H. Rept. 104-479 - 104th Congress (1995-1996)
March 12, 1996, As Reported by the Commerce Committee

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House Report 104-479 - SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION ACT OF 1996




[House Report 104-479]
[From the U.S. Government Printing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-479
_______________________________________________________________________


 
      SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION ACT OF 1996

                                _______


 March 12, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                        [To accompany H.R. 2972]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 2972) to authorize appropriations for the Securities and 
Exchange Commission, to reduce the fees collected under the 
Federal securities laws, 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
The Amendment....................................................     2
Purpose and Summary..............................................     4
Background and Need for Legislation..............................     5
Hearings.........................................................     7
Committee Consideration..........................................     7
Rollcall Votes...................................................     7
Committee Oversight Findings.....................................     7
Committee on Government Reform and Oversight.....................     7
New Budget Authority and Tax Expenditures........................     7
Committee Cost Estimate..........................................     8
Congressional Budget Office Estimate.............................     8
Inflationary Impact Statement....................................    11
Advisory Committee Statement.....................................    11
Section-by-Section Analysis and Discussion.......................    12
Agency Views.....................................................    18
Changes in Existing Law Made by the Bill, as Reported............    19
Appendix.........................................................    24
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Securities and Exchange Commission 
Authorization Act of 1996''.

SEC. 2. PURPOSES.

  The purposes of this Act are--
          (1) to authorize appropriations for the Securities and 
        Exchange Commission for fiscal year 1997; and
          (2) to reduce over time the rates of fees charged under the 
        Federal securities laws.

SEC. 3. AUTHORIZATION OF APPROPRIATIONS.

  Section 35 of the Securities Exchange Act of 1934 is amended to read 
as follows:

``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

  ``There are authorized to be appropriated to carry out the functions, 
powers, and duties of the Commission $317,000,000 for fiscal year 
1997.''.

SEC. 4. REGISTRATION FEES.

  Section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) is 
amended to read as follows:
  ``(b) Registration Fee.--
          ``(1) Recovery of cost of services.--The Commission shall, in 
        accordance with this subsection, collect registration fees that 
        are designed to recover the costs to the government of the 
        securities registration process, and costs related to such 
        process, including enforcement activities, policy and 
        rulemaking activities, administration, legal services, and 
        international regulatory activities.
          ``(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. In no case shall the fee required by this 
        subsection be less than $200, except that during fiscal year 
        2002 or any succeeding fiscal year such minimum fee shall be 
        $182.
          ``(3) General revenue fees.--The rate determined under this 
        paragraph is a rate equal to $200 for each $1,000,000 of the 
        maximum aggregate price at which such securities are proposed 
        to be offered, except that during fiscal year 2002 and any 
        succeeding fiscal year such rate is equal to $182 for each 
        $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 
                subparagraphs (B) and (C), the rate determined under 
                this paragraph is a rate equal to the following amount 
                for each $1,000,000 of the maximum aggregate price at 
                which such securities are proposed to be offered:
                          ``(i) $103 during fiscal year 1997;
                          ``(ii) $70 during fiscal year 1998;
                          ``(iii) $38 during fiscal year 1999;
                          ``(iv) $17 during fiscal year 2000; and
                          ``(v) $0 during fiscal year 2001 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.''.

SEC. 5. TRANSACTION FEES.

  (a) Amendment.--Section 31 of the Securities Exchange Act of 1934 (15 
U.S.C. 78ee) is amended to read as follows:

``SEC. 31. TRANSACTION FEES.

  ``(a) Recovery of Cost of Services.--The Commission shall, in 
accordance with this subsection, collect transaction fees 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 national securities exchange 
shall pay to the Commission a fee at a rate equal to $33 for each 
$1,000,000 of the aggregate dollar amount of sales of securities (other 
than bonds, debentures, and other evidences of indebtedness) transacted 
on such national securities exchange, except that for fiscal year 2002 
or any succeeding fiscal year such rate shall be equal to $25 for each 
$1,000,000 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.--Every 
national securities association shall pay to the Commission a fee at a 
rate equal to $33 for each $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 registered on such 
an exchange (other than bonds, debentures, and other evidences of 
indebtedness), except that for fiscal year 2002 or any succeeding 
fiscal year such rate shall be equal to $25 for each $1,000,000 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.--Every national securities 
        association shall pay to the Commission a fee at a rate equal 
        to the dollar amount determined under paragraph (2) for each 
        $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, and other evidences of indebtedness) subject to 
        prompt last sale reporting pursuant to the rules of the 
        Commission or a registered national securities association, 
        excluding any sales for which a fee is paid under subsection 
        (c).
          ``(2) Fee rates.--Except as provided in paragraph (4), the 
        dollar amount determined under this paragraph is--
                  ``(A) $12 for fiscal year 1997;
                  ``(B) $14 for fiscal year 1998;
                  ``(C) $17 for fiscal year 1999;
                  ``(D) $18 for fiscal year 2000;
                  ``(E) $20 for fiscal year 2001; and
                  ``(F) $25 for fiscal year 2002 or for any succeeding 
                fiscal year.
          ``(3) Limitation; deposit of fees.--Except as provided in 
        paragraph (4), no amounts shall be collected pursuant to this 
        subsection (d) for any fiscal year beginning before October 1, 
        2001, 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, except that any amounts in excess of the 
        following amounts (and any amount collected for fiscal years 
        beginning on or after October 1, 2001) shall be deposited and 
        credited as general revenues of the Treasury:
                  ``(A) $20,000,000 for fiscal year 1997;
                  ``(B) $26,000,000 for fiscal year 1998;
                  ``(C) $32,000,000 for fiscal year 1999;
                  ``(D) $32,000,000 for fiscal year 2000;
                  ``(E) $32,000,000 for fiscal year 2001; and
                  ``(F) $0 for fiscal year 2002 and any succeeding 
                fiscal year.
          ``(4) 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) Dates for Payment of Fees.--The fees required by subsections 
(b), (c), and (d) of this section shall be paid--
          ``(1) on or before March 15, with respect to transactions and 
        sales occurring during the period beginning on the preceding 
        September 1 and ending at the close of the preceding December 
        31; and
          ``(2) on or before September 30, with respect to transactions 
        and sales occurring during the period beginning on the 
        preceding January 1 and ending at the close of the preceding 
        August 31.
  ``(f) Exemptions.--The Commission, by rule, may exempt any sale of 
securities or any class of sales of securities from any fee 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.
  ``(g) Publication.--The Commission shall publish in the Federal 
Register notices of the fee rates applicable under this section for 
each fiscal year.''.
  (b) Effective Dates; Transition.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendment made by subsection (a) shall apply with respect to 
        transactions in securities that occur on or after January 1, 
        1997.
          (2) Off-exchange trades of last sale reported transactions.--
        The amendment made by subsection (a) shall apply with respect 
        to transactions described in section 31(d)(1) of the Securities 
        Exchange Act of 1934 (as amended by subsection (a) of this 
        section) that occur on or after September 1, 1996.
          (3) Rule of construction.--Nothing in this subsection shall 
        be construed to affect the obligation of national securities 
        exchanges and registered brokers and dealers under section 31 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) as in 
        effect prior to the amendment made by subsection (a) to make 
        the payments required by such section on March 15, 1997.

