House Report 107-52 - INVESTOR AND CAPITAL MARKETS FEE RELIEF ACT

[House Report 107-52]
[From the U.S. Government Publishing Office]

107th Congress Rept. 107-52
HOUSE OF REPRESENTATIVES
1st Session Part 1

======================================================================

INVESTOR AND CAPITAL MARKETS FEE RELIEF ACT

_______

May 1, 2001.--Ordered to be printed

_______

Mr. Oxley, from the Committee on Financial Services, submitted the
following

R E P O R T

together with

DISSENTING VIEWS

[To accompany H.R. 1088]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred
the bill (H.R. 1088) to amend the Securities Exchange Act of
1934 to reduce fees collected by the Securities and Exchange
Commission, and for other purposes, 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.............................................. 7
Background and Need for Legislation.............................. 8
Hearings......................................................... 10
Committee Consideration.......................................... 11
Committee Votes.................................................. 11
Committee Oversight Findings..................................... 13
Performance Goals and Objectives................................. 13
New Budget Authority, Entitlement Authority, and Tax Expenditures 13
Committee Cost Estimate.......................................... 13
Congressional Budget Office Estimate............................. 13
Federal Mandates Statement....................................... 19
Advisory Committee Statement..................................... 19
Constitutional Authority Statement............................... 19
Applicability to Legislative Branch.............................. 19
Exchange of Committee Correspondence............................. 19
Section-by-Section Analysis of the Legislation................... 22
Changes in Existing Law Made by the Bill, as Reported............ 27
Dissenting Views................................................. 40

Amendment

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 ``Investor and Capital Markets Fee
Relief Act''.

SEC. 2. IMMEDIATE TRANSACTION FEE REDUCTIONS.

Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is
amended--
(1) by striking ``\1/300\ of one percent'' each place it
appears in subsections (b) and (d) and inserting ``$12 per
$1,000,000'';
(2) in the first sentence of subsection (b), by striking ``,
except that'' and all that follows through the end of such
sentence and inserting a period;
(3) in paragraph (1) of subsection (d), by striking ``,
except that'' and all that follows through the end of such
paragraph and inserting a period;
(4) in subsection (e), by striking ``$0.02'' and inserting
``$0.0072''; and
(5) by adding at the end the following new subsection:
``(i) Pro Rata Application.--The rates per $1,000,000 required by
this section shall be applied pro rata to amounts and balances equal to
less than $1,000,000.''.

SEC. 3. REVISION OF SECURITIES TRANSACTION FEE PROVISIONS; ADDITIONAL
FEE REDUCTIONS.

(a) Pooling and Allocation of Collections.--Section 31 of the
Securities Exchange Act of 1934 (15 U.S.C. 78ee) is further amended--
(1) in subsection (b)--
(A) by striking ``Every'' and inserting ``Subject to
subsection (j), each''; and
(B) by striking the last sentence;
(2) by striking subsection (c);
(3) in subsection (d)--
(A) by striking paragraphs (2) and (3);
(B) by striking the following:
``(d) Off-Exchange Trades of Last-Sale-Reported Securities.--
``(1) Covered transactions.--Each national securities''
and inserting the following:
``(c) Off-Exchange Trades of Exchange Registered and Last-Sale-
Reported Securities.--Subject to subsection (j), each national
securities'';
(C) by inserting ``registered on a national
securities exchange or'' after ``security futures
products)''; and
(D) by striking ``, excluding any sales for which a
fee is paid under subsection (c)'';
(4) in subsection (e), by striking ``except that for fiscal
year 2007'' and all that follows through the end of such
subsection and inserting the following: ``except that for
fiscal year 2007 and each succeeding fiscal year such
assessment shall be equal to $0.0042 for each such
transaction.'';
(5) in subsection (f), by striking ``Dates for Payment of
Fees.--The fees required'' and inserting ``Dates for
Payments.--The fees and assessments required'';
(6) by redesignating subsections (e) through (i) (as added by
section 2(5)) as subsections (d) through (h), respectively;
(7) by adding at the end the following new subsection:
``(i) Deposit of Fees.--
``(1) Offsetting collections.--Fees collected pursuant to
subsections (b), (c), and (d) for any fiscal year--
``(A) shall be deposited and credited as offsetting
collections to the account providing appropriations to
the Commission; and
``(B) except as provided in subsection (k), shall not
be collected for any fiscal year except to the extent
provided in advance in appropriation Acts.
``(2) General revenues prohibited.--No fees collected
pursuant to subsections (b), (c), and (d) for fiscal year 2002
or any succeeding fiscal year shall be deposited and credited
as general revenue of the Treasury.''.
(b) Additional Reductions of Fees.--
(1) Amendment.--Section 31 of the Securities Exchange Act of
1934 (15 U.S.C. 78ee) is further amended by adding after
subsection (i) (as added by subsection (a)(7)) the following
new subsections:
``(j) Recapture of Projection Windfalls for Further Rate
Reductions.--
``(1) Annual adjustment.--For each of the fiscal years 2003
through 2011, the Commission shall by order adjust each of the
rates applicable under subsections (b) and (c) for such fiscal
year to a uniform adjusted rate that, when applied to the
baseline estimate of the aggregate dollar amount of sales for
such fiscal year, is reasonably likely to produce aggregate fee
collections under this section (including assessments collected
under subsection (d)) that are equal to the target offsetting
collection amount for such fiscal year.
``(2) Final rate adjustment.--For fiscal year 2012 and all of
the succeeding fiscal years, the Commission shall by order
adjust each of the rates applicable under subsections (b) and
(c) for all of such fiscal years to a uniform adjusted rate
that, when applied to the baseline estimate of the aggregate
dollar amount of sales for fiscal year 2012, is reasonably
likely to produce aggregate fee collections under this section
in fiscal year 2012 (including assessments collected under
subsection (d)) equal to the target offsetting collection
amount for fiscal year 2011.
``(3) Review and effective date.--An adjusted rate prescribed
under paragraph (1) or (2) and published under subsection (g)
shall not be subject to judicial review. Subject to subsections
(i)(1)(B) and (k)--
``(A) an adjusted rate prescribed under paragraph (1)
shall take effect on the later of--
``(i) the first day of the fiscal year to
which such rate applies; or
``(ii) 30 days after the date on which a
regular appropriation to the Commission for
such fiscal year is enacted; and
``(B) an adjusted rate prescribed under paragraph (2)
shall take effect on the later of--
``(i) the first day of fiscal year 2012; or
``(ii) 30 days after the date on which a
regular appropriation to the Commission for
fiscal year 2012 is enacted.
``(k) 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 (as offsetting collections) the
fees and assessments under subsections (b), (c), and (d) at the rate in
effect during the preceding fiscal year, until 30 days after the date
such a regular appropriation is enacted.
``(l) Definitions.--For purposes of this section:
``(1) Target offsetting collection amount.--The target
offsetting collection amount for each of the fiscal years 2002
through 2011 is determined according to the following table:

Target offsetting
``Fiscal year:
collection amount

2002............................................... $585,720,000
2003............................................... $679,320,000
2004............................................... $822,240,000
2005............................................... $976,320,000
2006............................................... $1,148,040,000
2007............................................... $880,880,000
2008............................................... $892,080,000
2009............................................... $1,023,120,000
2010............................................... $1,161,440,000
2011............................................... $1,321,040,000

``(2) Baseline estimate of the aggregate dollar amount of
sales.--The baseline estimate of the aggregate dollar amount of
sales for any fiscal year is the baseline estimate of the
aggregate dollar amount of sales of securities (other than
bonds, debentures, other evidences of indebtedness, and
security futures products) to be transacted on each national
securities exchange and by or through any member of each
national securities association (otherwise than on a national
securities exchange) during such fiscal year as determined by
the Commission, after consultation with the Congressional
Budget Office and the Office of Management and Budget, using
the methodology required for making projections pursuant to
section 257 of the Balanced Budget and Emergency Deficit
Control Act of 1985.''.
(2) Conforming amendment.--Section 31(g) of such Act (as
redesignated by subsection (a)(6) of this section) is amended
by inserting before the period at the end the following: ``not
later than April 30 of the fiscal year preceding the fiscal
year to which such rate applies, together with any estimates or
projections on which such fees are based''.

SEC. 4. REDUCTION OF REGISTRATION FEES.

Section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) is
amended by striking paragraphs (2) through (5) and inserting the
following:
``(2) Fee payment required.--At the time of filing a
registration statement, the applicant shall pay to the
Commission a fee at a rate that shall be equal to $125 per
$1,000,000 of the maximum aggregate price at which such
securities are proposed to be offered, except that during
fiscal year 2003 and any succeeding fiscal year such fee shall
be adjusted pursuant to paragraph (5) or (6).
``(3) Offsetting collections.--Fees collected pursuant to
this subsection for any fiscal year--
``(A) shall be deposited and credited as offsetting
collections to the account providing appropriations to
the Commission; and
``(B) except as provided in paragraph (9), shall not
be collected for any fiscal year except to the extent
provided in advance in appropriation Acts.
``(4) General revenues prohibited.--No fees collected
pursuant to this subsection for fiscal year 2002 or any
succeeding fiscal year shall be deposited and credited as
general revenue of the Treasury.
``(5) Annual adjustment.--For each of the fiscal years 2003
through 2011, the Commission shall by order adjust the rate
required by paragraph (2) for such fiscal year to a rate that,
when applied to the baseline estimate of the aggregate maximum
offering prices for such fiscal year, is reasonably likely to
produce aggregate fee collections under this subsection that
are equal to the target offsetting collection amount for such
fiscal year.
``(6) Final rate adjustment.--For fiscal year 2012 and all of
the succeeding fiscal years, the Commission shall by order
adjust the rate required by paragraph (2) for all of such
fiscal years to a rate that, when applied to the baseline
estimate of the aggregate maximum offering prices for fiscal
year 2012, is reasonably likely to produce aggregate fee
collections under this subsection in fiscal year 2012 equal to
the target offsetting comlection amount for fiscal year 2011.
``(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata to
amounts and balances equal to less than $1,000,000.
``(8) Review and effective date.--An adjusted rate prescribed
under paragraph (5) or (6) and published under paragraph (10)
shall not be subject to judicial review. Subject to paragraphs
(3)(B) and (9)--
``(A) an adjusted rate prescribed under paragraph (5)
shall take effect on the later of--
``(i) the first day of the fiscal year to
which such rate applies; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
such fiscal year is enacted; and
``(B) an adjusted rate prescribed under paragraph (6)
shall take effect on the later of--
``(i) the first day of fiscal year 2012; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
fiscal year 2012 is enacted.
``(9) 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 (as
offsetting collections) under this subsection at the rate in
effect during the preceding fiscal year, until 5 days after the
date such a regular appropriation is enacted.
``(10) Publication.--The Commission shall publish in the
Federal Register notices of the rate applicable under this
subsection and under sections 13(e) and 14(g) for each fiscal
year not later than April 30 of the fiscal year preceding the
fiscal year to which such rate applies, together with any
estimates or projections on which such rate is based.
``(11) Definitions.--For purposes of this subsection:
``(A) Target offsetting collection amount.--The
target offsetting collection amount for each of the
fiscal years 2002 through 2011 is determined according
to the following table:

Target offsetting
``Fiscal year:
collection amount
2002............................................... $512,500,000
2003............................................... $589,380,000
2004............................................... $650,385,000
2005............................................... $790,075,000
2006............................................... $949,050,000
2007............................................... $214,200,000
2008............................................... $233,700,000
2009............................................... $284,115,000
2010............................................... $333,840,000
2011............................................... $394,110,000

``(B) Baseline estimate of the aggregate maximum
offering prices.--The baseline estimate of the
aggregate maximum offering prices for any fiscal year
is the baseline estimate of the aggregate maximum
offering price at which securities are proposed to be
offered pursuant to registration statements filed with
the Commission during such fiscal year as determined by
the Commission, after consultation with the
Congressional Budget Office and the Office of
Management and Budget, using the methodology required
for projections pursuant to section 257 of the Balanced
Budget and Emergency Deficit Control Act of 1985.''.

SEC. 5. FEES FOR STOCK REPURCHASE STATEMENTS.

Section 13(e) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(e)) is amended--
(1) in paragraph (3), by striking ``a fee of \1/50\ of 1 per
centum of the value of securities proposed to be purchased''
and inserting ``a fee at a rate that, subject to paragraphs (5)
and (6), is equal to $125 per $1,000,000 of the value of
securities proposed to be purchased'';
(2) by inserting after paragraph (3) the following new
paragraphs:
``(4) Offsetting collections.--Fees collected pursuant to
this subsection for any fiscal year shall be deposited and
credited as offsetting collections to the account providing
appropriations to the Commission, and, except as provided in
paragraph (9), shall not be collected for any fiscal year
except to the extent provided in advance in appropriation Acts.
No fees collected pursuant to this subsection for fiscal year
2002 or any succeeding fiscal year shall be deposited and
credited as general revenue of the Treasury.
``(5) Annual adjustment.--For each of the fiscal years 2003
through 2011, the Commission shall by order adjust the rate
required by paragraph (3) for such fiscal year to a rate that
is equal to the rate (expressed in dollars per million) that is
applicable under section 6(b) of the Securities Act of 1933 for
such fiscal year.
``(6) Final rate adjustment.--For fiscal year 2012 and all of
the succeeding fiscal years, the Commission shall by order
adjust the rate required by paragraph (3) for all of such
fiscal years to a rate that is equal to the rate (expressed in
dollars per million) that is applicable under section 6(b) of
the Securities Act of 1933 for all of such fiscal years.
``(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata to
amounts and balances equal to less than $1,000,000.
``(8) Review and effective date.--An adjusted rate prescribed
under paragraph (5) or (6) and published under paragraph (10)
shall not be subject to judicial review. Subject to paragraphs
(4) and (9)--
``(A) an adjusted rate prescribed under paragraph (5)
shall take effect on the later of--
``(i) the first day of the fiscal year to
which such rate applies; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
such fiscal year is enacted; and
``(B) an adjusted rate prescribed under paragraph (6)
shall take effect on the later of--
``(i) the first day of fiscal year 2012; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
fiscal year 2012 is enacted.
``(9) 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 (as
offsetting collections) under this subsection at the rate in
effect during the preceding fiscal year, until 5 days after the
date such a regular appropriation is enacted.
``(10) Publication.--The rate applicable under this
subsection for each fiscal year is published pursuant to
section 6(b)(10) of the Securities Act of 1933.''.

