFR 250.106.........................  Form U-7D.................      200/100  Certificate of lease of       
                                                                                   utility facilities.          
17 CFR 250.106.........................  Form U-R-1................        2,000  Declaration regarding a       
                                                                                   reorganization.              
                                                                                                                
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                                          Investment Company Act of 1940                                        
                                                                                                                
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17 CFR 240.14a-101 (Item 22(a)(2)).....  Schedule 14A..............          125  Proxy filing fee.             
17 CFR 270.0-5(d)......................  Rule 0-5..................          500  Application under the 1940    
                                                                                   Act.                         
17 CFR 270.8b-6........................  Rule 8b-6, Forms N-1A, N-         1,000  1940 Act registration fee.    
                                          2, N-3, N-4 and N-5.                                                  
17 CFR 270.24f-2(a)(3).................  Rule 24f-2................          500  Registration of an indefinite 
                                                                                   amount of securities.        
17 CFR 270-30a-1.......................  Rule 30-1.................          125  Form N-SAR filing fee.        
                                                                                                                
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[[Page 25604]]

                                                                                                                
                               Investment Advisers Act of 1940 (``Advisers Act'')                               
                                                                                                                
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17 CFR 275.0-5(d)......................  Rule 0-5..................          150  Application under the Advisers
                                                                                   Act.                         
17 CFR 275.203-3(a)....................  Rule 203-3................          150  Advisers Act registration fee.
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\1\ (First/subseq.).                                                                                            


    Dated: May 16, 1996.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-12777 Filed 5-21-96; 8:45 am]
BILLING CODE 8010-01-P

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