SEC. 6. TIME FOR PAYMENT.

  Section 4(e) of the Securities Exchange Act of 1934 (15 U.S.C. 
78d(e)) is amended by inserting before the period at the end thereof 
the following: ``and the Commission may also specify the time that such 
fee shall be determined and paid relative to the filing of any 
statement or document with the Commission''.

SEC. 7. SENSE OF THE CONGRESS CONCERNING FEES.

  It is the sense of the Congress that--
          (1) the fees authorized by the amendments made by this Act 
        are in lieu of, and not in addition to, any fees that the 
        Securities and Exchange Commission is authorized to impose or 
        collect pursuant to section 9701 of title 31, United States 
        Code; and
          (2) in order to maintain the competitiveness of United States 
        securities markets relative to foreign markets, no fee should 
        be assessed on transactions involving portfolios of equity 
        securities taking place at times of day characterized by low 
        volume and during non-traditional trading hours.

                          Purpose and Summary

    The purpose of the legislation is to: (1) provide 
authorization for funding the Securities and Exchange 
Commission (SEC); and (2) reduce over time different fees 
charged by the SEC.
    H.R. 2972 takes a new approach to the issue of SEC funding. 
In lieu of a ``self-funding'' or ``user-fee'' system, H.R. 2972 
would gradually move the SEC from reliance on increased 
offsetting fees towards a full appropriation. In addition, 
registration fees under Section 6(b) of the Securities Act of 
1933 would be reduced over a 6-year period, while the 
application of existing securities transaction fees would be 
equalized. Finally, in conjunction with the proposed 
legislation, the SEC has agreed to eliminate certain fees that 
it collects pursuant to the Independent Offices Appropriations 
Act of 1952 (IOAA fees), which include a fee of $250 that must 
be paid in connection with filings of annual reports and 
certain periodic filings. In addition, Congress has expressed 
its willingness for the Commission to eliminate fees assessed 
on various overnight equity portfolio trading, during non-
traditional trading hours. This elimination could serve to 
enhance the market share of U. S. securities markets relative 
to foreign markets.
    H.R. 2972 is intended to operate in tandem with the 
existing Congressional appropriations process. In particular, 
the gradual decrease of offsetting fees will require 
coordination between the authorizing committee and the 
appropriations process to ensure that the SEC is adequately 
funded with appropriated funds. Moreover, the Commission's 
authority to collect fees to offset its appropriation must be 
adopted annually as part of legislation appropriating funds for 
the Commission. 1 To ensure that the SEC can plan its 
expenditures in advance during the transitional years when 
offsetting collections will continue, it is anticipated that 
the Appropriations Committee will provide the Commission each 
year with a total fixed appropriation amount that will then be 
offset and reduced by the offsetting fee collections received 
by the Commission in the fiscal year.
    \1\ In the absence of a current year appropriation, the 
Commission's authority to collect fees as offsetting collections to its 
appropriation will continue at the rate set in the prior fiscal year.
---------------------------------------------------------------------------

                  Background and Need for Legislation

    Since fiscal year 1983, the Securities and Exchange 
Commission has been a net contributor to the U.S. Treasury, 
collecting increasingly more in fees than is necessary to cover 
its budget. Until recently, all SEC fees were deposited in the 
general fund of the Treasury as revenues and the SEC was funded 
entirely through the annual appropriations process. Beginning 
in fiscal year 1991, however, due to increased budgetary 
pressures on discretionary spending, the Committee on 
Appropriations began providing part of the SECs annual funding 
requirements by increasing the rate fees under Section 6(b) of 
the Securities Act of 1933 and classifying the incremental 
increase as offsetting collections, i.e., funds available to 
the agency without further appropriation. Due to these actions, 
as well as a steadily increasing volume of securities 
offerings, the aggregate section 6(b) fees collected increased 
markedly during this period. In fiscal year 1995, for example, 
the fees collected were more than double the agency funding 
requirement. Fees assessed by the SEC include, but are not 
limited to: (1) the 6(b) fee, which applies to all registered 
securities (and, in 1995, raised approximately 72 percent of 
SEC revenue); (2) Independent Officers Appropriation Act (IOAA) 
fees, which, among other things, are assessed for review of 
annual filings; (3) Section 31 transaction fees on exchange 
listed stocks, including fees on overnight stock transactions; 
and (4) merger and tender offer fees.
    Various Members of Congress have expressed the concern that 
increasing SEC fees could constitute a tax on capital 
formation, due to the fact that the fees collected by the SEC 
so far outstrip the amounts appropriated to it. In addition, 
the SEC has argued that a more stable source of agency funding 
is required so that the agency can better manage its resources, 
particularly in view of the large growth of the securities 
markets and industry. In recent years, a number of initiatives 
have been proposed to address these issues, including 
legislation that was proposed and passed in the House during 
the 103rd Congress that would have created a ``user-fee'' 
funding mechanism for the SEC. None of these initiatives were 
enacted into law. In 1994, concerns involving these issues came 
to a head, and precipitated a funding crisis for the SEC, with 
its budget held up during the last days of the session, pending 
yet another short-term funding solution.
    Pursuant to H.R. 2972: (1) different fees charged by the 
SEC are reduced incrementally over six years by over $751 
million; and (2) over the same period, the SEC is increasingly 
funded by means of an appropriation, so that at the end of the 
period, the SEC is fully funded by means of an appropriation 
and SEC fees approximately cover the cost of running the SEC. 
These fees will be deposited in the Treasury as general 
revenue.
     Specifically, under H.R. 2972:
          The 6(b) fee is reduced in even increments from the 
        current rate of 1/29 of one percent to 1/55 of one 
        percent in 2002. This reduction will save investors 
        over $616 million over five years;
          The Section 31 fee is applied incrementally to 
        transactions on NASDAQ over five years, and then is 
        reduced from its current rate of 1/300 of one percent 
        to 1/400 of one percent in 2002;
          IOAA fees will be separately eliminated pursuant to 
        action by the SEC;
          Fees on overnight transactions on the New York Stock 
        Exchange shall be eliminated pursuant to action by the 
        SEC. This may enable the exchange to recapture business 
        lost to foreign exchanges that lack such fees;
          The total savings to investors by these fee 
        reductions through 2002 is estimated by the SEC to be 
        in excess of $751 million;
          Separately, the Appropriations Subcommittee on 
        Commerce, Justice, State, and Judiciary has agreed to 
        provide an additional incremental appropriation to the 
        SEC annually, to replace that which is lost by the fee 
        reductions in the bill; and
          Appendix A is a spreadsheet that details the schedule 
        of reductions in SEC fees and offsetting appropriations 
        from fiscal year 1996 to fiscal year 2002.

