[Congressional Record Volume 140, Number 137 (Tuesday, September 27, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 27, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
  CONTINUATION OF CERTAIN FEE COLLECTIONS FOR SECURITIES AND EXCHANGE 
                               COMMISSION

  Mr. GIBBONS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 5060) to provide for the continuation of certain fee 
collections for the expenses of the Securities and Exchange Commission 
for fiscal year 1995.
  The Clerk read as follows:

                               H.R. 5060

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. CONTINUED COLLECTION OF REVENUES AUTHORIZED.

       During fiscal year 1995, the rate of fees under section 
     6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) shall 
     remain at \1/29\ of 1 percent.

     2. DEPOSIT OF COLLECTIONS.

       The fees collected under section 6(b) of the Securities Act 
     of 1933 (to the extent attributable to a rate in excess of 
     \1/50\ of 1 percent by reason of section 1 of this Act) shall 
     be deposited as an offsetting collection to the amounts 
     appropriated to the Securities and Exchange Commission for 
     fiscal year 1995, to remain available until expended.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Florida [Mr. Gibbons] will be recognized for 20 minutes, and the 
gentleman from Florida [Mr. Shaw] will be recognized for 20 minutes.
  The Chair recognizes the gentleman from Florida [Mr. Gibbons].
  Mr. GIBBONS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 5060, a bill to provide for 
the continuation of certain registration fee collections for the 
expenses of the Securities and Exchange Commission for fiscal year 
1995.
  H.R. 5060 provides that certain securities registration fees will 
continue to be collected at their current rate through fiscal year 
1995. In addition, the bill provides that the amounts attributable to 
this 1-year extension would be deposited as offsetting collections to 
the amounts appropriated to the SEC for fiscal year 1995.
  The Ways and Means Committee acted on H.R. 5060 because extending the 
current rate of registration fees is a revenue measure. Earlier in the 
year, the committee objected when the Senate included this measure in 
the Senate appropriations bill for the SEC, in violation of the 
Constitutional requirement that revenue measures originate in the 
House. Chairman Obey recognized our jurisdictional concerns and assured 
us that the conference agreement for that legislation would not contain 
this provision.
  In accordance with this assurance, the conference agreement did not 
include an extension of the current rate of registration fees. However, 
according to the SEC, the amount the conference agreementappropriates 
to the SEC for fiscal year 1995 falls far short of the amount needed to 
fund the agency for the year. In fact, the SEC believes that it will 
have to severely restrict its operations during the year if additional 
funding is not provided. Therefore, it is critical that we pass this 
bill in order to allow the SEC to be adequately funded in fiscal year 
1995.
  By passing this bill, we are sending a revenue measure to the Senate. 
However, I want to make it absolutely clear to the other Chamber that 
we will not proceed to conference on the bill if they add other 
provisions to it. The Senate must agree to a clean bill if they want to 
allow the SEC the funding necessary to continue its important 
regulatory functions.
  Finally, I want to make it clear that the Committee on Ways and Means 
agreed to report H.R. 5060 favorably as a one-time, stop-gap measure in 
order to avert a potential shutdown of SEC operations. In future years, 
the committee fully expects that the SEC will be properly funded 
without recourse to further revenue legislation.
  Mr. Speaker, I urge the House to pass this crucial legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SHAW. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. SHAW asked and was given permission to revise and extend his 
remarks.)
  Mr. SHAW. Mr. Speaker, as Chairman Gibbons stated in his opening 
remarks, H.R. 5060 extends for 1 year at current levels the Securities 
and Exchange Commission registration fee on new stock issuances. This 
extension is required to forestall an impending funding crisis for the 
SEC beginning October 1 of this year.
  If an extension of this fee is not enacted by October 1, the SEC will 
be forced to begin closing down its agency on that date with the 
consequence that stock issuances will be hampered and rigorous 
enforcement of the securities laws may not take place until the agency 
is properly funded. This is obviously an intolerable situation and is 
the primary reason Ways and Means Committee members unanimously 
reported the bill to the House floor by voice vote.
  When the House Appropriations Committee reported legislation earlier 
this year funding the SEC for fiscal year 1995, it contained an 
extension of the securities registration fee as an offsetting 
collection. As this legislation moved to the House floor, this 
provision was stricken on the ground that it constituted legislating in 
an appropriations bill in violation of House rule XXI, clause 2. 
Consequently, the House-passed bill provided only partial funding for 
the SEC for fiscal year 1995.
  Likewise, the other body also included an extension of the securities 
registration fee in its appropriations bill funding the SEC. This 
provision was deleted in Conference under threat of a blue slip, a 
procedure designed to protect the constitutional prerogative of the 
House to originate revenue measures.
  I would like to echo Chairman Gibbons' comment that this bill is 
intended to be a one-time, stop-gap measure designed to solve the 
current funding crisis the SEC faces in fiscal year 1995. The Ways and 
Means Committee report accompanying the bill contains clear and 
unequivocal language that the committee expects the SEC to be properly 
funded in future fiscal years without recourse to revenue measures 
within the jurisdiction of the Ways and Means Committee.
  In closing, I would urge my colleagues to join with me in passing 
H.R. 5060 in order to avert a truly grave crisis in funding the SEC for 
fiscal year 1995.
  Mr. Speaker, I reserve the balance of my time.
  Mr. GIBBONS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Michigan [Mr. Dingell].
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)