SEC. 6. FEES FOR PROXY SOLICITATIONS AND STATEMENTS IN CORPORATE
CONTROL TRANSACTIONS.

Section 14(g) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(e)(3)) is amended--
(1) in paragraphs (1) and (3), by striking ``a fee of \1/50\
of 1 per centum of '' each place it appears and inserting ``a
fee at a rate that, subject to paragraphs (5) and (6), is equal
to $125 per $1,000,000 of '';
(2) by redesignating paragraph (4) as paragraph (11); and
(3) by inserting after paragraph (3) the following new
paragraphs:
``(4) Offsetting collections.--Fees collected pursuant to
this subsection for any fiscal year shall be deposited and
credited as offsetting collections to the account providing
appropriations to the Commission, and, except as provided in
paragraph (9), shall not be collected for any fiscal year
except to the extent provided in advance in appropriation Acts.
No fees collected pursuant to this subsection for fiscal year
2002 or any succeeding fiscal year shall be deposited and
credited as general revenue of the Treasury.
``(5) Annual adjustment.--For each of the fiscal years 2003
through 2011, the Commission shall by order adjust each of the
rates required by paragraphs (1) and (3) for such fiscal year
to a rate that is equal to the rate (expressed in dollars per
million) that is applicable under section 6(b) of the
Securities Act of 1933 for such fiscal year.
``(6) Final rate adjustment.--For fiscal year 2012 and all of
the succeeding fiscal years, the Commission shall by order
adjust each of the rates required by paragraphs (1) and (3) for
all of such fiscal years to a rate that is equal to the rate
(expressed in dollars per million) that is applicable under
section 6(b) of the Securities Act of 1933 for all of such
fiscal years.
``(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata to
amounts and balances equal to less than $1,000,000.
``(8) Review and effective date.--An adjusted rate prescribed
under paragraph (5) or (6) and published under paragraph (10)
shall not be subject to judicial review. Subject to paragraphs
(4) and (9)--
``(A) an adjusted rate prescribed under paragraph (5)
shall take effect on the later of--
``(i) the first day of the fiscal year to
which such rate applies; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
such fiscal year is enacted; and
``(B) an adjusted rate prescribed under paragraph (6)
shall take effect on the later of--
``(i) the first day of fiscal year 2012; or
``(ii) 5 days after the date on which a
regular appropriation to the Commission for
fiscal year 2012 is enacted.
``(9) 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 (as
offsetting collections) under this subsection at the rate in
effect during the preceding fiscal year, until 5 days after the
date such a regular appropriation is enacted.
``(10) Publication.--The rate applicable under this
subsection for each fiscal year is published pursuant to
section 6(b)(10) of the Securities Act of 1933.''.

SEC. 7. TRUST INDENTURE ACT FEE.

Section 307(b) of the Trust Indenture Act of 1939 (15 U.S.C.
77ggg(b)) is amended by striking ``Commission, but, in the case'' and
all that follows and inserting ``Commission.''.

SEC. 8. PAY PARITY PROVISIONS.

(a) Securities and Exchange Commission Employees.--Section 4(b) of
the Securities Exchange Act of 1934 (15 U.S.C. 78d(b)) is amended--
(1) by striking paragraphs (1) and (2) and by inserting the
following:
``(1) Appointment, compensation, and benefits.--
``(A) In general.--The Commission may appoint and fix
the compensation of such officers, attorneys,
economists, examiners, and other employees as may be
necessary for carrying out its functions under this
Act.
``(B) Rates of pay.--Rates of basic pay for all
employees of the Commission may be set and adjusted by
the Commission without regard to the provisions of
chapter 51 or subchapter III of chapter 53 of title 5,
United States Code.
``(C) Additional compensation and benefits.--The
Commission may provide additional compensation and
benefits to employees of the Commission if the same
type of compensation or benefits are then being
provided by any agency referred to under section 1206
of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 or, if not then being provided,
could be provided by such an agency under applicable
provisions of law, rule, or regulation.
``(2) Information; comparability.--In establishing and
adjusting schedules of compensation and additional benefits for
employees of the Commission, which are to be determined solely
by the Commission under this subsection, the Commission--
``(A) shall consult with and inform the heads of the
agencies referred to under section 1206 of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989;
``(B) shall inform the Congress of such compensation
and benefits; and
``(C) shall seek to maintain comparability with such
agencies regarding compensation and benefits.''.
(b) Technical Amendments.--
(1) Section 3132(a)(1) of title 5, United States Code, is
amended--
(A) in subparagraph (C), by striking ``or'' after the
semicolon;
(B) in subparagraph (D), by inserting ``or'' after
the semicolon; and
(C) by adding at the end of the following:
``(E) the Securities and Exchange Commission.''.
(2) Section 5373(a) of title 5, United States Code, is
amended--
(A) in paragraph (2), by striking ``or'' after the
semicolon;
(B) in paragraph (3), by striking the period and
inserting ``; or''; and
(C) by adding at the end the following:
``(4) section 4(b) of the Securities Exchange Act of 1934.''.

SEC. 9. STUDY OF THE EFFECT OF FEE REDUCTIONS.

(a) Study.--The Office of Economic Analysis of the Securities and
Exchange Commission (hereinafter referred to as the ``Office'') shall
conduct a study of the extent to which the benefits of reductions in
fees effected as a result of this Act are passed on to investors.
(b) Factors for Consideration.--In conducting the study under
subsection (a), the Office shall--
(1) consider all of the various elements of the securities
industry directly and indirectly benefitting from the fee
reductions, including purchasers and sellers of securities,
members of national securities exchanges, issuers, broker-
dealers, underwriters, participants in investment companies,
retirement programs, and others;
(2) evaluate the impact on different types of investors, such
as individual equity holders, individual investment company
shareholders, businesses, and other types of investors;
(3) include in the interpretation of the term ``investor''
shareholders of entities subject to the fee reductions; and
(4) consider the economic benefits to investors flowing from
the fee reductions to include such factors as market
efficiency, expansion of investment opportunities, and enhanced
liquidity and capital formation.
(c) Report to Congress.--Not later than 2 years after the date of
enactment of this Act, the Securities and Exchange Commission shall
submit to the Congress the report prepared by the Office on the results
of the study conducted under subsection (a).

SEC. 10. EFFECTIVE DATES.

(a) In General.--Except as provided in subsections (b), (c), and (d),
the amendments made by this Act shall take effect on October 1, 2001.
(b) Immediate Transaction Fee Reductions.--The amendments made by
section 2 shall take effect on the later of--
(1) the first day of fiscal year 2002; or
(2) 30 days after the date on which a regular appropriation
to the Commission for such fiscal year is enacted.
(c) Pay Parity.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by section 8 shall take effect on the date of
enactment of this Act.
(2) Exception.--The amendments made by section 8(b)(1) shall
take effect as of such date as the Securities and Exchange
Commission shall (by order published in the Federal Register)
prescribe, but in no event later than 1 year after the date of
enactment of this Act.
(d) Additional Exceptions.--The authorities provided by section
6(b)(9) of the Securities Act of 1933 and sections 13(e)(9), 14(g)(9)
and 31(k) of the Securities Exchange Act of 1934, as so designated by
this Act, shall not apply until October 1, 2002.

Purpose and Summary

The purpose of H.R. 1088, the Investor and Capital Markets
Fee Relief Act, is to provide cost savings to investors and
market participants. The legislation reduces or eliminates all
of the ``user'' fees imposed by the Securities and Exchange
Commission (SEC), including transaction fees, registration
fees, merger and tender offer fees, single stock future
transaction assessments, and Trust Indenture Act fees.
The legislation reduces transaction fees by over 60 percent
for the years 2002 to 2006. From 2007 to 2011, those fees are
reduced by over 40 percent. The fees are reduced by a smaller
percentage in the later years because under current law, the
fees will be lowered significantly in 2007. In the aggregate
over fiscal years 2002 to 2011, the bill reduces registration
fees by 28 percent. In the aggregate over fiscal years 2002 to
2011, the legislation reduces merger and tender offer fees by
50 percent. H.R. 1088 reduces the assessment on security
futures transactions by 64 percent in 2002, and an additional
44 percent in 2007.
The legislation directs the SEC, in consultation with the
Congressional Budget Office and the Office of Management and
Budget, to set the new reduced fee rates annually, based on
estimates reached pursuant to the methodology used by the CBO.
H.R. 1088 includes a provision granting SEC employees pay
parity with Federal banking regulators. This provision is
designed to help the Commission attract and retain first-rate
attorneys, accountants, and economists for its important
mission of protecting investors, preserving the integrity of
the capital markets, and promoting capital formation. This
provision would require a net funding increase of approximately
$70.9 million in fiscal 2002, with yearly adjustments for
inflation thereafter.
H.R. 1088 changes the budgetary treatment of fee
collections. Under current law, fees are deposited and
collected as either general revenue of the Treasury or
``offsetting collections,'' depending on the fee. The
legislation reduces overall SEC fee collections by eliminating
the general revenue portion of fee collections ($14.0 billion
or approximately 50 percent of projected SEC fee collections
over the next ten years). The bill is designed to keep
offsetting collections, which are the monies used by the SEC's
appropriators to fund the agency, at the levels projected under
current law over the next ten years. As such, H.R. 1088
provides a long-term stable funding source for the
appropriators to fund the Commission. The SEC has
enthusiastically endorsed H.R. 1088.

Background and Need for Legislation

Federal securities laws authorize the Securities and
Exchange Commission to impose ``user'' fees on investors and
market participants. The fees include: transaction fees, paid
when securities are sold, authorized under section 31 of
Securities Exchange Act of 1934; registration fees, paid by
corporations and investment companies when they register
securities for sale, authorized under section 6(b) of the
Securities Act of 1933; fees on mergers and tender offers,
which are bids to acquire publicly traded corporations through
purchase of their stock, authorized by sections 13(e) and 14(g)
of the Securities Exchange Act of 1934; and assessments paid by
investors on the sale of single stock futures, a hybrid
financial instrument made legal by enactment of the Commodity
Futures Modernization Act of 2000, authorized by section 31 of
Securities Exchange Act of 1934.
Congress created this fee structure in the 1930s, so that
the regulated community would pay for the cost of its
regulation, i.e., the fees paid by market participants would
fund the SEC. Congress intended the fees to provide the
Commission with sufficient fundingfor its important mission of
promoting capital formation and protecting investors. Congress neither
expected nor intended the fees to evolve from a cost-recovery mechanism
into a general tax deposited into the U.S. Treasury, with the proceeds
used to fund other Federal agencies and programs.
Since 1983, fee revenue has exceeded the budget of the SEC
by a significant and growing margin, due largely to a rising
stock market and unprecedented trading volume. In fiscal year
2000, overall SEC fee collections were $2.27 billion--more than
six times the Commission's $377 million budget.
According to the Congressional Budget Office (CBO), fee
revenue will continue on an upward path. The latest CBO
baseline estimates indicate that over $4 billion in fees will
be collected by fiscal year 2006--over ten times the
Commission's most recent budget.
The following chart illustrates the statutory authority,
rate, and amount of the fees that the SEC collected for fiscal
year 2000:

----------------------------------------------------------------------------------------------------------------
Actual collections, FY
SEC fee Statutory authority Rate 2000
----------------------------------------------------------------------------------------------------------------
Transaction......................... Sec. 31 of the 1/300th of 1%.......... $1.091 billion
Securities Exchange Act collected ($502
of 1934. million to general
revenues, $589 million
to offsetting
collections).
Registration........................ Sec. 6(b) of the 1/50th of 1%........... $1.102 billion
Securities Act of 1933. collected ($829
million to general
revenues, $279 million
to offsetting
collections).
Mergers and Tender Offers........... Sec. Sec. 13(e)(3) and 1/50th of 1%........... $78 million collected
14(g) of the Securities (all to general
Exchange Act of 1934. revenues).
Single Stock Futures................ Sec. 31 of the $0.02 for each round N/A.
Securities Exchange Act turn transaction.
of 1934.
----------------------------------------------------------------------------------------------------------------