                       Collection of Filing Fees

    Last month, the SEC's Office of Inspector General submitted 
its audit report on the agency's internal controls related to 
the collection of filing fees (Collection of Filing Fees, Audit 
Report No. 225, February 8, 1996). The audit confirmed the 
SEC's previous assessment that the internal controls ``are not 
materially in conformance with accounting standards'' and that 
``material weaknesses'' with respect to separation of duties, 
audit trails, and access create ``a relatively high risk'' that 
``errors and irregularities, including fraud, could occur 
without being detected.'' The audit identified additional 
specific problems and recommended corrective actions. SEC 
Chairman Levitt testified at the agency's reauthorization 
hearing that no fraud had been found by the audit and that the 
SEC was adopting new policies and procedures for collecting 
filing fees in response to the report. The hearing record is 
being held open for the submission of a report on those 
efforts. The Committee intends for these corrective actions to 
be completed as soon as possible.

                                Hearings

    The Subcommittee on Telecommunications and Finance held a 
hearing on H.R. 2972, the Securities and Exchange Commission 
Authorization Act of 1996, on February 28, 1996. The Chairman 
of the Securities and Exchange Commission, Arthur Levitt, 
testified in support of the legislation.

                        Committee Consideration

    On February 28, 1996, the Subcommittee on 
Telecommunications and Finance met in open markup session and 
approved H.R. 2972 for Full Committee consideration, without 
amendment, by a voice vote. On March 6, 1996, the Full 
Committee met in open markup session and ordered H.R. 2972 
reported to the House, as amended, by a voice vote, a quorum 
being present.

                             Rollcall Votes

     Clause 2(l)2(B) of rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and amendments thereto. There were no 
recorded votes taken in connection with ordering H.R. 2972 
reported or in adopting the amendment. The voice votes taken in 
Committee are as follows:
    Bill: H.R. 2972, Securities and Exchange Commission 
Authorization Act of 1996
    Amendment: Amendment by Mr. Fields re: technical amendment 
concerning the timing for fee payments.
    Disposition: Agreed to, by a voice vote.
    Motion: Motion by Mr. Bliley to order H.R. 2972, as 
amended, reported to the House
    Disposition: Agreed to, by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

               New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee finds that 
H.R. 2972 would result in increased revenues as reflected in 
the estimate provided by the Congressional Budget Office and 
contained in this report.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 403 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
403 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 11, 1996.
Hon. Thomas J. Bliley, Jr.,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2972, the 
Securities and Exchange Commission Authorization Act of 1996.
    Enactment of H.R. 2972 would affect receipts; therefore, 
pay-as-you-go procedures would apply.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                             James L. Blum,
                                   (For June E. O'Neill, Director.)
    Enclosure.

               congressional budget office cost estimate

    1. Bill number: H.R. 2972
    2. Bill title: Securities and Exchange Commission 
Authorization Act of 1996
    3. Bill status: As ordered reported by the House Committee 
on Commerce on March 6, 1996.
    4. Bill purpose: H.R. 2972 would authorize the 
appropriation of $371 million for fiscal year 1997 for the 
Securities and Exchange Commission (SEC). The bill would amend 
the Securities Act of 1933 and the Securities Exchange Act of 
1934 to change the levels and types of various registration and 
transaction fees.
    Registration Fees. Under the Securities Act of 1933, the 
SEC collects fees equal to 1/50 of one percent of the gross 
amount of securities registered with the commission. These fees 
are recorded as governmental receipts, or revenues. The 1996 
appropriations act (Public Law 104-99) requires the SEC to 
collect fees totaling 1/29 of one percent of the gross amount 
of securities registered with the SEC, with the additional 
amounts above the 1/50 of one percent treated as offsetting 
collections. Thus, while the portion of the fees up to the 
statutory rate is recorded on the revenue side of the budget, 
the additional fees are recorded as offsetting collections and 
used by the SEC to offset its spending in 1996.
    In fiscal years 1997-2000, the bill also would authorize 
the SEC to increase the registration fee by specified amounts 
over the statutory rate (1/50 of one percent) and deposit the 
additional amounts as offsetting collections, if provided in 
advance in an appropriations act. H.R. 2972 would reduce the 
statutory rate for registration fees to 1/55 of one percent 
beginning in fiscal year 2002.
    Transaction Fees. Under current law, the SEC collects a 
certain percentage of the gross aggregate dollar amount of 
sales of exchange-registered securities. The budget treats 
these fees as revenues.
    H.R. 2972 would reduce the transaction fees assessed on the 
exchange-registered securities beginning in fiscal year 2002. 
The bill also would extend the transaction fees to off-exchange 
trades, which currently include those conducted by the National 
Association of Security Dealers Automated Quotation (NASDAQ) 
system. In fiscal years 1997-2001, H.R. 2972 would establish 
yearly rates for the transaction fees charged for securities 
traded off-exchange. Each year a portion of these collections--
as authorized in the bill and if provided in advance in an 
appropriations act--would be designated for use as offsetting 
collections. Collections in excess of this amount would be 
deposited in the Treasury as revenues.
    5. Estimated cost to the Federal Government: Table 1 
summarizes the estimated budgetary impact of H.R. 2972 over the 
1996-2000 period. In addition to the net SEC spending shown in 
Table 1, the agency has spending authority from offsetting 
collections, and the bill would reduce the amount of such 
collections. Moreover, the bill would affect governmental 
receipts. Table 2 shows the estimated fee collections under 
H.R. 2972, as compared to projected fees under current law. The 
reduction in the amount of fees collected each year would 
necessitate increasing amounts of discretionary spending for 
SEC activities, assuming that the commission's total spending 
does not decrease significantly.
    The outlay effects of this bill fall within budget function 
370.