                              {time}  1530

  Mr. DINGELL. Mr. Speaker, I rise in strong support of the bill H.R. 
5060 and urge its adoption.
  First, Mr. Speaker, I commend my dear friends at the Committee on 
Ways and Means--I single out the leadership and hard work of acting 
Chairman Sam Gibbons and ranking Republican member Bill Archer and 
their staffs,--in bringing H.R. 5060 to the House floor today.
  At the outset, I want to note that the SEC is celebrating its 60th 
anniversary this week. For 60 years, the Nation has looked to the SEC 
to maintain the efficiency and honesty of the securities markets. By 
all accounts, it has done that job very well.
  The SEC's principal activities--reviewing registration statements and 
other corporate disclosures; inspecting mutual funds, broker-dealers, 
and other market professionals; and investigating and punishing 
violations of the securities laws--are labor-intensive and never-
ending. Not to fund these tasks fully or at all would shatter investor 
confidence and instigate a great national economic tragedy.
  I believe that, Democrat and Republican alike, we in this body are 
united in believing in the importance of economic growth. That growth 
will not occur without sustained capital formation. Capital formation 
will not occur unless the securities markets operate efficiently and 
unless investors can have confidence in the honesty and fairness of 
those markets. A strong SEC is necessary to both of these.
  As the committee report for the original Securities Act of 1933 
stated:

       The necessity for the bill arises out of the fact that 
     billions of dollars have been invested in practically 
     worthless securities, both foreign and domestic, including 
     those of foreign governments, by the American public through 
     incomplete, careless, or false representations. The result is 
     dire national distress.

  Today, more than 38 million individuals, one in every four 
households, own mutual fund shares. These millions of average Americans 
deserve vigilant and effective regulatory oversight over their savings. 
That objective can be accomplished only if the SEC is funded 
adequately.
  Mr. Speaker, the Congress does not have to choose between mounting 
deficit reduction pressures and fully funding this agency. Currently, 
the SEC collects in fees twice what we appropriate to it for its 
budget. However, this money goes straight to the U.S. Treasury. The SEC 
gets no credit for or use of these moneys. This deplorable situation is 
explained in detail in the letter that follows my statement. Last year, 
the Committees on Ways and Means, Appropriations, and Budget played 
pivotal roles in responding to the financial needs of the SEC, and 
worked with the Energy and Commerce Committee to provide the SEC a 
stable source of funding. That collaboration produced the bill H.R. 
2239 which passed the House unanimously in July 1993 but which was 
never acted on by the Senate. This inaction is an outrage. But our 
immediate problem is to avert the impending shutdown of this key 
Government agency and the resulting economic gridlock.
  To that end, H.R. 5060 provides that the section 6(b) registration 
fees would continue to be collected at the current rate of one twenty-
ninth of 1 percent for 1 additional year, that is, through the end of 
fiscal year 1995. The bill also provides that the amounts collected 
attributable to the continuation of the one-twenty-ninth-of-1-percent 
rate would be deposited as offsetting collections to the amounts 
appropriated to the SEC for fiscal year 1995. This would allow the 
incremental amounts raised by continued collection of the fee at the 
one-twenty-ninth-of-1-percent rate to be available for funding the SEC.
  Mr. Speaker, I commend the Committee on Ways and Means for this 
legislation and announce my intention to continue to press for 
responsible self-funding legislation for the SEC. I urge my colleagues 
to support this bill.
  I submit my letter to Chairman Gibbons for the Record.

