[Congressional Record Volume 148, Number 86 (Tuesday, June 25, 2002)]
[House]
[Pages H3905-H3909]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION ACT OF 2002

  Mr. OXLEY. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 3764) to authorize appropriations for the Securities and Exchange 
Commission, as amended.
  The Clerk read as follows:

                               H.R. 3764

       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 Authorization Act of 2002''.

     SEC. 2. AUTHORIZATION OF APPROPRIATIONS OF THE SECURITIES AND 
                   EXCHANGE COMMISSION.

       In addition to any other funds authorized to be 
     appropriated to the Securities and Exchange Commission, there 
     are authorized to be appropriated to carry out the functions, 
     powers, and duties of the Commission, $776,000,000 for fiscal 
     year 2003, of which--
       (1) not less than $134,000,000 shall be available for the 
     Division of Corporate Finance and for the Office of Chief 
     Accountant;
       (2) not less than $326,000,000 shall be available for the 
     Division of Enforcement; and
       (3) not less than $76,000,000 shall be available to 
     implement section 8 of the Investor and Capital Markets Fee 
     Relief Act, relating to pay comparability.

     SEC. 3. SENSE OF THE CONGRESS.

       It is the sense of the Congress that the Securities and 
     Exchange Commission should conduct a thorough annual review 
     of the annual financial statements contained in the most 
     recent periodic disclosures filed with the Commission by the 
     largest 500 reporting issuers, as determined by market 
     capitalization and by other factors as the Commission shall 
     determine.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Oxley) and the gentleman from New York (Mr. LaFalce) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Ohio (Mr. Oxley).


                             General Leave

  Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on this legislation, and to include extraneous material on the bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. OXLEY. Mr. Speaker, I yield myself 5 minutes.
  Mr. Speaker, the Securities and Exchange Commission Authorization Act 
of 2002 authorizes important new resources for the Securities and 
Exchange Commission for fiscal year 2003.
  I would like to commend the ranking member of the Committee on 
Financial Services, the gentleman from New York (Mr. LaFalce), and the 
chairman of the Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises, the gentleman from Louisiana (Mr. 
Baker), for their leadership on this very important and timely issue.
  As we know, the SEC is statutorily charged with supervising the 
Nation's securities markets. This legislation is necessary to 
reauthorize the work of the SEC to enable it to continue its mission of 
protecting investors and promoting efficiency, competition, and capital 
formation.
  For quite some time, the U.S. securities markets have been widely 
regarded as the deepest, most liquid, and fairest markets in the world, 
in large part due to the fine work of the SEC. Today, however, it is 
abundantly clear that our markets are in need of reform. Too many 
people have abused the public trust. In the wake of recent scandals, 
many have noted a crisis of public confidence in the integrity of our 
system.
  That is why the Committee on Financial Services was first out of the 
block in analyzing analysts, corporate reporting, and accountants.
  The committee drafted comprehensive legislation that overwhelmingly 
passed the House, and has directed the self-regulatory organizations to 
promulgate new rules on analysts and corporate governance. Much has 
been done, with still more to do, in order to ensure investors are 
protected through full and timely disclosure of financial information.
  The bill before us today authorizes the SEC at a level of $776 
million for fiscal year 2003, with $134 billion earmarked for the 
division of corporate finance and the office of the chief accountant, 
and $326 million earmarked for the division of enforcement.
  The bill identifies these particular divisions for increased funding 
because it is vital that the commission have sufficient resources to 
review public filings and bring enforcement cases against those who 
violate the securities laws.
  One of the primary findings of our hearings was the need for the 
commission to pursue wrongdoers in real time. This bill provides the 
commission with the resources it needs to do exactly that.
  The bill also fully funds the pay parity provisions of the Investor 
and Capital Markets Fee Relief Act enacted into law this past January. 
This $76 million in funding would grant SEC employees pay parity with 
the banking regulators and help the commission attract and retain the 
first-rate attorneys, accountants, and economists needed to protect 
investors.
  With modest staff and limited resources, the SEC currently oversees 
an estimated 8,000 brokerage firms employing nearly 700,000 brokers; 
7,500 investment advisors with approximately $20 trillion in assets 
under management; 34,000 investment company portfolios; and over 17,000 
reporting companies.
  The commission also has oversight responsibilities for nine 
registered securities exchanges, the National Association of Securities 
Dealers, the National Futures Association, 13 registered clearing 
agencies, and the Municipal Securities Rulemaking Board.
  The funding level authorized in this legislation is significantly 
higher than the fiscal year 2002 level, but there is ample 
justification. Much has changed since last year.
  The commission needs funding for its e-government and information 
technology initiatives, telecommunications systems, and security 
enhancement. The commission has not received a staffing increase in the 
last 2 years, despite the additional responsibilities put upon it by 
the enactment of the Commodity Futures Modernization Act and the Gramm-
Leach-Bliley Financial Services Modernization Act.