                                TABLE 1. Estimated Budgetary Impact of H.R. 2972                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                       1996     1997     1998     1999     2000 
----------------------------------------------------------------------------------------------------------------
                                       SPENDING SUBJECT TO APPROPRIATIONS                                       
Spending under current law:                                                                                     
    Budget authority \1\...........................................      103  .......  .......  .......  .......
    Estimated outlays..............................................      102       37  .......  .......  .......
Proposed changes                                                                                                
    Authorization level............................................  .......      317  .......  .......  .......
    Less: Offsetting collections...................................  .......     -154  .......  .......  .......
                                                                    --------------------------------------------
      Net authorization............................................  .......      163  .......  .......  .......
Estimated outlays..................................................  .......      122       41  .......  .......
Spending under H.R. 2972:                                                                                       
    Authorization level \1\........................................      103      163  .......  .......  .......
    Estimated outlays..............................................      102      159       41  .......  .......
                                                                    ============================================
                                                    REVENUES                                                    
Estimated revenues under current law...............................      372      387      400      416      430
Proposed changes...................................................  .......       10       15       22       29
                                                                    --------------------------------------------
Estimated revenues under H.R. 2972.................................      372      397      415      438      459
----------------------------------------------------------------------------------------------------------------
\1\ The 1996 amount is the annualized level for appropriations provided through March 15 for the programs       
  authorized by the bill.                                                                                       


                                       TABLE 2. Estimated SEC Fee Receipts                                      
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                     1996     1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Receipts under current law:                                                                                     
    Revenues.....................................      372      387      400      416      430      446      461
    Offsetting collections.......................      184      189      193      197      200      203      207
                                                  --------------------------------------------------------------
      Total fee receipts.........................      556      576      593      613      630      649      668
                                                  ==============================================================
Proposed changes:                                                                                               
    Revenues.....................................  .......       10       15       22       29       40       26
    Offsetting collections.......................  .......      -35      -73     -113     -144     -171     -207
                                                  --------------------------------------------------------------
      Total fee receipts.........................  .......      -25      -58      -91     -115     -131     -181
                                                  ==============================================================
Fee receipts under H.R. 2972:                                                                                   
    Revenues.....................................      372      397      415      438      459      486      487
    Offsetting collections.......................      184      154      120       84       56       32  .......
                                                  --------------------------------------------------------------
      Total fee receipts.........................      556      551      535      522      515      518      487
----------------------------------------------------------------------------------------------------------------

                          6. basis of estimate

Spending Subject to Appropriations

    Assuming appropriation of the authorized amount ($317 
million), and collection of the authorized fees ($154 million), 
CBO estimates that enacting H.R. 2972 would result in federal 
outlays of $163 million over the fiscal years 1997 and 1998. If 
future appropriation acts authorize the SEC to collect and use 
fees at the rates specified in H.R. 2972, spending financed by 
offsetting collections would total about $446 million through 
2001. Because the offsetting collections authorized in the bill 
would be offset by spending by the agency, no net change in the 
deficit would result.

Fees

    If the SEC continued to collect and use fees at the rate 
set in the 1996 appropriations act, collections would total 
$3.7 billion over the 1997-2002 period. However, the bill would 
phase out the offsetting collections by 2002. As a result, CBO 
estimates that the SEC would collect about $600 million less in 
fees over the 1997-2002 period.
    Although total fee collections would decrease under this 
bill, the amount of fees classified as revenues would increase. 
Through fiscal year 2001, H.R. 2972 would have no effect on the 
portions of the SEC registration and on-exchange transaction 
fees that are deposited in the Treasury as governmental 
receipts. Beginning in fiscal year 2002, the decrease in the 
rates at which these fees are collected would result in a loss 
of collections totaling about $20 million annually. In 
contrast, extending the transaction fees to off-exchange trades 
would increase revenues beginning in fiscal year 1997. In 
fiscal year 2002 and beyond, these additional collections from 
NASDAQ transaction fees would more than offset the decreased 
collections resulting from reducing the rates charged for the 
existing registration and transaction fees. CBO estimates that 
H.R. 2972 would increase governmental receipts by $76 million 
over fiscal years 1997-2000.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. CBO estimates that enactment 
of H.R. 2972 would affect receipts by changing fees charged by 
the SEC. The following table summarizes the estimated pay-as-
you-go impact of this bill.

----------------------------------------------------------------------------------------------------------------
                                                                       1996            1997            1998     
----------------------------------------------------------------------------------------------------------------
Change in outlays...............................................           (\1\)           (\1\)           (\1\)
Change in receipts..............................................               0              10              15
----------------------------------------------------------------------------------------------------------------
\1\ Not applicable.                                                                                             

    8. Estimated impact on state, local, and tribal 
governments: CBO estimates that this bill would impose no 
intergovernmental mandates as defined by Public Law 104-4, and 
would have no direct budgetary impact on state, local, or 
tribal governments.
    9. Estimated impact on the private sector: This bill would 
mandate new transaction fees on off-exchange-trades of last-
sale-reported securities and would reduce registration fees to 
issuing corporations and some transaction fees to other market 
participants. The direct cost to the private sector of the new 
transaction fees would not exceed $100 million in 1997 or in 
any of the four following years. Direct costs would fall 
primarily on trades executed through the NASDAQ system. The 
reduced registration and transaction fees would result in 
direct savings to other market participants, which would more 
than offset those costs. Such savings would accrue to issuing 
corporations that now pay the registration fee and to those 
that execute trades through other than the NASDAQ system, which 
would pay a lower transaction fee starting in 2002. Thus, CBO 
estimates that H.R. 2972 would result in an aggregate net 
direct savings to the private sector of about $600 million over 
the 1997-2002 period.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Federal Cost Estimate: Rachel 
Forward and Stephanie Weiner. State and Local Government 
Mandates Estimate: Pepper Santalucia. Private Sector Mandates 
Estimates: Jean Wooster.
    12. Estimate approved by: Robert A. Sunshine, (For Paul N. 
Van de Water, Assistant Director for Budget Analysis).

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that the bill 
would have no inflationary impact.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act are created by this 
legislation.

             Section-by-Section Analysis of the Legislation

                         Section 1. Short Title

    This section provides that the short title of the bill is 
the ``Securities and Exchange Commission Authorization Act of 
1996.''

                           Section 2. Purpose

    The purposes of the bill are (1) to authorize 
appropriations for the SEC for fiscal year 1997, and (2) to 
reduce over time the rates of fees charged under the Federal 
securities laws.

               Section 3. Authorization of Appropriations

    This section amends Section 35 of the Securities Exchange 
Act of 1934 (``Exchange Act'') to authorize appropriations to 
carry out the functions, powers, and duties of the SEC in the 
amount of $317 million during fiscal year 1997.

                      Section 4. Registration Fees

    This section amends Section 6(b) of the Securities Act of 
1933 (``Securities Act'') to gradually decrease the rate of 
securities registration fees collected under Section 6(b) of 
the Securities Act (``Section 6(b) fees''). Although the 
existing statutory rate of fees collected under Section 6(b) is 
1/50 of one percent; in fact, pursuant to appropriations 
action, the SEC has been collecting Section 6(b) fees at higher 
rates since 1990, which are used as offsets to the SEC's 
appropriation. In fiscal year 1995 and to date in fiscal year 
1996, the SEC is collecting Section 6(b) fees at a rate of 1/
29th of one percent pursuant to P.L. 103-352 (10/10/94), P.L. 
103-335 (9/30/94), P.L. 104-31 (9/30/95), P.L. 104-54 (11/19/
95), P.L. 104-56 (11/20/95), P.L. 104-94 (1/6/96) and P.L. 104-
99 (1/26/96).
    The bill anticipates that in fiscal year 1997 and 
subsequent fiscal years the Section 6(b) fee rate will decline 
so that it will actually be lower than the current statutory 
rate of 1/50th of one percent by fiscal year 2002. Likewise, 
the use of increased Section 6(b) fees as ``offsetting 
collections'' to the SEC's appropriation will also decrease 
over time. After fiscal year 2001, the bill provides that all 
fees collected under Section 6(b) will be deposited and 
credited as general revenues of the U.S. Treasury.
    The section references in the following analysis of Section 
6(b) are to provisions in the amended section of the Securities 
Act, and not to sections of the bill.