                                         House of Representatives,


                             Committee on Energy and Commerce,

                               Washington, DC, September 21, 1994.
     Hon. Sam Gibbons,
     Acting Chairman, Committee on Ways and Means, Washington, DC.
       Dear Mr. Chairman: I am writing to you today to thank you 
     for working with me to resolve the budgetary crisis currently 
     facing the Securities and Exchange Commission (SEC). The 
     Committee on Energy and Commerce deeply appreciates the 
     action taken by the Committee on Ways and Means to favorably 
     report H.R. 5060 to provide for the continuation of certain 
     fee collections for the expenses of the SEC for fiscal year 
     1995. H.R. 5060 was introduced yesterday by you and referred 
     jointly to the Committees on Energy and Commerce and Ways and 
     Means. Given the exigent circumstances and the need for 
     expeditious processing of this legislation, this Committee 
     will not asset its jurisdictional interest and agrees to be 
     discharged from further consideration of H.R. 5060.
       As you know, in 1990, under the leadership of the 
     Democratic Steering and Policy Committee, our respective 
     Committees engaged in discussions that resulted in the 
     statement issued by Speaker Foley in January 1991 regarding 
     the jurisdiction of House Committees with respect to 
     distinguishing between user fees and taxes. See 
     Jurisdictional Concepts Related to Clause 5 of Rule XXI, 
     Congressional Record, Vol. 137, No. 10, P. H507 (Jan. 15, 
     1991).
       Pursuant to that statement, I understand that 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 
     cost of specified regulatory activities (not including public 
     information activities and other activities benefiting the 
     public in general);
       (ii) The fees are assessed and collected only in such 
     manner as may reasonably be expected to result in an 
     agreegate 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 reasonably 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 so that it acquires the attributes of a tax, it 
     properly should be referred to the Committee on Ways and 
     Means.
       Pursuant to its statutory mandates, the SEC collects fees 
     for the filing of registration statements and other 
     documents, for transactions on the stock exchanges, and for 
     certain other activities under its regulatory jurisdiction. 
     See H. Rpt. 103-179 to Accompany H.R. 2239, the Securities 
     and Exchange Commission Authorization Act of 1993, at 23-24. 
     Aggregate fees collected by the SEC are dependent upon fee 
     rates established under the federal securities laws as well 
     as upon the level of fee-generating activity. As a result of 
     the 1990 Gramm-Rudman-Hollings deficit reduction legislation, 
     the SEC fees collect a surplus in addition to its 
     appropriated budget. In recent years, the SEC has been a net 
     contributor to the U.S. Treasury well above its appropriated 
     budget. See chart in H. Rpt. 103-179 at 25. The fees 
     collected by the SEC go to the Treasury as general revenues. 
     The SEC gets no use of or credit for these monies but rather 
     receives its yearly appropriations under the discretionary 
     spending caps.
       In recent appropriations bills, additional funding has been 
     provided for the SEC by increasing the rate of registration 
     fees under section 6(b) of the Securities Act of 1933 and 
     applying the amounts attributable to these increases as 
     offsetting collections credited against the SEC's 
     appropriations. However, because the SEC already collects 
     more in fees than is necessary to cover the costs of the 
     registration process, the amount of the fees is not 
     rationally related to the services the SEC renders. Thus, 
     increases in these fees are revenue measures. In the past, 
     the Committee on Ways and Means has expressed strong 
     jurisdictional concerns and the Energy and Commerce Committee 
     has expressed strong substantive and public policy concerns 
     see, e.g., letters from the Honorable John D. Dingell to the 
     Honorable John Joseph Moakley (June 17, 1994) and from the 
     Honorable John D. Dingell to the Honorable Alan B. Mollohan 
     (June 17, 1994)) about addressing the funding problems of the 
     SEC in this manner and, accordingly, last year's conference 
     report on the Commerce-Justice-State appropriations for 
     fiscal year 1994 included language noting the agreement of 
     the conferees that this would not be repeated in subsequent 
     appropriations bills.
       Last year, the Committee on Ways and Means worked with the 
     Congressional Budget Office (CBO) and the Committees on 
     Appropriations, Budget, and Energy and Commerce, in writing 
     legislation (H.R. 2239) to reauthorize the SEC and to enact a 
     full-cost recovery mechanism to address the SEC's funding 
     imbalance and bring its fee collections in line with the 1991 
     guidance cited and discussed above. As crafted by the four 
     Committees, with technical assistance from CBO, H.R. 2239 