The fees affect the bottom line of individual investors.
The 80 million Americans who own stocks directly or
indirectly--such as through a mutual fund, pension fund, or
401(k)--are subject to the transaction fee. Similarly,
registration, mergers, and tender offer fees all add costs to
capital formation, impeding job creation and economic growth,
and are ultimately paid by investors.
For more than a decade, Congress has sought to address
concerns about the SEC's excess fee collections. While there
has been consensus that the current structure is indefensible,
no legislative proposal has succeeded in eliminating the excess
fees.
By 1995, fee revenue was more than twice the amount of the
SEC budget. Many in Congress argued that the fees were becoming
an unintended tax on investors and capital formation.
Congress addressed these concerns in the National
Securities Markets Improvement Act of 1996 (NSMIA) (Public Law
104-290). Among other provisions, NSMIA lowered registration
fees, dramatically reduced transaction fees beginning in FY
2007, and extended the transaction fee to NASDAQ stocks to
provide competitive parity between the exchanges and the NASDAQ
market.
Despite the progress represented by the 1996 reforms, fees
continued to spiral upward due to increasing market volume and
a sustained bull market. In the 105th Congress, two competing
bills reducing transaction fees were introduced in the House to
bring fee collections in line with their original intent of
recouping the government's costs of supervising the markets.
One bill reduced the rate (H.R. 4269), and the other placed a
cap on the fees (H.R. 4213). No committee action was taken on
either bill.
In the 106th Congress, bills incorporating the two
different approaches to reducing transaction fees were
introduced again. In the House, the Committee on Commerce
reported legislation (H.R. 2441; H. Rpt. 106-1034) reducing the
rate from 1/300th of 1 percent to 1/500th of 1 percent. The
Senate Banking Committee also reported a bill (S. 2107; S. Rpt.
106-360) reducing the transaction fee rate. Neither bill
received further consideration.
In the 107th Congress, the Subcommittee on Capital Markets,
Insurance, and Government Sponsored Enterprises held a hearing
entitled ``Saving Investors Money: Reducing Excessive SEC
fees'' on March 7, 2001. The Subcommittee received testimony
from the Securities and Exchange Commission, the Senate
sponsors of S. 143 (a similar measure that passed the Senate on
a voice vote on March 23, 2001), and various market
participants, including one of the country's largest pension
fund managers, indicating that the ``user'' fees imposed by the
SEC are producing revenues far in excess of the Commission's
operating costs. The witnesses testified that the excess
collections are inconsistent with the explicit congressional
intent of the fees, which is to recover the costs to the
government for supervising the capital markets.
In the most recent fiscal year, the fees generated revenues
exceeding the SEC budget by over 600 percent. Over the next ten
years, it is estimated that total fee revenue will be
approximately $25 billion. The witnesses observed that these
fees are paid by investors and market participants, and are an
unjustified and excessive tax on retirement savings and capital
formation. The witnesses unanimouslyurged the Committee to
consider legislation that would reduce these excess fees.
The witnesses also testified in favor of providing the SEC
with the ability to pay their employees at a level commensurate
with that paid to other financial regulators, such as the
Office of the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, and
the Federal Reserve System. The SEC observed that it is
extremely difficult to retain top professional staff at current
pay levels, and noted that, after passage of the Gramm-Leach-
Bliley Act, SEC employees are often performing identical
functions as their counterparts in the banking agencies, yet
they receive considerably less compensation.

Hearings

The Subcommittee on Financial Institutions and Consumer
Credit held a hearing on H.R. 974, the Small Business Interest
Checking Act of 2001 on March 13, 2001. The Subcommittee
received testimony from: The Honorable Laurence H. Meyer,
Member, Board of Governors of the Federal Reserve System; Mr.
Donald V. Hammond, Acting Under Secretary for Domestic Finance,
Department of the Treasury; Mr. James E. Smith, Chairman and
Chief Executive Officer, Citizens Union State Bank & Trust of
Clinton, Missouri, President-Elect of the American Bankers
Association; Mr. David A. Bochnowski, Chairman and Chief
Executive Officer, Peoples Bank of Munster, Indiana, Chairman
of America's Community Bankers; Mr. Thomas P. Jennings, Senior
Vice President and General Counsel, First Virginia Banks, Inc.,
on behalf of the Financial Services Roundtable; and Mr. Robert
Gulledge, President and Chief Executive Officer, Citizens Bank,
Inc. of Robertsdale, Alabama, Chairman of the Independent
Community Bankers of America.

Committee Consideration

The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises met in open session on March
21, 2001 and approved H.R. 1088 for full Committee
consideration by a voice vote, without amendment, a quorum
being present.
On March 28, 2001, the Committee met in open session and
ordered H.R. 1088 reported, as amended, to the House with a
favorable recommendation by a voice vote.

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. Oxley to report the bill, with an amendment, to
the House with a favorable recommendation was agreed to by a
voice vote.
The following amendments were considered--
An amendment in the nature of a substitute by Mr. Fossella,
No. 1, making technical changes to the bill, was agreed to by a
voice vote, as amended.
An amendment to the amendment in the nature of a substitute
by Mr. Frank, No. 1a, striking the fee reduction provisions,
was not agreed to by a record vote of 12 yeas and 46 nays
(Record vote no. 3).
YEAS NAYS
Mr. LaFalce Mr. Oxley
Mr. Frank Mr. Leach
Mr. Kanjorski Mrs. Roukema
Ms. Waters Mr. Bereuter
Mr. Sanders Mr. Baker
Mr. Gutierrez Mr. Bachus
Ms. Velazquez Mr. Castle
Mr. Watt of North Carolina Mr. Royce
Ms. Lee Mr. Lucas of Oklahoma
Mr. Mascara Mr. Ney
Ms. Schakowsky Mr. Barr of Georgia
Mrs. Jones of Ohio Mrs. Kelly
Mr. Paul
Mr. Weldon of Florida
Mr. Ryun of Kansas
Mr. Riley
Mr. Jones of North Carolina
Mr. Ose
Mrs. Biggert
Mr. Green of Wisconsin
Mr. Toomey
Mr. Shays
Mr. Fossella
Mr. Gary Miller of California
Mr. Cantor
Mr. Grucci
Ms. Hart
Mrs. Capito
Mr. Ferguson
Mr. Rogers of Michigan
Mr. Tiberi
Mrs. Maloney of New York
Mr. Ackerman
Mr. Bentsen
Ms. Hooley of Oregon
Mr. Sherman
Mr. Sandlin
Mr. Inslee
Mr. Gonzalez
Mr. Ford
Mr. Hinojosa
Mr. Lucas of Kentucky
Mr. Shows
Mr. Crowley
Mr. Israel
Mr. Ross

An amendment to the amendment in the nature of a substitute
by Mr. Kanjorski, No. 1b, addressing the recovery of additional
costs for governmental activities beyond those incurred by the
Securities and Exchange Commission, was not agreed to by a
record vote of 14 yeas and 37 nays (Record vote no. 4).
YEAS NAYS
Mr. LaFalce Mr. Oxley
Mr. Kanjorski Mrs. Roukema
Ms. Waters Mr. Bereuter
Mr. Sanders Mr. Baker
Mr. Gutierrez Mr. Bachus
Mr. Watt of North Carolina Mr. Castle
Mr. Bentsen Mr. King
Ms. Hooley of Oregon Mr. Royce
Mr. Sherman Mr. Barr of Georgia
Mr. Meeks of New York Mrs. Kelly
Ms. Lee Mr. Cox
Mr. Mascara Mr. Weldon of Florida
Ms. Schakowsky Mr. Ryun of Kansas
Mrs. Jones of Ohio Mr. Riley
Mr. Jones of North Carolina
Mrs. Biggert
Mr. Green of Wisconsin
Mr. Toomey
Mr. Shays
Mr. Shadegg
Mr. Fossella
Mr. Cantor
Mr. Grucci
Ms. Hart
Mrs. Capito
Mr. Ferguson
Mr. Rogers of Michigan
Mr. Tiberi
Mrs. Maloney of New York
Mr. Maloney of Connecticut
Mr. Inslee
Mr. Moore
Mr. Gonzalez
Mr. Lucas of Kentucky
Mr. Shows
Mr. Israel
Mr. Ross

An amendment to the amendment in the nature of a substitute
by Mr. Bentsen, No. 1c, providing for a study of the effect of
the fee reductions, was agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. LaFalce, No. 1d, raising the fees in the underlying bill
by diminishing the reduction in fees in the underlying bill,
was not agreed to by a voice vote.

Committee Oversight Findings

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and made
findings that are reflected in this report.

Performance Goals and Objectives

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee finds that this
legislation does not authorize funding, and therefore no
statement is required.

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 this
legislation would result in changes to budget authority,
entitlement authority, or tax expenditures or revenues
consistent with the cost estimate prepared by the Director of
the Congressional Budget Office pursuant to section 402 of the
Congressional Budget Act of 1974.

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, April 3, 2001.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1088, the Investor
and Capital Markets Fee Relief 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. 1088--Investor and Capital Markets Fee Relief Act

Summary: H.R. 1088 would adjust the fees and assessments
that the Securities and Exchange Commission (SEC) is authorized
to collect for registrations, mergers, and transactions of
securities. Under current law, some of those fees and
assessments are recorded in the budget as governmental receipts
(revenues), and some are recorded as offsetting collections
that are credited against discretionary appropriations for the
SEC. The bill would reclassify all SEC fees and assessments as
offsetting collections and adjust the fee rates. If
implemented, H.R. 1088 would reduce the total amount of SEC
fees from an estimated $2.5 billion in fiscal year 2001 to $1.3
billion 2003. CBO estimates that enacting H.R. 1088 would
reduce governmental receipts by $1.5 billion in 2002 and by
$8.9 billion over the 2002-2006 period. Because H.R. 1088 would
affect governmental receipts, pay-as-you-go procedures would
apply. CBO estimates that implementing H.R. 1088 also would
cause the SEC's offsetting collections to increase by about
$126 million in 2002 and $130 million over the 2002-2006
period, relative to CBO's current baseline estimates.
The bill would authorize the SEC to increase employees'
compensation and benefits to make them comparable to agencies
that regulate banking, such as the Federal Deposit Insurance
Corporation (FDIC) and the National Credit Union Administration
(NCUA). CBO estimates that implementing the bill's
compensation-related provisions would cost about $362 million
over the 2001-2006 period, assuming the appropriation of the
necessary amounts.
H.R. 1088 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: The estimated
budgetary impact of H.R. 1088 is shown in Table 1. The costs of
this legislation fall within budget function 370 (commerce and
housing credit).

TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1088
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------
2001 2002 2003 2004 2005 2006
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION

CBO Baseline Estimate of Net SEC Spending:
Estimated Authorization Level \1\............... -594 0 0 0 0 0
Estimated Outlays............................... -620 -156 -54 -62 -86 -97
Proposed Changes:
Changes in Gross SEC Spending:
Estimated Authorization Level............... 16 65 69 71 73 75
Estimated Outlays........................... 14 60 69 71 73 75
Changes in Offsetting Collections:
Estimated Authorization Level............... 0 -126 -2 -1 0 -1
Estimated Outlays........................... 0 -126 -2 -1 0 -1
Changes in Net SEC Spending:
Estimated Authorization Level............... 16 -61 67 70 73 74
Estimated Outlays........................... 14 -66 67 70 73 74
Net SEC Spending Under H.R. 1088:
Estimated Authorization Level \1\........... -578 -61 67 70 73 74
Estimated Outlays........................... -606 -222 13 8 -13 -23

CHANGES IN REVENUES

Estimated Revenues.................................. 0 -1,494 -1,601 -1,750 -1,919 -2,097
----------------------------------------------------------------------------------------------------------------
\1\ The 2001 level is the estimated net amount appropriated for that year; the gross SEC appropriation for 2001
was $423 million.

Basis of estimate: CBO estimates that implementing the
compensation-related provisions of H.R. 1088 would increase the
gross spending of the SEC by $362 million over the 2001-2006
period, subject to appropriation of the necessary amounts. For
purposes of this estimate we assume the bill and supplemental
appropriations to implement it will be provided in the next few
months. Carrying out the bill's fee-related provisions would
increase offsetting collections by about $126 million in 2002
and $130 million over the 2002-2006 period, relative to CBO's
baseline estimates. Also, we estimate that enacting the bill
would reduce revenues by $1.5 billion in 2002 and by $8.9
billion over the 2002-2006 period by eliminating those SEC fees
and assessments that are currently recorded in the budget as
revenues.

Spending subject to appropriation

H.R. 1088 would have two effects on the spending of the SEC
that are subject to appropriation. First, the bill would
authorize the SEC to increase the compensation it offers to its
employees. Also, H.R. 1088 would restructure the fees the
agency is authorized to charge as an offset to its
discretionary appropriations.
Changes in Gross Spending. Currently, SEC employees fall
into two compensation categories: those subject to the pay
scales of the civil service system, and those whose salaries
have been adjusted to equal the amounts received by similar
employees in the securities industry. H.R. 1088 would authorize
the SEC to raise the pay of both types of employees to a level
commensurate with the compensation offered by federal banking
regulatory agencies. Based on information from the SEC and
several of the banking-related agencies, CBO estimates that
implementing this provision of the bill would cost $14 million
in 2001, $60 million in 2002, and $362 million over the 2001-
2006 period, assuming appropriation of the necessary amounts.
Changes in Offsetting Collections. H.R. 1088 would
restructure all four types of SEC collections: registration
fees, merger and tender fees, assessments on the trading of
single stock futures, and transaction fees (see Table 2). The
bill would reclassify all of these fees as offsetting
collections, as of October 1, 2001. Also, the bill would reduce
the rates on registration and merger fees effective on October
1, 2001, and on transaction fees and assessments as of 30 days
after the enactment of the 2002 appropriation for the SEC.
Based on historical information from the securities industry on
the number and type of securities registered and traded, CBO
estimates that the fee-related provisions of H.R. 1088 would
cause the SEC's offsetting collections to rise by $126 million
in 2002 and $130 million over the 2002-2006 period, relative to
CBO's baseline.
Transaction fees. Under current law, the SEC collects 1/
300th of a percent of the aggregate dollars 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. Currently,
fees collected from national securities associations are
recorded as offsetting collections, while fees from other
sources are recorded as revenues.
Under the bill, all transactions fees would be classified
as offsetting collections. Furthermore, the bill would reduce
the transaction fee rate in 2002 to $12 per $1 million of the
aggregate dollars traded. For the years 2003 through 2011, the
bill would require that the SEC establish a fee rate before a
fiscal year begins that would generate transaction fee
collections in that fiscal year equal to a target amount. For a
given year, the target amount would be equal to a figure
specified in the bill, minus the estimated assessments on
trades of single stock futures that would be collected by the
SEC in that year.