Subsection 6(b)(1)--Recovery of cost of services

    This provision restates the SEC's existing authority to 
collect securities registration fees, but specifies that such 
collections shall occur in the manner set forth in subsection 
(b). This paragraph also states that fees collected under 
Section 6(b) are designed generally to approximate the costs to 
the government of the securities registration process, and 
costs related to such process.

Section 6(b)(2)--Fee payment required

    This provision provides that, at the time of filing a 
registration statement, the applicant shall pay to the 
Commission a fee equal to the sum of the rates established by 
paragraphs (b)(3) and (b)(4).
    For purposes of compliance with the Congressional Budget 
Act of 1974, as amended, and other Federal budget requirements, 
Section 6(b) fees will be divided into two parts. One portion 
of the fee (which represents the existing statutory Section 
6(b) fee rate of 1/50th of one percent) will be directed 
towards the general fund of the U.S. Treasury (i.e., the 
general revenue fee specified in (b)(3)). The other portion of 
the fee, which will be collected only until fiscal year 2000, 
will be permitted to be designated as an ``offsetting 
collection'' to the SEC's appropriation, i.e., the offsetting 
collection fee specified in (b)(4).
    To eliminate any potential confusion regarding the 
appropriate fee rate for any fiscal year, the subsection 
provides that the Commission shall publish the applicable rate 
in the Federal Register. This notice should be a ministerial 
function for the SEC. The SEC, however, may round applicable 
rates to avoid computations that are unnecessarily complex. 
Such publication would not require notice and comment 
rulemaking proceedings under the Administrative Procedure Act.
    Finally, this paragraph provides that, despite the amount 
of any securities offering to be registered, there is a minimum 
filing fee. Under current law, this fee is $100. The bill would 
establish a $200 minimum fee until fiscal year 2001. Beginning 
in fiscal year 2002, the minimum fee rate would decline to 
$182.

Subsection 6(b)(3)--General revenue fees

    This provision specifies that a certain portion of the 
Section 6(b) fees collected by the Commission will be deposited 
and credited as general revenues in the U.S. Treasury. It also 
establishes the applicable fee rate for such general revenue 
fees. Specifically, paragraph (b)(3) provides that, until 
fiscal year 2001, the general revenue fee rate for securities 
registration filings will be the ``rate equal to $200 for each 
``$1,000,000'' of the maximum aggregate price at which 
securities are to be offered (this restates the existing 
statutory fee rate of 1/50 of one percent in dollar terms). 
Beginning in fiscal year 2002, the base rate will be lowered to 
the rate equal to $182 for each $1,000,000 (1/55 of one 
percent) of the maximum aggregate price of the securities 
offering. Notably, beginning in 2001, all the fees collected 
under Section 6(b) will be directed to the U.S. Treasury.

Subsection 6(b)(4)--Offsetting collection fees

    This provision specifies that, until fiscal year 2000, a 
portion of the Section 6(b) fees collected by the SEC will be 
permitted to be used as an ``offsetting collection'' to the 
SEC's appropriation. It also specifies the applicable fee rate 
for such offsetting collection fees. Such fee rates will 
decline over a five year period beginning in fiscal year 1997 
and ending in fiscal year 2001. This provision anticipates 
that, in lieu of offsetting collection fees, the Commission 
will receive additional increasing amounts of general 
appropriation funding as the specified offsetting collection 
fee rates decline. The anticipated changes in fee receipts are 
projected in Appendix A hereto.
    The provision specifies that offsetting collection fees may 
only be collected to the extent provided in advance in 
appropriations acts, except in circumstances in which an 
appropriation has lapsed. In such circumstances, the Commission 
shall continue to collect fees as offsetting collections at the 
rate in effect during the previous fiscal year. This provision 
is designed to prevent unpredictable oscillations in the rate 
of fees charged by the SEC. As a general matter, however, this 
provision should ensure close coordination between the 
authorizing committee and the appropriations process as the 
SEC's budget is considered each year. After fiscal year 2000, 
the use of offsetting collections under Section 6(b) to fund 
the SEC's appropriation will not be authorized by this bill.

                      Section 5. Transaction Fees

    Section (a) of this section amends Section 31 of the 
Exchange Act, the provision that currently imposes fees on 
transactions in shares that are registered on national 
securities exchanges.
    At present, Section 31 requires that every national 
securities exchange pay an annual fee to the Commission based 
on the aggregate dollar amount of the sales of securities 
(other than bonds, debentures, and other evidences of 
indebtedness) transacted on that exchange. In addition, Section 
31 requires payment of a similar fee from broker-dealers for 
over-the-counter (``OTC'') transactions in exchange-traded 
stocks. The section also gives the Commission authority to 
exempt any sale of securities or any class of sales of 
securities from imposition of the exchange fee.
    Among other things, the bill would amend Section 31 to 
extend transaction fees to OTC transactions that are subject to 
last sale reporting. Thus, for example, transactions traded on 
NASDAQ would be subject to such fees. The bill's intent in 
amending Section 31 to encompass transactions in OTC securities 
that are subject to last sale reporting is to provide more 
equal treatment of these organized markets, which also are 
overseen by the Commission. As OTC markets develop systems that 
facilitate national trading, the need for the Commission to 
oversee these markets also grows, and the original 
justification for excluding them from transaction fees is 
undercut.
    In addition to equalizing the application of Section 31 
fees, the section would also permit fees on OTC transactions to 
be phased in over a five year period. Moreover, the newly-
imposed OTC transaction fees would be permitted to be used as 
offsetting collections to fund the Commission's appropriation 
until fiscal year 2001. Beginning in fiscal year 2002, all OTC 
transaction fees would be directed for deposit in the general 
fund of the U.S. Treasury.
    The section references in the following analysis of Section 
31 are to provisions in the amended section of the Exchange Act 
and not to sections of the bill.

Subsection 31(a)--Recovery of costs of services

    This provision restates the SEC's existing authority to 
collect securities registration fees, but specifies that such 
collections shall occur in the manner set forth in revised 
Section 31. This subsection also states that fees collected 
under Section 31 are designed generally to approximate the 
costs to the government of the supervision and regulation of 
securities markets and securities professionals, and costs 
related to such supervision and regulation.