                              {time}  1615

  Now, with the tragic events of September 11 in which the SEC's 
Northeast regional office was destroyed and the deep crisis in 
confidence facing the markets, the challenges facing the SEC have never 
been greater. For the U.S. markets to remain the envy of the world, it 
is absolutely vital for the SEC to have the necessary resources to 
protect investors and promote capital formation. I urge all of my 
colleagues to support this important legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of the adoption of the bill. Mr. 
Speaker, I am pleased to join with the gentleman from Ohio (Mr. Oxley) 
in strongly supporting this legislation. Authorizing the resources that 
the SEC needs to provide meaningful market oversight is one of the most 
important steps we can take to restore the integrity of our markets, to 
restore confidence on the part of the public in the integrity of our 
markets.
  Unfortunately, as our securities markets and public companies have 
skyrocketed in size and complexity, we

[[Page H3906]]

have done little to ensure that the SEC had the means to keep up. The 
SEC has fought a losing battle to keep up with the immense growth of 
corporate filings.
  Transactional filings alone grew by almost 40 percent over the last 
half of the 1990s, but the resources available for reviewing those 
filings did not grow. Despite this increase in activity, staffing 
levels at the SEC remained flat over the same period and, in fact, 
declined during fiscal year 2002.
  While the drop-off in IPOs last year enabled the SEC to review more 
of the annual financial statements filed by public companies than it 
had for many years, it was still able to review only 16 percent of 
those statements. That is grossly inadequate.
  We are clearly now reaping the results of this historic neglect, with 
the number and size of restated financial reports due to financial 
misstatements and fraudulent accounting practices growing each year. 
The failure of Enron and the many issues for investors, employees, 
accountants, auditors and analysts raised by that failure and numerous 
other failures has further taxed the ability of the SEC to oversee the 
markets.
  If we are to restore the quality and integrity of our financial 
reporting system, it is crucial that the SEC receive the funding 
necessary to increase the staff available to perform its market 
oversight functions, particularly regular reviews of corporate 
financial statements. Moreover, the SEC must have the additional 
enforcement staff necessary to bring enforcement actions swiftly when 
companies misrepresented their financial condition in their financial 
statements.
  H.R. 3764 is a step to providing both authorizing funding for pay 
parity and doubling the staff of the Division of Corporate Finance, the 
Office of the Chief Accountant and the Division of Enforcement.
  At a time when Americans have become more reliant on the performance 
of their stock investments for their savings and retirement, we cannot 
afford to allow the practices we have seen over the last few years 
continue to taint our markets. I was very disappointed that in the wake 
of the collapse of Enron and the successive waves of accounting 
scandals the President did not include a substantial increase in 
funding for the SEC in his budget request to Congress. The SEC plays a 
crucial role in the sound functioning of our markets and our economy 
and that crucial role cannot be ignored.
  We in Congress must send a strong signal to the administration and to 
the world of the importance of a strong and fully functional SEC to 
restoring confidence in our markets. This bill is an important step 
towards creating that strong legislative response that might restore 
confidence in our financial reporting system and our securities 
markets.
  If our capital markets are to retain their position as the most 
efficient and the most transparent in the world, it is critical that we 
ensure that our markets are subject to the best possible oversight; and 
only then will investors both at home and abroad regain their 
confidence that our markets are indeed the best in the world. Mr. 
Speaker, I urge the adoption of the bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. OXLEY. Mr. Speaker, I reserve the balance of my time.
  Mr. LaFALCE. Mr. Speaker, how much time do I have remaining?
  The SPEAKER pro tempore (Mr. Linder). The gentleman from New York 
(Mr. LaFalce) has 15 minutes remaining.
  Mr. LaFALCE. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
New York (Mrs. Maloney).
  Mrs. MALONEY of New York. Mr. Speaker, I rise in support of H.R. 
3764, the SEC Reauthorization Act. The past year will go down in 
history as one of the most scandal ridden in the history of our 
Nation's capital markets. Enron, Global Crossing, TYCO, and ImClone all 
raise the clouds of insider corruption, massive financial restatements, 
and outright fraud on investors.
  This bill takes an important step in assigning these episodes to 
history and ensuring that the SEC has the resources to prevent future 
problems. This legislation commits significant new resources to the 