     maintained strict Congressional control over SEC fee 
     collections and expenses by providing that the authority of 
     the SEC to collect and deposit fees as offsetting collections 
     would be available only to the extent provided in advance in 
     appropriations Acts. The method of fee adjustment, deposit 
     and credit of offsetting collections, and other safeguards 
     were spelled out in the statute. So as not to increase the 
     budget deficit and to maintain pay-go scorecard neutrality, 
     H.R. 2239 required that SEC fees continue to collect general 
     revenues for fiscal years 1994 through 1998. Thereafter, SEC 
     fees would be set and collected solely to recover the costs 
     of that agency's regulatory activities. H.R. 2239, which 
     enjoys bipartisan cosponsorship, has the strong support of 
     the Administration, the securities industry, the SEC, state 
     securities regulators, the securities bar, consumer groups, 
     and others. On July 20, 1993, the House passed H.R. 2239 
     unanimously.
       Subsequently, the Senate Banking Committee's Subcommittee 
     on Securities held hearings on the SEC's budget 
     authorization, and, in August 1993, that subcommittee's 
     chairman wrote to me indicating his support, and that of the 
     leadership of the full Banking Committee, for legislation 
     along the lines of H.R. 2239. He also expressed his intention 
     to move full-cost recovery legislation in this Congress. See 
     letter from Senator Christopher J. Dodd to the Honorable John 
     D. Dingell (August 6, 1993); see also letter from Senator 
     Alfonse M. D'Amato to the Honorable John D. Dingell (August 
     3, 1993). However, the Senate Banking Committee has taken no 
     action on this or any other reauthorization for the SEC. 
     Indeed, we were informed by Senate staff at an August 23, 
     1994 meeting, called at the behest of the Administration, 
     that Senators Gramm, Dodd and Domenici were opposed to SEC 
     full-cost recovery, thus leaving the House to resolve the 
     problems that such opposition created.
       On June, 28, 1994, the House passed H.R. 4603, to make 
     appropriations for the Departments of Commerce, Justice, and 
     State, the Judiciary, and related agencies programs for 
     fiscal year 1995. As reported by the Committee on 
     Appropriations, H.R. 4603 included a provision that would 
     have allowed continued collection of registration fees at the 
     rate in effect during fiscal year 1994, with such amounts 
     applied as an offsetting collection to the SEC's 
     appropriation. This provision was subject to points of order 
     and was stricken on the ground that it constituted 
     legislating in an appropriations bill in violation of House 
     Rule XXI, clause 2. As passed, the House bill therefore 
     provided only partial funding for the SEC for fiscal year 
     1995.
       On July 22, 1994, the Senate passed its version of H.R. 
     4603. The Senate amendments included a provision 
     (substantially similar to the provision stricken from the 
     House bill) extending the fiscal year 1994 registration fee 
     rate increase for an additional year in order to provide 
     additional funding for the SEC. However, in response to last 
     year's conference agreement and the jurisdictional concerns 
     of the Committee on Ways and Means, the conference agreement 
     for H.R. 4603 did not include the extension of the 
     registration fees to fund the SEC. According to OMB, due to 
     the operation of the Anti-Deficiency Act, notwithstanding the 
     conference report's implication that the SEC would have funds 
     adequate to maintain its operations through February 1995, 
     the amount appropriated in fact falls far short of the amount 
     needed to fund the agency for the year and would result in 
     the agency having to send out reduction-in-force notices and 
     begin the process of shutting down its operations as soon as 
     October 1994.
       H.R. 5060 would avert this crisis by providing that the 
     section 6(b) registration fees would continue to be collected 
     at the current rate of 1/29 of one percent for one additional 
     year, i.e., during fiscal year 1995, and that the amounts 
     collected attributable thereto would be deposited as 
     offsetting collections to the amounts attributable to the SEC 
     for fiscal year 1995. It is my understanding that the House 
     and Senate Committees on Appropriations will ensure enactment 
     of the companion appropriations component. We agree with you 
     that this is a one-time stop-gap measure that will not be 
     repeated and pledge our continued vigorous efforts to secure 
     enactment of a comprehensive solution that serves the public 
     interest.
       I wish to thank you again, Mr. Chairman, for your full 
     cooperation and the cooperation of your staff in addressing 
     this matter. Please include this letter in your Committee 
     report on H.R. 5060.
           Sincerely,
                                                  John D. Dingell,
                                                         Chairman.

