[Congressional Record Volume 142, Number 84 (Monday, June 10, 1996)]
[Senate]
[Pages S6015-S6017]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMM (for himself and Mr. D'Amato):
  S. 1855. A bill to reduce registration fees required to be paid by 
issuers of securities, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.


    the securities and exchange commission fee reduction act of 1996

 Mr. GRAMM. Mr. President, today, I am joined by Banking 
Committee

[[Page S6016]]

Chairman D'Amato in introducing the Securities and Exchange Commission 
Fee Reduction Act of 1996. This legislation is similar to a bill that 
was approved overwhelmingly by the House of Representatives earlier 
this year, and it should enjoy similar support in the Senate.
  Today, so-called user fees collected by the Securities and Exchange 
Commission [SEC] will pay for the entire SEC budget nearly three times 
over. These fees have become transformed into a tax on investment and 
capital formation. The legislation that we are introducing today will 
reduce these excess fees in stages over a period of 5 years until the 
amounts collected are approximately in line with the budget of the SEC.
  Mr. President, permit me to review the history of these fees, so that 
this bill, and its importance, can be placed in context. For many years 
a variety of user fees have been assessed to support the budget of the 
SEC. The most significant of these fees is assessed on new securities 
issues as they are registered with the Commission. A lesser fee is 
imposed on New York and American Stock Exchange trades.
  From their inception, fees were kept minimal, closely related to the 
cost of actually running the SEC, and therefore could be called user 
fees, paid so that the SEC could guard the integrity of our securities 
markets, a clear benefit to everybody. That began to change with the 
1990 budget. The slump in market activity following Black Monday in 
1987 caused worry in some quarters that the money generated by existing 
fees might not keep pace with the growing budget of the SEC. So the 
registration fees were raised, temporarily. That not only made up for 
lost revenue, it inadvertently produced annual surpluses of up to $70 
million over and above the SEC's budget.
  Creating a surplus by raising a fee is a dangerous precedent. Before 
1992, the SEC user fees had become a cash cow. Even so, the 
registration fee ratio was altered again. The surplus then jumped to 
$180 million and had continued to climb each year since. It will 
approach $400 million this year.
  It it improbable that a more destructive way to raise revenues could 
be found. Not unlike an increase in interest rates, the registration 
fees increase the cost of raising equity capital, with the unavoidable 
result that equity investment is lower than it would otherwise be. 
These fees have raised the cost of entry into the equity markets.
  The cost to the economy is immense. These fees tax our economy's seed 
capital--the money needed to create a harvest of new jobs, goods, 
services, economic growth, and opportunity. Clearly, the cost of these 
taxes imposed on new stock issues and stock trades measured in loss of 
economic activity must be counted in billions of dollars.
  Since a tax on new issues and equity transactions must be among the 
most inefficient ways to raise revenues, such a tax should never be 
used to fund general government. That is why I oppose setting fees at a 
level higher than necessary to fund the SEC. The adoption of this bill 
will return us to this principle, which governed SEC fees prior to the 
change in 1990.
  These excess fees have been recognized as a tax by the House Ways and 
Means Committee. This fact resulted in a near shutdown of the SEC 2 
years ago in a dispute between the Appropriations and Ways and Means 
Committees over jurisdiction for tax legislation. To prevent a 
recurrence of that problem, a compromise was reached whereby the Ways 
and Means Committee will withhold its objections to such fees being 
raised in appropriations bills, but only while the excess fees are on 
track to their elimination. This bill implements that compromise, which 
also has the full support of the authorizing committee in the House and 
the SEC.
  This legislation is revenue neutral, since the excess SEC fees have 
not been used for deficit reduction but rather as offsetting 
collections in appropriations bills. The fees collected for deficit 
reduction purposes remain unchanged.
  Mr. President, this position finds a strong consensus in this 
Congress. The legislation adopted by the House of Representatives had 
the support of Republicans and Democrats and was carefully crafted in 
consultation with the Ways and Means, Commerce, and Appropriations 
Committees of the other body. I believe that the companion bill we are 
introducing today will find similar support here.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1855

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

     SECTION 1. SHORT TITLE.