TABLE 2.--SEC FEES UNDER CBO'S BASELINE ESTIMATES AND H.R. 1088
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------
2001 2002 2003 2004 2005 2006
----------------------------------------------------------------------------------------------------------------
SEC Fees Under CBO's January 2001 Baseline:
Transaction Fees................................ 1,370 1,627 1,887 2,284 2,712 3,189
Registration Fees............................... 1,024 980 953 912 958 999
Merger Fees..................................... 84 89 93 97 99 100
Assessments on Single Stock Futures............. 0 1 1 2 2 2
-----------------------------------------------------------
Total......................................... 2,478 2,697 2,934 3,295 3,771 4,290
===========================================================
SEC Fee Collections Under H.R. 1088:
Transaction Fees................................ 1,370 758 679 822 975 1,147
Registration Fees............................... 1,024 513 589 650 790 949
Merger Fees..................................... 84 56 66 72 84 94
Assessments on Single Stock Futures............. 0 1 1 1 1 1
-----------------------------------------------------------
Total......................................... 2,478 1,328 1,335 1,545 1,850 2,191
===========================================================
Proposed Changes:
Transaction Fees................................ 0 -869 -1,208 -1,462 -1,737 -2,042
Registration Fees............................... 0 -467 -364 -262 -168 -50
Merger Fees..................................... 0 -33 -27 -25 -15 -6
Assessments on Single Stock Futures............. 0 0 0 1 1 1
-----------------------------------------------------------
Total Changes................................. 0 -1,369 -1,599 -1,750 -1,921 -2,099
----------------------------------------------------------------------------------------------------------------

CBO estimates that implementing H.R. 1088 would yield $758
million in 2002 from such fees. By comparison, under our
current baseline assumptions, CBO estimates $989 million in
offsetting collections from transaction fees in 2002. (Under
current law, we also estimate revenues of $638 million in 2002
from transaction fees.)
Registration fees. Under current law, the SEC collects a
fee on the registration of securities. The current registration
fee is $200 per $1 million of the maximum aggregate price for
securities that are proposed to be offered during the 2002-2006
period. After 2006, the fee drops to $67 per $1 million of the
maximum aggregate price for securities that are proposed to be
offered. These fees are recorded as governmental receipts
(revenues). Current law also requires, subject to
appropriation, that the SEC charge an additional registration
fee of $39 per $1 million of the maximum aggregate price for
securities that are proposed to be offered in 2002. Under
current law, this added registration fee gradually declines
after 2002, until it ends at the end of 2005. These additional
fees are recorded as offsetting collections.
H.R. 1088 would eliminate all registration fees that are
recorded as governmental receipts and would set fees that are
recorded as offsetting collections at $125 per $1 million of
the maximum aggregate price for securities that are proposed to
be offered in 2002. For the years 2003-2011, the bill would
require that the SEC establish a fee rate before a fiscal year
begins that would generate registration fee collections in that
fiscal year equal to a target amount. CBO estimates that under
the bill the SEC would collect $513 million in registration
fees in 2002, subject to appropriation. By comparison, we
estimate that under the CBO baseline the SEC would collect a
total of $980 million in registration fees in 2002 ($820
million that would be recorded as revenues and $160 million in
offsetting collections).
Merger and tender fees. Under current law, the SEC charges
a merger fee equal to $200 per $1 million of the value of
securities proposed to be purchased as part of a merger. These
fees are also currently recorded as revenues. H.R. 1088 would
eliminate the current merger fee and establish a new one that
would be recorded as an offsetting collection at a rate equal
to the rate for registration fees under the bill. CBO estimates
that under H.R. 1088 the SEC would collect about $56 million in
merger fees in 2002, subject to appropriation. By comparison,
under the CBO baseline, we estimate that merger fees would
total $89 million in 2002.
Assessments on transactions of single stock futures. The
Commodity Futures Modernization Act of 2000 allowed individuals
to begin trading futures on individual stocks. The act also
established an assessment on these trades equal to 2 cents per
transaction through 2006 and 0.75 cents per transaction for
2007 and thereafter. These assessments are currently recorded
as governmental receipts (i.e., revenues). Under CBO's
baseline, we project that these assessments will total $1
million in 2002.
H.R. 1088 would reclassify those assessments that are
recorded as receipts and would treat them as offsetting
collections subject to annual appropriation acts. The bill also
would change the rates on these assessments to $0.0072 per
transaction during the 2002-2006 period and $0.0042 per
transaction in 2007 and thereafter. CBO estimates that, under
H.R. 1088, the SEC would collect $1 million in assessments on
trading of single stock futures in 2002 and $5 million over the
2002-2006 period.
Summary. CBO's January 2001 baseline includes estimated
offsetting collections for the SEC totaling about $1.15 billion
in 2002, rising to $2.2 billion in 2006. We estimate the change
in the fee rates paid for registrations, mergers, transactions,
and trades of single stock futures and the reclassification of
all SEC fees as offsetting collections would increase the
offsetting collections received by the SEC by $126 million in
2002 and $130 million during the 2002-2006 period (relative to
our baseline projections).

Revenues

H.R. 1088 would eliminate all fees and assessments on
registrations, mergers, and transactions that are currently
recorded as revenues. CBO estimates that H.R. 1088 would reduce
revenues by $8.9 billion over the 2002-2006 period, and by
$14.0 billion over the 2002-2011 period.
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
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in Table 3. For the purposes of
enforcing pay-as-you-go procedures, only the effects in the
current year, the budget year, and the succeeding four years
are counted.

TABLE 3.--ESTIMATED IMPACT OF H.R. 1088 ON DIRECT SPENDING AND RECEIPTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 1008 2009 2010 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays........................ Not applicable
Changes in receipts....................... 0 -1,494 -1,601 -1,750 -1,919 -2,097 -921 -933 -1,009 -1,087 -1,176
--------------------------------------------------------------------------------------------------------------------------------------------------------

Intergovernmental and private-sector impact: H.R. 1088
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Previous CBO estimate: On March 14, 2001, CBO transmitted a
cost estimate for S. 143, the Competitive Market Supervision
Act of 2001, as ordered reported by the Senate Committee on
Banking, Housing, and Urban Affairs on March 2, 2001. S. 143
contains the provisions in H.R. 1088 that would authorize the
SEC to raise the compensation of its employees to levels
commensurate with other financial regulatory agencies. S. 143
would also reclassify all SEC fees as offsetting collections
and alter the fee rates. However, that bill would change SEC
fees in different ways than H.R. 1088, and S. 143 would require
that total offsetting collections fall between a minimum amount
and a maximum amount for each year. CBO estimated that S. 143
would reduce revenues by $8.9 billion over the 2001-2006 period
and would have no effect on offsetting collections, relative to
the CBO baseline.
Because H.R. 1088 and S. 143 would affect state, local, and
tribal governments in the same way, the intergovernmental
mandate statements for both bills are identical.
S. 143 contains a private-sector mandate with costs below
the annual threshold established by UMRA ($113 million in 2001,
adjusted for inflation). Provisions in the Senate bill would
require each national securities exchange and the national
securities association to file monthly with the SEC an estimate
of fees and assessments that they are required to pay. H.R.
1088 does not include those provisions and the bill does not
contain any private-sector mandates as defined by UMRA.
Estimate prepared by: Federal Costs: Ken Johnson and Erin
Whitaker. Impact on State, Local, and Tribal Governments: Susan
Sieg Tompkins. Impact on the Private Sector: Lauren Marks.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis. G. Thomas Woodward, Assistant
Director for Tax Analysis.

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 of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States); Article 1, section 8,
clause 3 (relating to the power to regulate interstate
commerce); Article 1, section 8, clause 5 (relating to the
power to coin money and regulate the value thereof); and
Article I, section 8, clause 18 (relating to making all laws
necessary and proper for carrying into execution powers vested
by the Constitution in the government of the United States).

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.

Exchange of Committee Correspondence

House of Representatives,
Committee on Agriculture,
Washington, DC, April 2, 2001.
Hon. Michael G. Oxley,
Chairman, House Committee on Financial Services, Rayburn House Office
Building, Washington, DC.
Dear Mr. Chairman: On March 28, 2001, the Committee on
Financial Services ordered reported H.R. 1088, the Investor and
Capital Markets Fee Relief Act. As you are aware, section 2 of
the bill affects the Agriculture Committee's jurisdiction with
regard to transaction fees on security futures products.
Because of your willingness to consult with the Committee
on Agriculture regarding this matter, your continuing support
for our requested changes, and the need to move this
legislation expeditiously, I will waive consideration of the
bill by the Agriculture Committee. By agreeing to waive its
consideration of the bill, the Agriculture Committee does not
waive its jurisdiction over H.R. 1088. In addition, the
Committee on Agriculture reserves its authority to seek
conferees on any provisions of the bill that are within our
jurisdiction during any House-Senate conference that may be
convened on this legislation. I ask your commitment to support
any request by our Committee for conferees on H.R. 1088 or
related legislation.
I request that you include this letter and your response as
part of your committee's report on the bill and the
Congressional Record during consideration of the legislation on
the House floor.
Thank you for your cooperation in this matter.
Sincerely,
Larry Combest,
Chairman.
------

House of Representatives,
Committee on Financial Services,
Washington, DC, April 2, 2001.
Hon. Larry Combest,
Chairman, House Committee on Agriculture, Longworth House Office
Building, Washington, DC.
Dear Chairman Combest: Thank you for your letter regarding
your Committee's jurisdictional interest in H.R. 1088, the
Investor and Capital Markets Fee Relief Act.
I acknowledge your committee's jurisdictional interest in
the changes to the fee structure for security futures products
contained in this legislation and appreciate your cooperation
in moving the bill to the House floor expeditiously. I agree
that your decision to forego further action on the bill will
not prejudice the Committee on Agriculture with respect to its
jurisdictional prerogatives on this or similar legislation. I
will include a copy of your letter and this response in the
Committee's report on the bill and the Congressional Record
when the legislation is considered by the House.
Thank you again for your cooperation.
Sincerely,
Michael G. Oxley,
Chairman.
------

House of Representatives,
Committee on Ways and Means,
Washington, DC, April 2, 2001.
Hon. Michael G. Oxley,
Chairman, House Committee on Financial Services, Rayburn House Office
Building, Washington, DC.
Dear Congressman Oxley: I am writing to express my support
for what you are trying to accomplish in H.R. 1088, the
Investor and Capital Markets Fee Relief Act. The Committee on
Ways and Means has long taken a jurisdictional interest in the
fees collected by the Securities and Exchange Commission. In
our view, these ``fees'' are taxes because they greatly exceed
the SEC's regulatory costs. In the past, we worked with the
Committees on Commerce and Appropriations to attempt to rectify
this problem.
As you know, I am strongly committed to protecting the
jurisdictional interest of the Committee on Ways and Means and
to ensuring that all revenue measures are properly referred to
this Committee. To this end, the Committee on Ways and Means
relies upon the statement issued by the Speaker in January 1991
(and reiterated by Speaker Hastert on January 3, 2001)
regarding the jurisdiction of the House Committees with respect
to fees and revenue measures. Pursuant to that statement, the
Committee on Ways and Means generally will not assert
jurisdiction over ``true'' regulatory fees that meet the
following requirements:
(i) The fees are assessed and collected solely to cover the
costs of specified regulatory activities (not including public
information activities and other activities benefitting the
public in general);
(ii) The fees are assessed and collected only in such
manner as may reasonably be expected to result in an aggregate
amount collected during any fiscal year which does not exceed
the aggregate amount of the regulatory costs referred to in (i)
above;
(iii) The only persons subject to the fees are those who
directly avail themselves of, or are directly subject to, the
regulatory activities referred to in (i) above; and
(iv) The amounts of the fees (a) are structured such that
any person's liability for such fees is reasonable based on the
proportion of the regulatory activities which relate to such
person, and (b) are nondiscriminatory between foreign and
domestic entities.
Additionally, pursuant to the Speaker's statement, the mere
reauthorization of a preexisting fee that had not historically
been considered a tax would not necessarily require a
sequential referral to the Committee on Ways and Means.
However, if such a preexisting fee were fundamentally changed,
it properly should be referred to the Committee on Ways and
Means.
We last addressed SEC fees in the National Securities
Markets Improvement Act of 1996. That legislation was intended
to reform the SEC fee structure and bring the total amount of
fees down to the level of the SEC's budget. In a letter from
Chairman Archer to the Chairman of the Commerce Committee,
Congressman Bliley (whose committee had jurisdiction over the
SEC at the time), Chairman Archer noted the Committee on Ways
and Means' longstanding goal of reducing these ``fees'' so that
they truly are fees rather than taxes. Chairman Archer also
reserved jurisdictional interest in the fee structure, and
stated that the Committee would strongly oppose any attempts to
delay or lengthen the fee phase-down schedule provided by the
1996 Act.
Since the enactment of the 1996 Act, it has become
increasingly clear that actual fee collections greatly exceed
what was estimated in 1996. In fact, I understand that these
fees are projected to generate over $2.5 billion in revenue in
fiscal year 2001, more than six times the SEC budget. H.R. 1088
seeks to address this issue by reducing these fees down to the
level of the SEC's budget, which was also the goal of the 1996
Act.
Because H.R. 1088 would not ensure that fee collections
will not exceed the amount required to fund the relevant
regulatory activities of the SEC fees, the bill does not meet
requirements (i) and (ii) of the Speaker's statement set forth
above. If the fees were being newly created, or were
fundamentally different from existing fees, the Committee on
Ways and Means would ask that H.R. 1088 be referred to it, in
accordance with its jurisdictional prerogative. However, the
Committee understands that the intent of H.R. 1088 is to
significantly reduce these fees and eliminate fees in excess of
the SEC's budget. Under such circumstances (and without
prejudice to the jurisdictional interest of the Committee on
Ways and Means), I will not seek sequential referral of H.R.
1088 or have any objection to its consideration by the House.
However, I would emphasize that, if the fee structure set
forth in H.R. 1088 is modified in the future, the Committee on
Ways and Means will take all action necessary to protect its
proper jurisdictional interest. For example, the Committee will
view any modification as falling within its jurisdiction if
such modification would result in fee collections in excess of
the amount required to fund the relevant regulatory activities
of the SEC.
Finally, I would respectfully request that you include a
copy of this letter in the report for H.R. 1088 or in the
Record during floor consideration of the bill. With best
personal regards,
Sincerely,
Bill Thomas,
Chairman.
------