Subsection 31(b)--Exchange-traded securities

    This subsection requires every national securities exchange 
to pay to the Commission a fee equal to $33 for each $1,000,000 
of the aggregate dollar amount of sales of securities 
(excluding bonds, debentures and other evidences of 
indebtedness) transacted on such exchanges. The fee rate of $33 
for each $1,000,000 restates the existing statutory fee rate of 
1/300th of one percent in dollar terms. Beginning in fiscal 
year 2002, the fee rate will be lowered to $25 for each 
$1,000,000 of such aggregate dollar amount of sales (1/400 of 
one percent). This subsection continues the current treatment 
of such fees as general revenues, and expressly provides that 
fees collected pursuant to this subsection shall be deposited 
and collected as general revenue of the Treasury.

Subsection 31(c) Off-exchange-traded exchange-registered securities

    This subsection requires every national securities 
association to pay to the Commission a fee at a rate equal to 
$33 for each $1,000,000 (or 1/300 of one percent) of the 
aggregate dollar amount of sales of securities (excluding 
bonds, debentures, and other evidences of indebtedness) 
transacted by or through a member of such association, 
otherwise than on a national securities exchange. Beginning in 
fiscal year 2002, the fee rate will be lowered to $25 for each 
$1,000,000 of such aggregate dollar amount of sales (1/400 of 
one percent). Fees collected pursuant to this subsection must 
be deposited and collected as general revenue of the U.S. 
Treasury.
    This subsection would essentially transfer the existing 
payment obligations of broker-dealers with respect to Section 
31 fees that are due on OTC transactions of exchange-registered 
securities. Currently, broker-dealers pay such fees directly to 
the Commission. Under the bill, these fees are to be collected 
and paid to the Commission by a national securities 
association. As a practical matter, the only currently-
registered national securities association, the National 
Association of Securities Dealers, Inc. (``NASD''), would be 
the collection agent for such fees.

Subsection 31(d)--Off-exchange trades of last-sale-reported securities

    This provision would extend Section 31 transaction fees to 
sales of OTC securities subject to prompt last sale reporting. 
Such fees would be phased in gradually over a five-year period, 
and authorized for use as offsetting collections to the 
Commission's appropriation until fiscal year 2001. The 
provision excludes any sales for which a fee is paid under 
subsection (c).
    Paragraph (1) provides that national securities 
associations shall pay to the SEC securities transaction fees 
based on the aggregate dollar amount of sales transactions by 
their members in securities (excluding bonds, debentures, and 
other evidences of indebtedness) in the OTC market that are 
subject to prompt last sale reporting. The NASD, as the only 
currently-registered national securities association, would be 
the collection agent for such fees.
    The phrase ``securities * * * covered by prompt last sales 
reporting pursuant to the rules of the Commission or a 
registered national securities association'' would include 
NASDAQ securities. The provision includes both securities 
designated as qualified for trading in a national market system 
pursuant to section 11A(a)(2) of the Exchange Act (NASDAQ/NMS 
securities), as well as regular NASDAQ, or NASDAQ Small Cap, 
securities. In addition, this language would extend the 
application of Section 31 to securities traded on the NASD's 
Bulletin Board system, as real-time transaction reporting for 
these transactions provides the means to verify the amount of 
sales upon which fees would be assessed. Finally, as real-time 
reporting is extended, additional securities could become 
subject to transaction fees.
    Under paragraph (2), fees on OTC transactions subject to 
last-sale reporting would be phased in over a five-year period. 
Beginning in 1997, the fee rate would be the rate equal to $12 
for each $1,000,000 of the aggregate dollar amount of sales 
transacted; the fee rate would increase gradually until it 
corresponded with the existing statutory rate of Section 31 
fees in fiscal year 2001.
    Paragraph (3) provides that, from fiscal year 1997 to 
fiscal year 2001, certain amounts generated from the newly-
imposed fees on OTC transactions may be used as offsetting 
collections to the SEC's appropriations. The provision, 
however, specifies that offsetting collection fees may only be 
collected to the extent provided in advance in appropriations 
acts, unless there is a lapse in appropriations. This provision 
requires close coordination between the authorizing committee 
and the appropriations process as the SEC's budget is 
considered each year. After fiscal year 2001, the use of 
Section 31 fees as offsetting collections to fund the SEC's 
appropriation will not be authorized by this bill.
    Paragraph (4) provides that in circumstances in which an 
appropriation has lapsed, the Commission shall continue to 
collect fees as offsetting collections at the rate in effect 
during the previous fiscal year. This provision is designed to 
prevent unpredictable oscillations in the rate of fees charged 
by the SEC.

Subsection 31(e)--Dates for payment of fees

    Under existing law, Section 31(e) requires payments of 
Section 31 fees to the Commission annually, on March 15 of each 
year. In lieu of a single annual payment, the bill contemplates 
that all existing and new transaction fees will be paid to the 
Commission by the exchanges and the NASD, as the only 
registered national securities association, on a semi-annual 
basis. Specifically, all fees for transactions occurring 
between September 1 and December 31 would be due on or before 
the following March 15, while fees for transactions occurring 
between January 1 and August 31 would be due to the Commission 
on or before the following September 30.

Subsection 31(f)--Exemptions

    This subsection restates the Commission's existing 
authority to, by rule, exempt any sale of securities or class 
of sales of securities from any fee imposed by Section 31 of 
the Exchange Act. The Commission may grant such exemption if it 
is consistent with the public interest, the equal regulation of 
markets and brokers and dealers, and the development of a 
national market system. Upon enactment of this bill, it is 
anticipated that the Commission will review Rule 31-1 under the 
Exchange Act to, among other things, rescind the existing 
exemption contained therein for transactions in certain NASDAQ 
securities.