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

     SEC. 2. REDUCING 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) Fee payment required.--
       ``(A) In general.--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 paragraph (3).
       ``(B) Publication of fees.--The Commission shall publish in 
     the Federal Register notices of the fee rates applicable 
     under this subsection for each fiscal year.
       ``(C) Amounts of fees.--In no case shall a minimum fee 
     required by this subsection be greater than $100.
       ``(2) General revenue fees.--
       ``(A) Rate.--The rate determined under this paragraph is a 
     rate equal to--
       ``(i) during each fiscal year before fiscal year 2002, $200 
     for each $1,000,000 of the maximum aggregate price at which 
     the subject securities are proposed to be offered; and
       ``(ii) during fiscal year 2002 and each succeeding fiscal 
     year, $182 for each $1,000,000 of the maximum aggregate price 
     at which the subject securities are proposed to be offered.
       ``(B) Revenues of treasury.--Fees collected during any 
     fiscal year pursuant to this paragraph shall be deposited and 
     credited as general revenues of the Treasury.
       ``(3) Offsetting collection fees.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), for each $1,000,000 of the maximum aggregate price 
     at which the subject securities are proposed to be offered, 
     the rate determined under this paragraph is a rate equal to--
       ``(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 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. 3. 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) Exchange-Traded Securities.--
       ``(1) Rate.--Each national securities exchange shall pay to 
     the Commission a fee at a rate equal to--
       ``(A) $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 during the period to which the 
     fee relates under subsection (d); and
       ``(B) for fiscal year 2002 and each succeeding fiscal year, 
     $25 for each $1,000,000 of such aggregate dollar amount of 
     sales during the period to which the fee relates under 
     subsection (d).
       ``(2) Revenues of treasury.--Fees collected pursuant to 
     this subsection shall be deposited and collected as general 
     revenue of the Treasury.
       ``(b) Off-Exchange-Trades of Exchange-Registered 
     Securities.--
       ``(1) Rates.--Each national securities association shall 
     pay to the Commission a fee at a rate equal to--
       ``(A) $33 for each $1,000,000 of the aggregate dollar 
     amount of sales transacted during the period to which the fee 
     relates under subsection (d) 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); and
       ``(B) for fiscal year 2002 and each succeeding fiscal year, 
     $25 for each $1,000,000 of the aggregate dollar amount of 
     sales referral to in subparagraph (A) during the period to 
     which the fee relates under subsection (d).
       ``(2) Revenues of treasury.--Fees collected pursuant to 
     this subsection shall be deposited and collected as general 
     revenue of the Treasury.
       ``(c) Off-Exchange-Trades of Last-Sale-Reported 
     Securities.--

[[Page S6017]]

       ``(1) Covered transactions.--Each 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 
     during the period to which the fee relates under subsection 
     (d) 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 (b).
       ``(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 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.
       ``(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.
       ``(d) Dates for Payment of Fees.--The fees required by 
     subsections (a), (b), and (c) 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.
       ``(e) Exemptions.--
       ``(1) Commission authority.--The Commission may, by rule, 
     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.
       ``(2) Low-volume transactions.--No fee shall be assessed 
     under this section for transactions involving portfolios of 
     equity securities taking place at times of day characterized 
     by low volume and during nontraditional trading hours, as 
     determined by the Commission.
       ``(f) Publication.--The Commission shall publish in the 
     Federal Register notices of the fee rates applicable under 
     this section for each fiscal year.''.
       (b) Effective Date; Transition.--
       (1) Effective date.--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 October 
     1, 1996.
       (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 
     October 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, as in effect on the 
     day before the effective date of the amendment made by 
     subsection (a), to make the payments required by such section 
     on March 15, 1997.

     SEC. 4. 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 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. 5. ELIMINATION OF UNNECESSARY FEES.

       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.
 Mr. D'AMATO. Mr. President, I am pleased to join my 
distinguished colleague and Securities Subcommittee Chairman, Senator 
Gramm, in sponsoring legislation to fully and fairly fund the 
Securities and Exchange Commission. The Securities and Exchange 
Commission Fee Reduction Act of 1996 provides a long-term solution to 
the SEC's current funding problems.
  The Securities and Exchange Commission is funded through offsetting 
collections to increases in its section 6(b) fees. Section 6(b) fees 
are paid by issuers who register their securities with the Securities 
and Exchange Commission. In the last several years, the section 6(b) 
fees assessed on issuers has resulted in fees collected by the agency 
that far exceeds the cost of regulation. Any fees raised over and above 
the Securities and Exchange Commission's budget are deposited into the 
General Treasury for deficit reduction. Last year, the SEC raised 
approximately $750 million in fees to pay for a budget of less than 
$300 million.
  The section 6(b) fees have become a tax on capital formation. These 
user fees now raise enough money to fund the SEC three times. The 
proposed 1997 budget continues this trend by raising the statutory fee 
level and expanding the fee base. The 1997 budget proposal raises $776 
million in fees to fund the SEC's $307 million budget.
  The Securities and Exchange Commission Fee Reduction Act will 
stabilize the SEC's fee structure by reducing fees and increasing 
appropriations over a 5-year period. It will return the section 6(b) 
registration fees closer to the statutory level of one-fiftieth of 1 
percent and it will create a more equitable fee structure by expanding 
current section 31 trading fees now paid only for transactions executed 
on securities exchanges to include transactions on the over-the-counter 
market. As fees are reduced over the 5-year period, direct 
appropriations will be used to fund the SEC.
  Mr. President, the bill Senator Gramm and I introduce today will 
create a permanent funding structure for the SEC that enables the 
agency to pay for itself. At one point several years ago, Congress 
considered making the SEC a self-funded agency. The fee structure in 
H.R. 2972 allows the SEC to be virtually self-funded, yet gives 
Congress greater control over the agency.
  It is critical for Congress to ensure that a stable and fair funding 
structure exists for the agency responsible for safeguarding our 
preeminent capital markets. Further, fees paid by participants in the 
securities markets--particularly for capital formation--should bear a 
rational relationship to the cost of regulation.
  In the words of Securities and Exchange Commission Levitt when 
testifying before the Commerce, State, Judiciary Appropriations 
Subcommittee: ``In order to continue the Commission's excellent record 
of effective law enforcement, market oversight, and investor protection 
the SEC will need a long-term funding mechanism.''
  Mr. President, the bill we introduce today resolves the long-debated 
problem of how to provide the Securities and Exchange Commission with a 
permanent funding structure that allows the SEC to pay for itself. I 
commend my colleague from Texas for his leadership on this legislation 
and look forward to working with him to enact the Securities and 
Exchange Commission Fee Reduction Act of 1996.

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