House of Representatives,
Committee on Financial Services,
Washington, DC, April 2, 2001.
Hon. William M. Thomas,
Chairman, House Committee on Ways and Means, Longworth
House Office Building, Washington, DC.
Dear Chairman Thomas: Thank you for your letter regarding
your Committee's jurisdictional interest in H.R. 1088, the
Investor and Capital Markets Fee Relief Act.
I acknowledge your committee's jurisdiction over the
revenue aspects of this legislation and appreciate your
cooperation in moving the bill to the House floor
expeditiously. I agree that your decision to forego further
action on the bill will not prejudice the Committee on Ways and
Means with respect to its jurisdictional prerogatives on this
or similar legislation. I will include a copy of your letter
and this response in the Committee's report on the bill and the
Congressional Record when the legislation is considered by the
House.
Thank you again for your cooperation.
Yours truly,
Michael G. Oxley,
Chairman.

Section-by-Section Analysis of the Legislation

Section 1. Short title

This section establishes the short title of the bill, the
``Investor and Capital Markets Fee Relief Act.''

Section 2. Immediate transaction fee reductions

Section 2 reduces the fee rate in section 31 of the
Securities Exchange Act (15 U.S.C. 78ee) applicable to
securities transactions on exchanges and in the over-the-
counter market and the assessment on security futures
transactions on exchanges in fiscal 2002. The section 31 fee
rate on securities transactions is reduced by 64 percent in
fiscal 2002 (from the current rate of 1/300th of 1 percent, or
$33.33 per million, to $12 per million of the dollar amount of
securities transactions). The section 31 assessment on security
futures transactions also is reduced by 64 percent in fiscal
2002 (from the current $0.02 to $0.0072 per round turn
transaction).

Section 3. Revision of securities transaction fee provisions;
additional fee reductions

Section 3 provides a mechanism for adjusting the section 31
fee rate on securities transactions after fiscal year 2002, and
makes an additional reduction to the section 31 assessment on
security futures transactions. The section also converts all
section 31 fees and assessments to offsetting collections, with
no fees credited as general revenue of the Treasury.
This section includes a mechanism to adjust the fee rate on
securities transactions each year from fiscal years 2003
through 2011 so that the rate, when applied to an estimate of
the total dollar volume of securities transactions for a given
year, is reasonably likely to produce collections equal to a
target amount for that year. The target amounts for fiscal 2003
through 2011 are fixed at levels that (based on current
projections of total dollar volume) will result in a rate of
$12 per million from fiscal years 2003 through 2006 (versus
$33.33 per million under current law), and a rate of $7 per
million from fiscal years 2007 through 2011 (versus $12.50 per
million under current law).
The SEC will determine the estimate of the total dollar
volume of securities transactions in a given year, after
consultation with the Congressional Budget Office (CBO) and the
Office of Management and Budget (OMB), using the methodology
that CBO uses to make projections under the Balanced Budget and
Emergency Deficit Control Act of 1985. Tying the adjustment
mechanism to each year's target amount has the effect of
decreasing (or increasing) the section 31 fee rate on a yearly
basis depending on the estimated total dollar volume of
securities transactions for the year. In other words, any
unexpected increase in the projected dollar volume of
securities transactions will lead to a reduction in the section
31 fee rate to meet the target amount.
The SEC will perform the task of setting the fee rate each
year. The fee rate will be set by order and published in the
Federal Register (along with the underlying estimates or
projections on which the rate is based) not later than April 30
prior to the start of each fiscal year. The setting of the fee
rate will be a ministerial task (determined by dividing that
year's estimate of the total dollar volume of securities
transactions by that year's statutory target amount), and will
not be subject to judicial review. The adjusted rate will go
into effect on the later of the first day of the fiscal year or
30 days after a regular appropriation for the SEC has been
enacted. The 30-day delay is designed to provide industry with
sufficient lead-time to make any necessary system changes for
the new section 31 fee rate. If a regular appropriation has not
been enacted on the first day of the fiscal year, the SEC will
collect fees at the rate in effect during the prior fiscal year
until the new rate goes into effect.
There is one ``final rate adjustment'' to set the section
31 fee rate after fiscal 2011. Specifically, for fiscal 2012,
the SEC will adjust the rate so that the rate, when applied to
the estimate of the total dollar volume of securities
transactions in fiscal 2012, is reasonably likely to produce
the target amount for fiscal 2011 (the prior fiscal year). This
adjustment is intended to create additional, permanent fee
relief. The final rate adjustment for fiscal 2012 will apply to
all subsequent fiscal years.
Section 3 also reduces the assessment on security futures
transactions an additional 44 percent in fiscal 2007 (from
$0.0075 under current law to $0.0042 per round turn
transaction).
Finally, the Committee recognizes that the legislation
ultimately may require that the Commission receive an up-front
appropriation each year that would be reduced by offsetting
collections as they are collected. The Commission would need
such an up-front appropriation purely for cash-flow reasons; it
would not ``cost'' anything in terms of general revenue.

Section 4. Reduction of registration fees

Section 4 reduces the fee rate under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)) that applies when
companies register their securities with the SEC. The section
also converts all section 6(b) fees on the registration of
securities to offsetting collections, with no fees credited as
general revenue of the Treasury.
Under the section, the section 6(b) fee rate on the
registration of securities is reduced in fiscal 2002 (from $239
per million to $125 per million of the maximum offering price
at which securities are proposed to be offered). For each of
the fiscal years 2003 through 2011, the section 6(b) rate will
be adjusted to a rate that, when applied to an estimate of the
aggregate maximum offering price at which securities are
proposed to be offered during the year, is reasonably likely to
produce collections equal to a specified target amount for that
year. The target amounts for fiscal 2003 through 2011 are fixed
in the bill so that there will be an aggregate reduction in
projected section 6(b) fee collections of 28 percent over ten
years.
The SEC will determine the estimate of the aggregate
maximum offering price at which securities are proposed to be
offered during a given year, after consultation with the
Congressional Budget Office and the Office of Management and
Budget, using the methodology that the Congressional Budget
Office uses to make projections under the Balanced Budget and
Emergency Deficit Control Act of 1985. Tying the adjustment
mechanism to each year's target amount has the effect of
decreasing (or increasing) the section 6(b) fee rate on a
yearly basis depending on the estimate of the aggregate maximum
offering price at which securities are proposed to be offered
during a given year. In other words, any unexpected growth in
projected registered offerings will lead to a reduction in the
section 6(b) fee rate to meet the target amount.
The SEC will perform the task of setting the fee rate each
year. The fee rate will be set by order and published in the
Federal Register (along with the underlying estimates or
projections on which the rate is based) not later than April 30
prior to the start of each fiscal year. The setting of the fee
rate will be a ministerial task (determined by dividing that
year's estimate of the aggregate maximum offering price at
which securities are proposed to be offered during the year by
that year's statutory target amount), and will not be subject
to judicial review. The adjusted rate will go into effect on
the later of the first day of the fiscal year or 5 days after a
regular appropriation for the SEC has been enacted. The five-
day delay is designed to provide industry with sufficient
advance notice of the new section 6(b) fee rate. If a regular
appropriation has not been enacted on the first day of the
fiscal year, the SEC will collect fees at the rate in effect
during the prior fiscal year until the new rate goes into
effect.
There is one ``final rate adjustment'' to set the section
6(b) fee rate after fiscal 2011. Specifically, for fiscal 2012,
the SEC will adjust the rate so that the rate, when applied to
the estimate of the aggregate maximum offering price at which
securities are proposed to be offered during fiscal 2012, is
reasonably likely to produce the target offsetting collection
amount for fiscal 2011 (the prior fiscal year). This adjustment
is intended to create additional, permanent fee relief. The
final rate adjustment for fiscal 2012 will apply to all
subsequent fiscal years.

Section 5. Fees for stock repurchase statements

Section 5 reduces the fee rate under section 13(e) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(e)) that applies
to stock repurchase statements filed with the SEC in connection
with ``going-private'' transactions. The section also converts
all section 13(e) fees to offsetting collections, with no fees
credited as general revenue of the Treasury.
In fiscal 2002, the section 13(e) fee rate on the
repurchase of securities is reduced from 1/50th of one percent,
or $200 per million, to $125 per million of the value of
securities proposed to be purchased. After fiscal 2002, the fee
rate will be adjusted by Commission order to equal the fee rate
under section 6(b). The adjusted rate will go into effect on
the later of the first day of the fiscal year or 5 days after a
regular appropriation for the SEC has been enacted. The five-
day delay is designed to provide industry with sufficient
advance notice of the new section 13(e) fee rate. If a regular
appropriation has not been enacted on the first day of the
fiscal year, the SEC will collect fees at the rate in effect
during the prior fiscal year until the new rate goes into
effect.

Section 6. Fees for proxy solicitations and statements in corporate
control transactions

Section 6 reduces the fee rates under section 14(g) of the
Securities Exchange Act of 1934 (15 U.S.C. 78n(g)) that apply
to proxy solicitations and statements in corporate control
transactions filed with the SEC. The section also converts all
section 14(g) fees to offsetting collections, with no fees
credited as general revenue of the Treasury.
The section 14(g) fee rates are reduced in fiscal 2002 from
1/50th of one percent, or $200 per million, to $125 per million
of the value of the transaction. After fiscal 2002, the fee
rates will be adjusted byCommission order to equal the fee rate
under section 6(b). By linking the section 14(g) fee rates and the
section 13(e) fee rate addressed under section 5 of the Act
(collectively known as ``merger and tender offer'' fee rates) to the
fee rate under section 6(b), the section results in an aggregate
reduction in projected merger and tender offer fee collections of 50
percent over ten years.
The adjusted rates will go into effect on the later of the
first day of the fiscal year or 5 days after a regular
appropriation for the SEC has been enacted. The five-day delay
is designed to provide industry with sufficient advance notice
of the new section 13(e) fee rate. If a regular appropriation
has not been enacted on the first day of the fiscal year, the
SEC will collect fees at the rates in effect during the prior
fiscal year until the new rates go into effect.

Section 7. Trust Indenture Act fee

Section 7 eliminates the $100 filing fee that applies to
applications for qualification of certain indentures under
section 307(b) of the Trust Indenture Act of 1939 (15 U.S.C.
77ggg(b)). This filing fee raises negligible revenues ($2,300
during fiscal 2000).

Section 8. Pay parity provisions

Section 8 gives the SEC the ability to match the pay and
benefits of Federal banking regulators to address the SEC's
current staffing crisis and to reflect the increased
coordination of activities among financial service regulators
following enactment of the Gramm-Leach-Bliley Act of 1999. The
pay parity provisions are based on language that the Office of
the Comptroller of the Currency received in the enactment of
FIRREA in 1989. Specifically, the Commission is given the
authority to fix the total compensation of SEC employees,
including pay and benefits.
Under section 8, the guiding standard is comparability of
total pay and benefits with those offered by the Federal
banking regulators. To further this objective, the bill
requires the Commission to consult with and inform the banking
regulators regarding SEC pay and benefits, as well as to inform
Congress.
Section 8 also makes a technical amendment to remove the
SEC from the Senior Executive Service system. This change makes
the SEC consistent with Federal banking regulators such as the
Office of the Comptroller of the Currency, which was removed
from the Senior Executive Service system when it was given pay
parity with the Federal Reserve and the FDIC in 1989.
Implementing pay parity with the Federal banking regulators
would require a net funding increase for the SEC of
approximately $70.9 million in fiscal 2002, with yearly
adjustments for inflation thereafter.