  Mr. MARKEY. Mr. Speaker, I would like to commend Chairman Gibbons for 
his cooperative and timely assistance in providing the Securities and 
Exchange Commission with the funding it needs to continue its crucial 
responsibilities of safeguarding the investing public and promoting 
efficient securities markets. As things now stand, the SEC has been 
appropriated a mere $125 million for fiscal year 1995. That is far 
short of the $306 million appropriation requested by that agency and 
provided for in the President's budget. Without the prompt and 
responsible action taken today by Chairman Gibbons and the members of 
the Committee on Ways and Means, the SEC would face a serious shortfall 
in its funding, with the possibility of reduction-in-force [RIF] 
notices having to be issued as early as October 5 of this year. We also 
applaud our colleagues on the Appropriations Committee, who have long 
been sensitive to the plight of the SEC, for working to effectuate a 
corresponding appropriation of funds.
  The important work of the SEC must not be allowed to be interrupted. 
As the securities markets have grown in volume and complexity, the 
SEC's job has become both more difficult and more essential. Between 
1981 and 1993, the value of public offerings has increased by 1,789 
percent. The number of investment advisers over that period grew by 292 
percent and the value of assets under their management has swelled by 
2,033 percent. In the fast-growing mutual fund area, the number of 
investment companies has increased by 393 percent and assets have grown 
by 662 percent. As more and more investors enter the marketplace 
through mutual funds and defined contribution retirement programs, so 
the critical nature of the SEC's task is enhanced.

  The funding problems of the SEC have their roots, ironically, in the 
SEC's status as a net contributor to the Federal Treasury. The fees 
collected by the SEC go to the Treasury as general revenues. The SEC 
gets no credit for those amounts, and as the imbalance has worsened 
over time, so has the pressure increased on the SEC to be ``cash cow'' 
to fund other Federal programs. For example, last year, the SEC 
collected over $600 million in fees, but received less than half that 
amount to fund its operations. The wider the gap between what the SEC 
takes in and what it uses, the more SEC fees look like taxes rather 
than user fees. Both my Committee and the Committee on Ways and Means 
would like to see these fees return to their historic status as user 
fees. In the interim, however, we have been forced to rely on stopgap 
attempts to satisfy both SEC's budget needs and the Treasury's hunger 
for revenues through an increase in SEC fees on new stock 
registrations. All we are doing today is extending that stopgap 
approach at the same level for yet another year.
  There is, however, an alternative. Unfortunately, that alternative, 
approved unanimously by the House on July 20, 1993, in the form of H.R. 
2239, is unavailable to use as it has not been pursued by our Senate 
colleagues. H.R. 2239 was specifically designed to resolve the SEC's 
budget problems once and for all, thus relieving Congress of having to 
take such stopgap measures as we are forced to take today. This bill 
was drafted with the cooperative input of the administration, the 
Appropriations, Budget, Ways and Means and Energy and Commerce 
Committees, and the Congressional Budget Office. H.R. 2239 would create 
a mechanism to fully recover the costs of the agency's budget through 
fee collections. To mute any budget impact, it would wean the Treasury 
off any excess amounts collected over a 5-year period. The Senate, 
however, has provided obstinate in its refusal to take up this 
legislation this Congress. I hope that next year, we can persuade the 
Senate to do the right thing, and pass full cost recovery legislation, 
so that SEC funding can be assured and the SEC can focus exclusively on 
its mandate to protect investors and safeguard the nation's 
increasingly complex securities markets.
  Mr. SHAW. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. GIBBONS. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore. (Mr. Fields of Louisiana). The question is 
on the motion offered by the gentleman from Florida (Mr. Gibbons) that 
the House suspend the rules and pass the bill, H.R. 5060.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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