Subsection 31(g)--Publication

    To eliminate any potential confusion regarding the 
appropriate fee rate for any fiscal year, the subsection 
provides that the Commission shall publish the applicable rates 
in the Federal Register. This notice should be a ministerial 
function for the SEC. The SEC may round applicable rates to 
avoid unnecessarily complex calculations. Such notice 
publication would not require notice and comment rulemaking 
proceedings under the Administrative Procedure Act.
    Section (b) of Section 5 contains effective dates and 
transition rules for the revisions made to Section 31 by 
section (a) above.
    Section (b)(1) provides that, in general, the amendments 
made to Section 31 by this bill shall apply with respect to 
transactions in securities that occur on or after January 1, 
1997.
    Section (b)(2) provides a special effective date for the 
new fee that would apply to OTC transactions in last sale 
reported securities. Payment obligations with respect to such 
fees would apply to transactions occurring on or after 
September 1, 1996.
    Finally, section (b)(3) provides that this bill does not 
extinguish any existing payment obligations that arise under 
Section 31 as it is currently in effect. Thus, payment 
obligations of national securities exchanges, and brokers and 
dealers, to make payments due on March 15, 1997, with respect 
to transactions covered by Section 31 prior to the enactment of 
this bill remain in effect.

                      section 6. time for payment

    This section adds a new clause to Section 4(e) of the 
Exchange Act giving the SEC discretion to determine when the 
amount of a required fee will be determined and when it will be 
paid relative to the filing of any statement or document with 
the SEC. For example, under a system of company or shelf 
registration, for purposes of sections 6(b) and 6(c) of the 
Securities Act, this section would provide the SEC with 
authority to allow the filing of a registration statement 
registering an indefinite quantity of securities, or a 
specified quantity of securities with additional quantities of 
securities registered pursuant to post-effective amendments, 
and to allow the determination and payment of the required fee 
to be made at the time that the quantity of securities to be 
offered was determined by the issuer or added pursuant to a 
post-effective amendment.
    In addition, this section is intended to permit the SEC to 
accept the filing of registration statements or other documents 
which are not preceded by or accompanied by the required fee, 
instead permitting the fee to be paid after filing. The 
Committee intends that, in the event that the SEC permits such 
a filing, procedures should be followed to collect the required 
fees subsequent to filing. In the event such fees are not paid, 
they should be subject of appropriate debt collection 
procedures.

     section 7. sense of the congress concerning discretionary fees

    This provision expresses the sense of the Congress that the 
fees authorized by this Act, are in lieu of, and not in 
addition to, any fees that the SEC currently imposes under the 
Independent Offices Appropriations Act of 1952 (section 9701 of 
Title 31, United States Code). Such miscellaneous fees include 
a fee of $250 that must be paid in connection with filings of 
annual reports and certain periodic filings. In addition, the 
provision expresses the sense of Congress that no fees should 
be assessed on equity portfolio trades taking place at times of 
day characterized by low volume during non-traditional trading 
hours.

                              Agency Views

                   U.S. Securities and Exchange Commission,
                                 Washington, DC, February 27, 1996.
Hon. Thomas J. Bliley, Jr.,
Chairman, Committee on Commerce,
Rayburn House Office Building, Washington, DC.
    Dear Tom: I write to offer my support and endorsement of 
the ``Securities and Exchange Commission Authorization Act of 
1996.'' Thank you for your strong leadership and the support of 
Chairmen Fields, Rogers and Archer in designing a creative 
approach to the SEC's funding both on a short-term and long 
term basis.
    Your proposed resolution to the perennial problem of SEC 
funding and fees is perhaps the most important aspect of the 
``Securities and Exchange Commission Authorization Act of 
1996.'' The funding mechanism for the SEC would reduce Section 
6(b) fees over a five-year period and expand existing 
securities transaction fees to the over-the-counter market, 
recognizing that the Commission also oversees those markets. 
Under your proposal, the SEC also has agreed to act to 
eliminate certain fees that it collects pursuant to the 
Independent Offices Appropriation Act of 1952 (``IOAA fees''), 
which include a fee of $250 that must be paid in connection 
with filings of annual reports and certain periodic filings. 
Finally, the SEC would gradually move from reliance on 
increased offsetting fees towards full appropriation status. 
The Commission believes that adoption of this approach provides 
a long-term solution to the SEC's funding problems.
    Finally, the premier aspect of the SEC Authorization Bill 
is that it enables us to maintain our vigorous programs to both 
protect investors and ensure that the capital formation system 
in the U.S. markets is efficient. This legislation will help 
the agency avoid the funding problems it has had in the past, 
and enable the SEC to be funded entirely through appropriations 
by the year 2001.
    David Cavicke has been extremely helpful in this important 
initiative. We look forward to working with you and your staff 
toward finally passage of this authorization legislation.
            Sincerely,
                                           Arthur Levitt, Chairman.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 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

          * * * * * * *

                   securities and exchange commission

  Sec. 4. (a)  * * *
          * * * * * * *
    (e) Notwithstanding any other provision of law, whenever 
any fee is required to be paid to the Commission pursuant to 
any provision of the securities laws or any other law, the 
Commission may provide by rule that such fee shall be paid in a 
manner other than in cash and the Commission may also specify 
the time that such fee shall be determined and paid relative to 
the filing of any statement or document with the Commission.
          * * * * * * *

                           [transaction fees

  [Sec. 31. Every national securities exchange shall pay to the 
Commission on or before March 15 of each calendar year a fee in 
an amount equal to one three-hundredths of 1 per centum of the 
aggregate dollar amount of the sales of securities (other than 
bonds, debentures, and other evidences of indebtedness) 
transacted on such national securities exchange during each 
preceding calendar year to which this section applies. Every 
registered broker and dealer shall pay to the Commission on or 
before March 15 of each calendar year a fee in an amount equal 
to one three-hundredths of 1 per centum of the aggregate dollar 
amount of the sales of securities registered on a national 
securities exchange (other than bonds, debentures, and other 
evidences of indebtedness) transacted by such broker or dealer 
otherwise than on such an exchange during each preceding 
calendar year: Provided, however, That no payment shall be 
required for any calendar year in which such payment would be 
less than one hundred dollars. The Commission, by rule, may 
exempt any sale of securities or any class of sales of 
securities from any fee 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.]

SEC. 31. TRANSACTION FEES.