Section 9. Study of the effect of fee reductions

Section 9 requires the SEC's Office of Economic Analysis to
study the extent to which the benefits of the bill's fee
reductions are passed on to investors. The section provides
factors that the Office of Economic Analysis must consider in
conducting its study, including the elements of the securities
industry that benefit from the fee reductions, the impact of
fee reductions on different types of investors, and the
economic benefits to investors flowing from fee reductions. The
section also provides that the Office of Economic Analysis
shall treat shareholders of entities subject to the fee
reductions as ``investors'' for purposes of the study. In
determining whether the benefits of the Act's fee reductions
are passed on to investors, this section does not require the
SEC to conduct surveys of the securities industry or investors
to the extent the information is otherwise available. Likewise,
this section does not require the SEC to develop or test
econometric models of investors' transaction demand. The SEC is
required to submit a report on the findings from the study
required by this section to the Congress within two years of
enactment of the bill.

Section 10. Effective dates

Section 10 provides that the section 31 fee and assessment
rate reductions for fiscal 2002 are effective as of the later
of October 1, 2001 or 30 days after the SEC's regular
appropriation for fiscal year 2002 has been enacted. The 30-day
delay is designed to provide industry with sufficient lead time
to make any necessary system changes for the new section 31 fee
and assessment rates. With the exception of the ``lapse of
appropriation'' provisions, the other fee provisions are
effective as of October 1, 2001. The ``lapse of appropriation''
provisions created by this bill in section 6(b)(9) of the
Securities Act and sections 13(e)(9), 14(g)(9) and 31(k) of the
Exchange Act are effective as of October 1, 2002. The delayed
effective date is necessary to make sure that SEC fees are
credited as offsetting collections and not general revenue. As
a result of this delay, for fiscal 2002, if the Commission's
regular appropriation is not enacted by October 1, 2001, the
Committee recognizes that any continuing resolution would need
to authorize the Commission to continue to collect securities
transaction, registration, and merger and tender offer fees to
prevent a fee collection stoppage. After fiscal 2002, the
``lapse of appropriation'' provisions will eliminate the need
for fee collection authorization language in any continuing
resolutions. The pay parity provisions are effective on the
date of enactment, with the exception of the provisions
removing the SEC from the Senior Executive Service system. To
facilitate the transition to a new compensation system, the SEC
is given the authority to eliminate the Senior Executive
Service system within twelve months of enactment.

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):

SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

short title

Section 1. This Act may be cited as the ``Securities Exchange
Act of 1934''.

* * * * * * *

securities and exchange commission

Sec. 4. (a) * * *

* * * * * * *

(b) Appointment and Compensation of Staff and Leasing
Authority.--
[(1) Appointment and compensation.-- The Commission
is authorized to appoint and fix the compensation of
such officers, attorneys, examiners, and other experts
as may be necessary for carrying out its functions
under this Act, without regard to the provisions of
other laws applicable to the employment and
compensation of officers and employees of the United
States, and the Commission may, subject to the civil-
service laws, appoint such other officers and employees
as are necessary in the execution of its functions and
fix their salaries in accordance with the
Classification Act of 1923, as amended.
[(2) Economists.--
[(A) Commission authority.--Notwithstanding
the provisions of chapter 51 of title 5, United
States Code, the Commission is authorized--
[(i) to establish its own criteria
for the selection of such professional
economists as the Commission deems
necessary to carry out the work of the
Commission;
[(ii) to appoint directly such
professional economists as the
Commission deems qualified; and
[(iii) to fix and adjust the
compensation of any professional
economist appointed under this
paragraph, without regard to the
provisions of chapter 54 of title 5,
United States Code, or subchapters II,
III, or VIII of chapter 53, of title 5,
United States Code.
[(B) Limitation on compensation.--No base
compensation fixed for an economist under this
paragraph may exceed the pay for Level IV of
the Executive Schedule, and no payments to an
economist appointed under this paragraph shall
exceed the limitation on certain payments in
section 5307 of title 5, United States Code.
[(C) Other benefits.--All professional
economists appointed under this paragraph shall
remain within the existing civil service system
with respect to employee benefits.]
(1) Appointment, compensation, and benefits.--
(A) In general.--The Commission may appoint
and fix the compensation of such officers,
attorneys, economists, examiners, and other
employees as may be necessary for carrying out
its functions under this Act.
(B) Rates of pay.--Rates of basic pay for all
employees of the Commission may be set and
adjusted by the Commission without regard to
the provisions of chapter 51 or subchapter III
of chapter 53 of title 5, United States Code.
(C) Additional compensation and benefits.--
The Commission may provide additional
compensation and benefits to employees of the
Commission if the same type of compensation or
benefits are then being provided by any agency
referred to under section 1206 of the Financial
Institutions Reform, Recovery, and Enforcement
Act of 1989 or, if not then being provided,
could be provided by such an agency under
applicable provisions of law, rule, or
regulation.
(2) Information; comparability.--In establishing and
adjusting schedules of compensation and additional
benefits for employees of the Commission, which are to
be determined solely by the Commission under this
subsection, the Commission--
(A) shall consult with and inform the heads
of the agencies referred to under section 1206
of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989;
(B) shall inform the Congress of such
compensation and benefits; and
(C) shall seek to maintain comparability with
such agencies regarding compensation and
benefits.

* * * * * * *

periodical and other reports

Sec. 13. (a) * * *

* * * * * * *

(e)(1) * * *

* * * * * * *

(3) At the time of filing such statement as the Commission
may require by rule pursuant to paragraph (1) of this
subsection, the person making the filing shall pay to the
Commission [a fee of \1/50\ of 1 per centum of the value of
securities proposed to be purchased] a fee at a rate that,
subject to paragraphs (5) and (6), is equal to $125 per
$1,000,000 of the value of securities proposed to be purchased.
The fee shall be reduced with respect to securities in an
amount equal to any fee paid with respect to any securities
issued in connection with the proposed transaction under
section 6(b) of the Securities Act of 1933, or the fee paid
under that section shall be reduced in an amount equal to the
fee paid to the Commission in connection with such transaction
under this paragraph.
(4) Offsetting collections.--Fees collected pursuant
to this subsection for any fiscal year shall be
deposited and credited as offsetting collections to the
account providing appropriations to the Commission,
and, except as provided in paragraph (9), shall not be
collected for any fiscal year except to the extent
provided in advance in appropriation Acts. No fees
collected pursuant to this subsection for fiscal year
2002 or any succeeding fiscal year shall be deposited
and credited as general revenue of the Treasury.
(5) Annual adjustment.--For each of the fiscal years
2003 through 2011, the Commission shall by order adjust
the rate required by paragraph (3) for such fiscal year
to a rate that is equal to the rate (expressed in
dollars per million) that is applicable under section
6(b) of the Securities Act of 1933 for such fiscal
year.
(6) Final rate adjustment.--For fiscal year 2012 and
all of the succeeding fiscal years, the Commission
shall by order adjust the rate required by paragraph
(3) for all of such fiscal years to a rate that is
equal to the rate (expressed in dollars per million)
that is applicable under section 6(b) of the Securities
Act of 1933 for all of such fiscal years.
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances equal to less than $1,000,000.
(8) Review and effective date.--An adjusted rate
prescribed under paragraph (5) or (6) and published
under paragraph (10) shall not be subject to judicial
review. Subject to paragraphs (4) and (9)--
(A) an adjusted rate prescribed under
paragraph (5) shall take effect on the later
of--
(i) the first day of the fiscal year
to which such rate applies; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for such fiscal year is enacted; and
(B) an adjusted rate prescribed under
paragraph (6) shall take effect on the later
of--
(i) the first day of fiscal year
2012; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for fiscal year 2012 is enacted.
(9) 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 (as offsetting collections) under this
subsection at the rate in effect during the preceding
fiscal year, until 5 days after the date such a regular
appropriation is enacted.
(10) Publication.--The rate applicable under this
subsection for each fiscal year is published pursuant
to section 6(b)(10) of the Securities Act of 1933.

* * * * * * *

proxies

Sec. 14. (a) * * *

* * * * * * *

(g)(1)(A) At the time of filing such preliminary proxy
solicitation material as the Commission may require by rule
pursuant to subsection (a) of this section that concerns an
acquisition, merger, consolidation, or proposed sale or other
disposition of substantially all the assets of a company, the
person making such filing, other than a company registered
under the Investment Company Act of 1940, shall pay to the
Commission the following fees:
(i) for preliminary proxy solicitation material
involving an acquisition, merger, or consolidation, if
there is a proposed payment of cash or transfer of
securities or property to shareholders, [a fee of \1/
50\ of 1 per centum of] a fee at a rate that, subject
to paragraphs (5) and (6), is equal to $125 per
$1,000,000 of such proposed payment, or of the value of
such securities or other property proposed to be
transferred; and
(ii) for preliminary proxy solicitation material
involving a proposed sale or other disposition of
substantially all of the assets of a company, [a fee of
\1/50\ of 1 per centum of] a fee at a rate that,
subject to paragraphs (5) and (6), is equal to $125 per
$1,000,000 of the cash or of the value of any
securities or other property proposed to be received
upon such sale or disposition.

* * * * * * *

(3) At the time of filing such statement as the Commission
may require by rule pursuant to subsection (d)(1) of this
section, the person making the filing shall pay to the
Commission [a fee of \1/50\ of 1 per centum of] a fee at a rate
that, subject to paragraphs (5) and (6), is equal to $125 per
$1,000,000 of the aggregate amount of cash or of the value of
securities or other property proposed to be offered. The fee
shall be reduced with respect to securities in an amount equal
to any fee paid with respect to such securities in connection
with the proposed transaction under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee paid
under that section shall be reduced in an amount equal to the
fee paid to the Commission in connection with such transaction
under this subsection.
(4) Offsetting collections.--Fees collected pursuant
to this subsection for any fiscal year shall be
deposited and credited as offsetting collections to the
account providing appropriations to the Commission,
and, except as provided in paragraph (9), shall not be
collected for any fiscal year except to the extent
provided in advance in appropriation Acts. No fees
collected pursuant to this subsection for fiscal year
2002 or any succeeding fiscal year shall be deposited
and credited as general revenue of the Treasury.
(5) Annual adjustment.--For each of the fiscal years
2003 through 2011, the Commission shall by order adjust
each of the rates required by paragraphs (1) and (3)
for such fiscal year to a rate that is equal to the
rate (expressed in dollars per million) that is
applicable under section 6(b) of the Securities Act of
1933 for such fiscal year.
(6) Final rate adjustment.--For fiscal year 2012 and
all of the succeeding fiscal years, the Commission
shall by order adjust each of the rates required by
paragraphs (1) and (3) for all of such fiscal years to
a rate that is equal to the rate (expressed in dollars
per million) that is applicable under section 6(b) of
the Securities Act of 1933 for all of such fiscal
years.
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances equal to less than $1,000,000.
(8) Review and effective date.--An adjusted rate
prescribed under paragraph (5) or (6) and published
under paragraph (10) shall not be subject to judicial
review. Subject to paragraphs (4) and (9)--
(A) an adjusted rate prescribed under
paragraph (5) shall take effect on the later
of--
(i) the first day of the fiscal year
to which such rate applies; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for such fiscal year is enacted; and
(B) an adjusted rate prescribed under
paragraph (6) shall take effect on the later
of--
(i) the first day of fiscal year
2012; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for fiscal year 2012 is enacted.
(9) 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 (as offsetting collections) under this
subsection at the rate in effect during the preceding
fiscal year, until 5 days after the date such a regular
appropriation is enacted.
(10) Publication.--The rate applicable under this
subsection for each fiscal year is published pursuant
to section 6(b)(10) of the Securities Act of 1933.
[(4)] (11) Notwithstanding any other provision of law, the
Commission may impose fees, charges, or prices for matters not
involving any acquisition, merger, consolidation, sale, or
other disposition of assets described in this subsection, as
authorized by section 9701 of title 31, United States Code, or
otherwise.

* * * * * * *

SEC. 31. TRANSACTION FEES.

(a) Recovery of Cost of Services.--The Commission shall, in
accordance with this section, collect transaction fees and
assessments that are designed to recover the costs to the
Government of the supervision and regulation of securities
markets and securities professionals, and costs related to such
supervision and regulation, including enforcement activities,
policy and rulemaking activities, administration, legal
services, and international regulatory activities.
(b) Exchange-Traded Securities.--[Every] Subject to
subsection (j), each national securities exchange shall pay to
the Commission a fee at a rate equal to [\1/300\ of one
percent] $12 per $1,000,000 of the aggregate dollar amount of
sales of securities (other than bonds, debentures, other
evidences of indebtedness, and security futures products)
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. Fees 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 \1/300\ 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, other evidences of
indebtedness, and security futures products), 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. Fees collected pursuant to this subsection
shall be deposited and collected as general revenue of the
Treasury.]
[(d) Off-Exchange Trades of Last-Sale-Reported Securities.--
[(1) Covered transactions.--Each national securities]
(c) Off-Exchange Trades of Exchange Registered and Last-Sale-
Reported Securities.--Subject to subsection (j), each national
securities association shall pay to the Commission a fee at a
rate equal to [\1/300\ of one percent] $12 per $1,000,000 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, other evidences of indebtedness, and security
futures products) registered on a national securities exchange
or subject to prompt last sale reporting pursuant to the rules
of the Commission or a registered national securities
association[, excluding any sales for 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.].
[(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.
[(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.]
[(e)] (d) Assessments on Security Futures Transactions.--Each
national securities exchange and national securities
association shall pay to the Commission an assessment equal to
[$0.02] $0.0072 for each round turn transaction (treated as
including one purchase and one sale of a contract of sale for
future delivery) on a security future traded on such national
securities exchange or by or through any member of such
association otherwise than on a national securities exchange,
[except that for fiscal year 2007 or any succeeding fiscal year
such assessment shall be equal to $0.0075 for each such
transaction. Assessments collected pursuant to this subsection
shall be deposited and collected as general revenue of the
Treasury.] except that for fiscal year 2007 and each succeeding
fiscal year such assessment shall be equal to $0.0042 for each
such transaction.
[(f) Dates for Payment of Fees.--The fees required] (e) Dates
for payments.--The fees and assessments required by subsections
(b), (c), and (d) of this section shall be paid--
(1) * * *

* * * * * * *

[(g)] (f) Exemptions.--The Commission, by rule, may exempt
any sale of securities or any class of sales of securities from
any fee or assessment imposed by this section, if the
Commission finds that such exemption is consistent with the
public interest, the equal regulation of markets and brokers
and dealers, and the development of a national market system.
[(h)] (g) Publication.--The Commission shall publish in the
Federal Register notices of the fee or assessment rates
applicable under this section for each fiscal year not later
than April 30 of the fiscal year preceding the fiscal year to
which such rate applies, together with any estimates or
projections on which such fees are based.
(h) Pro Rata Application.--The rates per $1,000,000 required
by this section shall be applied pro rata to amounts and
balances equal to less than $1,000,000.
(i) Deposit of Fees.--
(1) Offsetting collections.--Fees collected pursuant
to subsections (b), (c), and (d) for any fiscal year--
(A) shall be deposited and credited as
offsetting collections to the account providing
appropriations to the Commission; and
(B) except as provided in subsection (k),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
(2) General revenues prohibited.--No fees collected
pursuant to subsections (b), (c), and (d) for fiscal
year 2002 or any succeeding fiscal year shall be
deposited and credited as general revenue of the
Treasury.
(j) Recapture of Projection Windfalls for Further Rate
Reductions.--
(1) Annual adjustment.--For each of the fiscal years
2003 through 2011, the Commission shall by order adjust
each of the rates applicable under subsections (b) and
(c) for such fiscal year to a uniform adjusted rate
that, when applied to the baseline estimate of the
aggregate dollar amount of sales for such fiscal year,
is reasonably likely to produce aggregate fee
collections under this section (including assessments
collected under subsection (d)) that are equal to the
target offsetting collection amount for such fiscal
year.
(2) Final rate adjustment.--For fiscal year 2012 and
all of the succeeding fiscal years, the Commission
shall by order adjust each of the rates applicable
under subsections (b) and (c) for all of such fiscal
years to a uniform adjusted rate that, when applied to
the baseline estimate of the aggregate dollar amount of
sales for fiscal year 2012, is reasonably likely to
produce aggregate fee collections under this section in
fiscal year 2012 (including assessments collected under
subsection (d)) equal to the target offsetting
collection amount for fiscal year 2011.
(3) Review and effective date.--An adjusted rate
prescribed under paragraph (1) or (2) and published
under subsection (g) shall not be subject to judicial
review. Subject to subsections (i)(1)(B) and (k)--
(A) an adjusted rate prescribed under
paragraph (1) shall take effect on the later
of--
(i) the first day of the fiscal year
to which such rate applies; or
(ii) 30 days after the date on which
a regular appropriation to the
Commission for such fiscal year is
enacted; and
(B) an adjusted rate prescribed under
paragraph (2) shall take effect on the later
of--
(i) the first day of fiscal year
2012; or
(ii) 30 days after the date on which
a regular appropriation to the
Commission for fiscal year 2012 is
enacted.
(k) 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 (as
offsetting collections) the fees and assessments under
subsections (b), (c), and (d) at the rate in effect during the
preceding fiscal year, until 30 days after the date such a
regular appropriation is enacted.
(l) Definitions.--For purposes of this section:
(1) Target offsetting collection amount.--The target
offsetting collection amount for each of the fiscal
years 2002 through 2011 is determined according to the
following table:

Target offsetting
Fiscal year: collection amount

2002.................................................. $585,720,000
2003.................................................. $679,320,000
2004.................................................. $822,240,000
2005.................................................. $976,320,000
2006.................................................. $1,148,040,000
2007.................................................. $880,880,000
2008.................................................. $892,080,000
2009.................................................. $1,023,120,000
2010.................................................. $1,161,440,000
2011.................................................. $1,321,040,000

(2) Baseline estimate of the aggregate dollar amount
of sales.--The baseline estimate of the aggregate
dollar amount of sales for any fiscal year is the
baseline estimate of the aggregate dollar amount of
sales of securities (other than bonds, debentures,
other evidences of indebtedness, and security futures
products) to be transacted on each national securities
exchange and by or through any member of each national
securities association (otherwise than on a national
securities exchange) during such fiscal year as
determined by the Commission, after consultation with
the Congressional Budget Office and the Office of
Management and Budget, using the methodology required
for making projections pursuant to section 257 of the
Balanced Budget and Emergency Deficit Control Act of
1985.

* * * * * * *

----------

SECTION 6 OF THE SECURITIES ACT OF 1933

registration of securities and signing of registration statement

Sec. 6. (a) * * *
(b) Registration Fee.--
(1) * * *
[(2) Fee payment required.--At the time of filing a
registration statement, the applicant shall pay to the
Commission a fee that shall be equal to the sum of the
amounts (if any) determined under the rates established
by paragraphs (3) and (4). The Commission shall publish
in the Federal Register notices of the fee rates
applicable under this section for each fiscal year.
[(3) General revenue fees.--The rate determined under
this paragraph is a rate equal to $200 per $1,000,000
of the maximum aggregate price at which such securities
are proposed to be offered, except that during fiscal
year 2007 and any succeeding fiscal year such rate is
equal to $67 per $1,000,000 of the maximum aggregate
price at which such securities are proposed to be
offered. Fees collected during any fiscal year pursuant
to this paragraph shall be deposited and credited as
general revenues of the Treasury.
[(4) Offsetting collection fees.--
[(A) In general.--Except as provided in sub-
paragraphs (B) and (C), the rate determined
under this paragraph is a rate equal to the
following amount per $1,000,000 of the maximum
aggregate price at which such securities are
proposed to be offered:
[(i) $95 during fiscal year 1998;
[(ii) $78 during fiscal year 1999;
[(iii) $64 during fiscal year 2000;
[(iv) $50 during fiscal year 2001;
[(v) $39 during fiscal year 2002;
[(vi) $28 during fiscal year 2003;
[(vii) $9 during fiscal year 2004;
[(viii) $5 during fiscal year 2005;
and
[(ix) $0 during fiscal year 2006 or
any succeeding fiscal year.
[(B) Limitation; deposit.--Except as provided
in subparagraph (C), no amounts shall be
collected pursuant to this paragraph (4) for
any fiscal year except to the extent provided
in advance in appropriations Acts. Fees
collected during any fiscal year pursuant to
this paragraph shall be deposited and credited
as offsetting collections in accordance with
appropriations Acts.
[(C) 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 paragraph at the rate in effect during the
preceding fiscal year, until such a regular
appropriation is enacted.
[(5) Pro rata application of rates.--The rates
required by this subsection shall be applied pro rata
to amounts and balances equal to less than $1,000,000.]
(2) Fee payment required.--At the time of filing a
registration statement, the applicant shall pay to the
Commission a fee at a rate that shall be equal to $125
per $1,000,000 of the maximum aggregate price at which
such securities are proposed to be offered, except that
during fiscal year 2003 and any succeeding fiscal year
such fee shall be adjusted pursuant to paragraph (5) or
(6).
(3) Offsetting collections.--Fees collected pursuant
to this subsection for any fiscal year--
(A) shall be deposited and credited as
offsetting collections to the account providing
appropriations to the Commission; and
(B) except as provided in paragraph (9),
shall not be collected for any fiscal year
except to the extent provided in advance in
appropriation Acts.
(4) General revenues prohibited.--No fees collected
pursuant to this subsection for fiscal year 2002 or any
succeeding fiscal year shall be deposited and credited
as general revenue of the Treasury.
(5) Annual adjustment.--For each of the fiscal years
2003 through 2011, the Commission shall by order adjust
the rate required by paragraph (2) for such fiscal year
to a rate that, when applied to the baseline estimate
of the aggregate maximum offering prices for such
fiscal year, is reasonably likely to produce aggregate
fee collections under this subsection that are equal to
the target offsetting collection amount for such fiscal
year.
(6) Final rate adjustment.--For fiscal year 2012 and
all of the succeeding fiscal years, the Commission
shall by order adjust the rate required by paragraph
(2) for all of such fiscal years to a rate that, when
applied to the baseline estimate of the aggregate
maximum offering prices for fiscal year 2012, is
reasonably likely to produce aggregate fee collections
under this subsection in fiscal year 2012 equal to the
target offsetting collection amount for fiscal year
2011.
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances equal to less than $1,000,000.
(8) Review and effective date.--An adjusted rate
prescribed under paragraph (5) or (6) and published
under paragraph (10) shall not be subject to judicial
review. Subject to paragraphs (3)(B) and (9)--
(A) an adjusted rate prescribed under
paragraph (5) shall take effect on the later
of--
(i) the first day of the fiscal year
to which such rate applies; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for such fiscal year is enacted; and
(B) an adjusted rate prescribed under
paragraph (6) shall take effect on the later
of--
(i) the first day of fiscal year
2012; or
(ii) 5 days after the date on which a
regular appropriation to the Commission
for fiscal year 2012 is enacted.
(9) 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 (as offsetting collections) under this
subsection at the rate in effect during the preceding
fiscal year, until 5 days after the date such a regular
appropriation is enacted.
(10) Publication.--The Commission shall publish in
the Federal Register notices of the rate applicable
under this subsection and under sections 13(e) and
14(g) for each fiscal year not later than April 30 of
the fiscal year preceding the fiscal year to which such
rate applies, together with any estimates or
projections on which such rate is based.
(11) Definitions.--For purposes of this subsection:
(A) Target offsetting collection amount.--The
target offsetting collection amount for each of
the fiscal years 2002 through 2011 is
determined according to the following table:

Target offsetting
Fiscal year: collection amount
2002.................................................. $512,500,000
2003.................................................. $589,380,000
2004.................................................. $650,385,000
2005.................................................. $790,075,000
2006.................................................. $949,050,000
2007.................................................. $214,200,000
2008.................................................. $233,700,000
2009.................................................. $284,115,000
2010.................................................. $333,840,000
2011.................................................. $394,110,000

(B) Baseline estimate of the aggregate
maximum offering prices.--The baseline estimate
of the aggregate maximum offering prices for
any fiscal year is the baseline estimate of the
aggregate maximum offering price at which
securities are proposed to be offered pursuant
to registration statements filed with the
Commission during such fiscal year as
determined by the Commission, after
consultation with the Congressional Budget
Office and the Office of Management and Budget,
using the methodology required for projections
pursuant to section 257 of the Balanced Budget
and Emergency Deficit Control Act of 1985.

* * * * * * *

SECTION 307 OF THE TRUST INDENTURE ACT OF 1939

qualification of indentures covering securities not required to be
registered

Sec. 307. (a) * * *
(b) The filing with the Commission of an application, or of
an amendment to an application, shall be deemed to have taken
place upon the receipt thereof by the [Commission, but, in the
case of an application, only if it is accompanied or preceded
by payment to the Commission of a filing fee in the amount of
$100, such payment to be made in cash or by United States
postal money order or certified or bank check, or in such other
medium of payment as the Commission may authorize by rule and
regulation.] Commission.

* * * * * * *

----------

TITLE 5, UNITED STATES CODE

* * * * * * *

PART III--EMPLOYEES

* * * * * * *

Subpart B--Employment and Retention

CHAPTER 31--AUTHORITY FOR EMPLOYMENT

* * * * * * *

SUBCHAPTER II--THE SENIOR EXECUTIVE SERVICE

* * * * * * *

Sec. 3132. Definitions and exclusions

(a) For the purpose of this subchapter--
(1) ``agency'' means an Executive agency, except a
Government corporation and the General Accounting
Office, but does not include--
(A) * * *

* * * * * * *

(C) the Federal Election Commission; [or]
(D) the Office of the Comptroller of the
Currency, the Office of Thrift Supervision, the
Federal Housing Finance Board, the Resolution
Trust Corporation, the Farm Credit
Administration, the Office of Federal Housing
Enterprise Oversight of the Department of
Housing and Urban Development, and the National
Credit Union Administration; or
(E) the Securities and Exchange Commission.

* * * * * * *

Subpart D--Pay and Allowances

* * * * * * *

SUBCHAPTER VII--MISCELLANEOUS PROVISIONS

* * * * * * *

Sec. 5373. Limitation on pay fixed by administrative action

(a) Except as provided in subsection (b) and by the
Government Employees Salary Reform Act of 1964 (78 Stat. 400)
and notwithstanding the provisions of other statutes, the head
of an Executive agency or military department who is authorized
to fix by administrative action the annual rate of basic pay
for a position or employee may not fix the rate at more than
the rate for level IV of the Executive Schedule. This section
does not impair the authorities provided by--
(1) sections 248, 481, and 1819 of title 12;
(2) section 831b of title 16; [or]
(3) sections 403a-403c, 403e-403h, and 403j of title
50[.]; or
(4) section 4(b) of the Securities Exchange Act of
1934.