  (a) Recovery of Cost of Services.--The Commission shall, in 
accordance with this subsection, collect transaction fees 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 national securities 
exchange shall pay to the Commission a fee at a rate equal to 
$33 for each $1,000,000 of the aggregate dollar amount of sales 
of securities (other than bonds, debentures, and other 
evidences of indebtedness) transacted on such national 
securities exchange, except that for fiscal year 2002 or any 
succeeding fiscal year such rate shall be equal to $25 for each 
$1,000,000 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.--
Every national securities association shall pay to the 
Commission a fee at a rate equal to $33 for each $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 registered on such an 
exchange (other than bonds, debentures, and other evidences of 
indebtedness), except that for fiscal year 2002 or any 
succeeding fiscal year such rate shall be equal to $25 for each 
$1,000,000 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.--Every national securities 
        association shall pay to the Commission a fee at a rate 
        equal to the dollar amount determined under paragraph 
        (2) for each $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, 
        and other evidences of indebtedness) subject to prompt 
        last sale reporting pursuant to the rules of the 
        Commission or a registered national securities 
        association, excluding any sales for which a fee is 
        paid under subsection (c).
          (2) Fee rates.--Except as provided in paragraph (4), 
        the dollar amount determined under this paragraph is--
                  (A) $12 for fiscal year 1997;
                  (B) $14 for fiscal year 1998;
                  (C) $17 for fiscal year 1999;
                  (D) $18 for fiscal year 2000;
                  (E) $20 for fiscal year 2001; and
                  (F) $25 for fiscal year 2002 or for any 
                succeeding fiscal year.
          (3) Limitation; deposit of fees.--Except as provided 
        in paragraph (4), no amounts shall be collected 
        pursuant to this subsection (d) for any fiscal year 
        beginning before October 1, 2001, 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, except that any 
        amounts in excess of the following amounts (and any 
        amount collected for fiscal years beginning on or after 
        October 1, 2001) shall be deposited and credited as 
        general revenues of the Treasury:
                  (A) $20,000,000 for fiscal year 1997;
                  (B) $26,000,000 for fiscal year 1998;
                  (C) $32,000,000 for fiscal year 1999;
                  (D) $32,000,000 for fiscal year 2000;
                  (E) $32,000,000 for fiscal year 2001; and
                  (F) $0 for fiscal year 2002 and any 
                succeeding fiscal year.
          (4) 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) Dates for Payment of Fees.--The fees required by 
subsections (b), (c), and (d) of this section shall be paid--
          (1) on or before March 15, with respect to 
        transactions and sales occurring during the period 
        beginning on the preceding September 1 and ending at 
        the close of the preceding December 31; and
          (2) on or before September 30, with respect to 
        transactions and sales occurring during the period 
        beginning on the preceding January 1 and ending at the 
        close of the preceding August 31.
  (f) Exemptions.--The Commission, by rule, may exempt any sale 
of securities or any class of sales of securities from any fee 
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.
  (g) Publication.--The Commission shall publish in the Federal 
Register notices of the fee rates applicable under this section 
for each fiscal year.
          * * * * * * *

                    [authorization of appropriations

  [Sec. 35. There are authorized to be appropriated to carry 
out the functions, powers, and duties of the Commission--
          [(1) $178,023,000 for the fiscal year ending 
        September 30, 1990; and
          [(2) $212,609,000 for the fiscal year ending 
        September 30, 1991.]

SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

  There are authorized to be appropriated to carry out the 
functions, powers, and duties of the Commission $317,000,000 
for fiscal year 1997.
          * * * * * * *
                              ----------                              


                SECTION 6 OF THE SECURITIES ACT OF 1933

                                TITLE I

          * * * * * * *

    registration of securities and signing of registration statement

  Sec. 6. (a)  * * *
  [(b) At the time of filing a registration statement the 
applicant shall pay to the Commission a fee of one-fiftieth of 
1 per centum of the maximum aggregate price at which such 
securities are proposed to be offered, but in no case shall 
such fee be less than $100.]
  (b) Registration Fee.--
          (1) Recovery of cost of services.--The Commission 
        shall, in accordance with this subsection, collect 
        registration fees that are designed to recover the 
        costs to the government of the securities registration 
        process, and costs related to such process, including 
        enforcement activities, policy and rulemaking 
        activities, administration, legal services, and 
        international regulatory activities.
          (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. In 
        no case shall the fee required by this subsection be 
        less than $200, except that during fiscal year 2002 or 
        any succeeding fiscal year such minimum fee shall be 
        $182.
          (3) General revenue fees.--The rate determined under 
        this paragraph is a rate equal to $200 for each 
        $1,000,000 of the maximum aggregate price at which such 
        securities are proposed to be offered, except that 
        during fiscal year 2002 and any succeeding fiscal year 
        such rate is equal to $182 for each $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 
                subparagraphs (B) and (C), the rate determined 
                under this paragraph is a rate equal to the 
                following amount for each $1,000,000 of the 
                maximum aggregate price at which such 
                securities are proposed to be offered:
                          (i) $103 during fiscal year 1997;
                          (ii) $70 during fiscal year 1998;
                          (iii) $38 during fiscal year 1999;
                          (iv) $17 during fiscal year 2000; and
                          (v) $0 during fiscal year 2001 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.
          * * * * * * *

                                                                     A P P E N D I X                                                                    
 ESTIMATE OF OFFSETTING COLLECTIONS FROM A DECLINING FEE RATE UNDER SECTION 6(b) OF THE 1933 SECURITIES ACT AND THE EXPANSION OF SECTION 31 OF THE 1934 
                                                          SECURITIES EXCHANGE ACT TO THE NASDAQ                                                         
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Fiscal year 1996  Fiscal year 1997  Fiscal year 1998  Fiscal year 1999    Fiscal year      Fiscal year      Fiscal year  
                              ------------------------------------------------------------------------       2000             2001             2002     
                                                                                                      --------------------------------------------------
                                 $M      6(b)      $M      6(b)      $M      6(b)      $M      6(b)              6(b)             6(b)             6(b) 
                                         rate              rate              rate              rate      $M      rate     $M      rate     $M      rate 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Offsetting collections:                                                                                                                                 
    Section 6(b) of 1933 Act.    $184  1/29 of     $134  1/33 of      $93  1/37 of      $52  1/42 of      $24  1/46 of      $0  1/50 of      $0  1/55 of
                                        1                 1                 1                 1                 1                1                1     
                                        percent.          percent.          percent.          percent.          percen           percen           percen
                                                                                                                t.               t.               t     
    Section 31 of 1934 Act...      $0  ........     $20  1/800 of     $26  1/700 of     $32  1/600 of     $32  1/550       $32  1/500        $0  1/400  
                                                          1                 1                 1                 of 1             of 1             of 1  
                                                          percent.          percent.          percent.          percen           percen           percen
                                                                                                                t.               t.               t     
                              --------------------------------------------------------------------------------------------------------------------------
      Total offsetting           $184  ........    $154  ........    $119  ........     $84  ........     $56  .......     $32  .......      $0  .......
       collections.                                                                                                                                     
                              ==========================================================================================================================
Change from prior year--                          ($30)             ($35)             ($35)             ($27)            ($25)            ($32)         
 Reductions in offsetting                                                                                                                               
 collections to be covered by                                                                                                                           
 general fund appropriations.                                                                                                                           
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Notes:                                                                                                                                                 
The amount of offsetting collections in each year is based on revenue estimated to be received from a decrease in the rate of fees under Section 6(b) of
  the Securities Act of 1933 and from an expansion of Section 31 of the Securities Exchange Act of 1934 to the NASDAQ.                                  
This chart assumes that all FY 2002 fee revenue will be deposited as general revenue into the U.S. Treasury.                                            
While the rate of fees under Section 31 of the 1934 Securities Exchange Act continue to increase in each fiscal year to a maximum rate of 1/400 of 1    
  percent, the amount of using offsetting collections available to fund the SEC in FYs 2000 and 2001 are capped at the FY 1999 amount of $32 million.   
Due to timing concerns in the first year of implementation, Section 31 fee revenue in fiscal 1997 is based on eleven months of NASDAQ transactions. All 
  subsequent years are on a twelve month basis.