* * * * * * *

DISSENTING VIEWS

While many of us would agree with the supporters of H.R.
1088, the Investor and Capital Markets Fee Relief Act, that
ideally we should charge any user fee only at a level designed
to cover its intended purposes, we remain seriously concerned
at this time about both the substance of this legislation and
the priority attached to it in the 107th Congress.
Budget Priorities. Our primary apprehension about H.R. 1088
is a broad policy concern related to budget priorities. In our
view, our nation has other budget priorities that it should
first address before committing to such a drastic reduction in
revenue. H.R. 1088 will reduce federal receipts by
approximately $14 billion between 2002 and 2011. An immediate
rush to such a substantial reduction seems precipitous and
imprudent, given the current debate in Congress about budget
priorities, pending cuts in social programs--many within this
Committee's jurisdiction--and the size of what seems an
inevitable tax cut. In passing H.R. 1088, we may effectively
spend money that we do not know we have. As the Minority's
views of the Budget Committee's report on the fiscal 2002
budget resolution point out: ``the bottom line is that no
economic or budget forecast covering ten years, however
conscientious, can be a sound basis for a plan to spend an
available budget surplus down to precisely zero.'' We risk
returning our nation to a pattern of deficit spending if we are
not prudent.
Although the House Budget Committee appears to have
provided enough latitude in the Budget Resolution, which passed
House last week, to accommodate the decrease in securities
fees, the Senate has not considered its budget plan at this
time and we have not reconciled the differences between the two
bodies. Moreover, while those who wish to can certainly arrange
things so that we comply with the technicalities of federal
budget law, we cannot avoid the more fundamental issue of
appropriate budget priorities.
This Committee has responsibility for oversight over
federal housing programs and the budget for the Department of
Housing and Urban Development. The Bush Administration's budget
blueprint would cut housing significantly, and a number of
other areas that should receive priority treatment--education,
health care, workplace safety--are being cut or have
significant remaining unmet needs. Moreover, the Bush
Administration did not even include decreases in securities
fees in its budget blueprint. As a result, in this environment
we find it difficult to argue that this legislation should be a
top priority that deserves to move with such speed. Any debate
about SEC fee reductions should occur within the context of a
real discussion of budget priorities under a real budget.
Furthermore, as presently crafted H.R. 1088 poses
implications for the ``pay-as-you-go'' requirements established
under the Budget Enforcement Act of 1990. This statute provides
that direct spending and revenue legislation enacted for a
fiscal year not incur a net cost on a cumulative PAYGO
``scorecard.'' Unless Congress directs otherwise, a negative
balance in the scorecard at the end of the year will trigger a
sequester in which largely across-the-board spending cuts are
put into effect automatically.
In recently examining S. 143--substantially similar
legislation to H.R. 1088 approved by the Senate earlier this
month--the Congressional Budget Office noted that because S.
143 would lower governmental receipts, pay-as-you-go procedures
would apply. We can expect that the Congressional Budget Office
will reach a similar conclusion when evaluating H.R. 1088.
Consequently, under PAYGO procedures, these cuts in securities
fees could ultimately result in cuts in other important
government programs, like Head Start, medical research, and
transportation infrastructure improvements, at the end of the
year.
Adequate Funding Of Investor Protection. We have other
serious concerns about approving this legislation at this time.
We are not fully convinced that this bill will provide the full
amount of funding actually needed to cover all of the
government's activities related to the nation's securities
markets.
H.R. 1088, if passed in its present form, will provide a
substantial reduction in the existing user fees charged by the
Securities and Exchange Commission (SEC). The bill attempts to
ensure that SEC funding needs are adequately safeguarded. But
what neither the bill nor the Committee is addressing is
whether current SEC enforcement and oversight efforts are
adequate given a continually changing, and potentially
troubling, market situation. Moreover, each day the securities
marketplace is becoming ever larger and more complex while SEC
resources have in recent years remained comparatively very
static, as we will further detail below.
In recent months, we have experienced a $5-trillion loss in
the value of publicly traded securities. Certainly, some of
that loss results from over-speculation by investors. But much
of that loss has other causes. For example, the SEC, as we
understand, is currently investigating the accounting practices
of a number of companies that may have been partially
responsible for this dramatic decline in market capitalization.
The SEC has also noted that earnings restatements in the last
three years at Cendant, MicroStrategy,McKesson, Columbia-MCA,
Oxford Healthcare, Sunbeam, Green Tree, Waste Management, and RiteAid
have alone cost approximately $40 billion in market capitalization. The
SEC needs appropriate resources to complete these and other
examinations.
We also live in an increasingly interconnected global
economy and securities marketplace, in which the United States
and the efficacy of its regulatory oversight play a pivotal
role. SEC enforcement actions are increasing in number and
significance. Investor complaints have increased in recent
years. The many special problems posed by Internet transactions
have also placed further strains on the agency's limited
resources. To obtain a better sense of the difficulties the SEC
faces in addressing this new technology, one need only to refer
to a report by the SEC's Office of Compliance Inspections and
Examinations entitled ``Examinations of Broker-Dealers Offering
Online Trading: Summary of Findings and Recommendations.''
We have additional concerns about the SEC's resources at a
time of increasing market complexity. We have, for example,
experienced enormous increases in the number of companies going
public in recent years. Should this trend continue, it would
place additional burdens on the agency. Furthermore, millions
of Americans who once only had bank savings accounts have now
directly or indirectly become participants in the securities
markets and income from that participation will help determine
the strength of their household incomes, options for their
children's education, their access to health care, and the
security of their retirement. In an environment where Americans
are becoming a nation of investors rather than a nation of
savers, funding for investor protection and the agency
responsible for it should take on an increased, not a
decreased, priority.
Moreover, the evidence before us at this time unfortunately
appears to indicate that our programs designed to protect
securities investors may lack the resources needed to function
properly. ``Many Holes Weaken Safety Net for Victims of Failed
Brokerages''--an article that appeared in the New York Times on
September 25, 2000--notes that ``[a]t a time when millions of
United States citizens have taken their money out of federally
insured banks and put it into brokerage firms, the Securities
Investor Protection Corporation's charge of protecting the
investing public has never been more important. * * * But a
close look at this little-understood organization shows that
the safety net that investors believe the corporation offers is
in fact full of holes.'' Furthermore, an article appearing in
USA Today on January 9, 2001 entitled ``Conned Investors May
Never See Refunds, SEC Collection Rate Falls Sharply Since
'94,'' indicates that the SEC has fallen badly behind, having
collected only 16.9 percent of more than $1.7 billion in
illegal gains that securities fraudsters have been ordered to
hand over since 1995. Furthermore, that collection rate fell to
an abysmal 4.3 percent in 2000 according to the news report.
The failure to protect legitimate investors from fraudulent
broker-dealers, stock swindlers, and other securities scam
artists, deserves serious examination both by the SEC and this
Committee. In the upcoming months, the General Accounting
Office will complete studies on the Securities Investor
Protection Corporation as well as the SEC controls over
disgorgement cases, and these comprehensive reports will
hopefully provide us with more information about the extent of
these problems and the reforms needed to address them.
Unfortunately, H.R. 1088, by lowering SEC fees now, will limit
the resources available to correct these and other problems in
the securities industry later.
Moreover, we especially note the findings contained in the
SEC's ``Agency Resources and Industry Growth'' pamphlet of
March 2001. It shows that SEC staff has grown only about 2.5
percent from 1991 to 2000 while the volume on the national
exchanges and NASDAQ have increased approximately 34 percent.
SEC review staff during the same period has fluctuated between
238 to 271 positions, with 245 full-time employees in 2000. In
1991, there were 180 SEC staff positions for New York Stock
Exchange oversight while the assets of the exchange's member
firms stood at $604 billion. In 2000, New York Stock Exchange
member assets stood at $2,344 trillion while oversight staff
had only increased by 95 positions. In 1991, investment advisor
assets under management were $5.4 trillion, and the SEC had 140
inspection staff for those assets. In 2000, there were $17.5
trillion of investment advisor assets under management, but the
SEC inspection staff only stood at 273. These initial
comparisons indicate the SEC's resources have not kept pace
with the financial markets it is charged with regulating.
In sum, we should not be judging the adequacy of SEC
funding by looking at what has been enough in the past. We
should instead be examining what is needed in this new world to
ensure that the SEC has the necessary ability to adequately
monitor what is happening in the securities marketplace and
safeguard market stability and investor protection. And we
should do that before, not after, we act on this legislation.
Moreover, even if we could agree that H.R. 1088 provides
the SEC with the resources required to meet its future needs,
we have no assurances that the bill will provide sufficient
funding to cover the costs of the government's other
securities, regulatory, adjudicatoryand oversight activities.
In H.R. 1088 we have not accounted for all of the government's
securities-related activities, such as Federal Bureau of Investigation
inquiries, Justice Department criminal prosecutions, judicial branch
resources expended on securities cases, and congressional oversight,
among other activities. Because we have not accounted for these
activities, the proposed securities fee reductions contained in H.R.
1088 may eliminate too much revenue needed for fully effective
enforcement. We should have therefore inserted some consideration of
these costs into the fee-setting process designed under H.R. 1088.
During the Committee's consideration of H.R. 1088, we
attempted to correct this oversight by offering an amendment
that would have required the General Accounting Office (GAO) no
later than January 1 of the years 2002 through 2012 to identify
the agencies and institutions of the government other than the
SEC that are involved in the enforcement, prosecution, and
adjudication of matters arising under our securities laws. In
its evaluation, the GAO would have estimated the total amount
of appropriated funds reasonably likely to be expended in the
upcoming fiscal year by such agencies and institutions in
conducting such activities. The GAO would have then calculated
for any such fiscal year such increases in the target
offsetting collection amounts as may be necessary to recover
such total amounts, and the SEC would have used these revised
targeting amounts as the basis for establishing fee rates each
year. Unfortunately, this amendment was not accepted.
Examination Of Other Government Fees. Furthermore, if we
are going to cut user fees, we should examine the government
fee structure more broadly and consider the significance of the
burden they impose, and on whom. The federal government
collects an enormous number of user fees and administrative
charges, and those collections may well be in excess of need in
other areas. For example, there are fees on the recording of
intellectual property rights of all kinds, fees related to air
traffic, numerous user fees imposed by the Department of
Agriculture for its services, fees on the use of national
parks, etc. Surely, we should examine all such user fees and
administrative charges before deciding to reduce so
substantially only those affecting the securities industry.
Moreover, there are proposals for fee reductions of equal
or greater merit before our own Committee that we believe our
Committee should first consider. There is, for example, a
bipartisan bill pending before the Committee that would reduce
the governmental user fees for low- and moderate-income
policemen, firemen and teachers who cannot even afford to live
in the communities they serve. The Congressional Budget Office
estimates that this proposal would actually increase receipts
for the government, rather than lose it as H.R. 1088
contemplates, because of the increased number of loans approved
by the Federal Housing Administration. But that important bill
has not been brought to the Committee's attention.
Unfortunately, the user fees paid by low- and moderate-income
policemen, firemen and teachers do not appear to be a priority
concern.
Lesser Fee Reduction More Prudent. If SEC fees are to be
cut despite the aforementioned concerns, the Committee should
have pursued a more prudent approach in crafting this
legislation. The brokerage firms who are market makers and
floor specialists on the national exchanges would receive
substantial benefits from H.R. 1088. While these institutions
will receive very large breaks under the bill, about 20 percent
of the estimated $14 billion decrease in securities fees over
the next ten years, the individual sellers of stock will
benefit by only a few dollars each year, if that much. The
Ranking Member of the Capital Markets Subcommittee consistently
noted during the consideration of this legislation that fees on
the sale of stock are just 33 cents per $10,000 of
transactions. In other words, individuals will likely presently
spend more to feed a parking meter in front of their broker
than they do on these transactions. They consequently will not
receive the considerable relief supporters of H.R. 1088 contend
they will obtain.
At the end of the last session when this legislation was
under discussion in the Commerce Committee, a meritorious
compromise was developed by Mr. Towns and Mr. Dingell that
would have only cut Section 31 fees--those fees that arguably
impact most adversely on consumers. The cost of that fee
reduction would be approximately $4.7 billion over 10 years, as
opposed to the $14 billion cost of the bill before us. If it is
the will of the Committee to have fee reductions, then this is
an approach to SEC fee reduction that we find more persuasive
at this time.
Pay Parity. Finally, in the midst of our debate on the
appropriate level of SEC fees, another issue--which is
unrelated and of far greater import--has been included in the
underlying bill: providing the SEC with the tools necessary to
employ and retain competent staff by authorizing pay schedules
similar to other federal financial regulators. While Congress
has exempted other federal financial regulators like the Office
of the Comptroller of the Currency, the Federal Reserve, the
Federal Deposit Insurance Corporation, and the National Credit
Union Administration from government employee pay schedules,
the SEC continues to operate under the provisions of that law.
This factor has led to considerable personnel instability at
the SEC, which is now faced with handling sophisticated markets
and attracting specialized and expensive employees to
accomplish its mission. The Commission has been seeking to
achieve ``pay parity'' with other financial regulators for a
number of Congresses and the underlying bill provides them this
needed support. We strongly support providing pay parity for
the SEC and would work hard to gain passage of such provisions
in a stand-alone bill.
John J. LaFalce.
Paul E. Kanjorski.
Melvin L. Watt.
Barbara Lee.
Jan D. Schakowsky.
Stephanie Tubbs Jones.