SEC, which I can attest are truly needed based on what we have learned 
from hearings in the Committee on Financial Services.
  The bill authorizes $776 million for the SEC in fiscal year 2003, 
$338 million more than the fiscal year appropriations 2002 level and 
$233 million, 43 percent more than the administration requested. At 
least $134 million will go to SEC's chief accountant and corporation 
finance division, $326 million to the enforcement division, and $76 
million to pay parity.
  While these sums are significant and necessary, my colleagues are 
well aware that the agency is funded through transaction fees and not 
traditional tax revenue. This pay parity money is especially important 
given the staff crisis the agency has experienced in recent years.
  Having recently visited the SEC field office in the Woolworth 
Building in lower Manhattan, a facility that was formerly located in 
the World Trade Center complex, I can tell you that pay parity is 
truly, truly needed. Pay parity will bring SEC employees up to the pay 
levels of their colleagues at the Federal banking regulators. I believe 
the securities regulators should not be treated as a second-class 
citizen behind the bank regulators. It is bad for investors and 
industry, and this is a truly worthy investment.
  I have already sent a bipartisan letter along with 27 of my 
colleagues on the Committee on Financial Services requesting funding 
for pay parity; and I want to thank the ranking member, the gentleman 
from New York (Mr. LaFalce), for pushing for this provision and the 
gentleman from Ohio (Mr. Oxley) for holding to his commitment in last 
year's fee reduction legislation to win pay parity.
  Passage of this legislation today is yet another step on the road to 
winning back public confidence in our financial markets and rebuilding 
the trust of individual investors in financial reporting. It is my hope 
we build on it by passing real reform of the accounting industry with 
this Congress. To that end, I congratulate Senator Sarbanes for his 
overwhelming bipartisan victory by a 17-4 vote for his accounting 
legislation in the Senate Banking Committee. I look forward to working 
on this legislation in the conference committee, and I urge passage of 
this bill.
  Mr. OXLEY. Mr. Speaker, I yield 5 minutes to the gentleman from 
Virginia (Mr. Wolf).
  Mr. LaFALCE. Mr. Speaker, I yield 1 minute to the gentleman from 
Virginia (Mr. Wolf).
  Mr. WOLF. Mr. Speaker, I rise in support of H.R. 3764 and strongly 
support the additional funding for the Securities and Exchange 
Commission. However, I would like to point out a concern I have with 
some of the language in the bill.
  This bill requires not less than $134 million for the Division of 
Corporate Finance and the Office of Chief Accountant and not less than 
$326 million for the Division of Enforcement. These amounts are double 
the level of funding requested by the President for these activities in 
fiscal year 2003. Enacting this legislation will require other programs 
to be cut by $231 million.
  Our allocation of this bill, which has the FBI, DEA, INS, State 
Department, embassy security, the Karachi bombing last week and all of 
these other programs, is now down $393 million below, our allocation 
right now, $393 million below what the administration requested. So you 
add $393 million and $231 million, and I think you get a disaster for 
the Commerce Department, for the State Department, for the Justice 
Department, for the FBI, for the DEA, for the Bureau of Prisons.
  So the Subcommittee on Commerce, Justice, State and Judiciary of the 
Committee on Appropriations, which has jurisdiction of the SEC, will 
have to reduce the funding requested for other agencies funded by the 
committee.
  I hope, particularly in this war against terrorism, we really cannot 
cut the FBI. If you have a loved one working at an embassy around the 
world, we really cannot cut back embassy security. Anyone who thinks we 
can cut INS really has not been following the paper.
  I would hope we could work on revising this bill language before the 
bill is conferenced with the Senate, or else I think we will have a 
major substantive defeat for the war against terrorism.

[[Page H3907]]

  The administration I think has to do more with regard to the SEC. Pay 
parity is very important. But as you take these numbers with the 
allocation we will have a disaster.
  Mr. OXLEY. Mr. Speaker, will the gentleman yield?
  Mr. WOLF. I yield to the gentleman from Ohio.
  Mr. OXLEY. Mr. Speaker, I want to thank my friend from Virginia for 
yielding.
  I point out that since the mid-1990s, as the gentleman knows, the SEC 
has been funded through section 31 fees and other fee operations.
  During our debate on the legislation that reduced the fees, we came 
to understand that, clearly, those fees in this case would cover the 
operation of the SEC. As a matter of fact, history would suggest that 
the fees generate six times currently what it takes to run the SEC.
  Mr. WOLF. Reclaiming my time, I know he is a good fellow and a 
classmate, that 54 group that came in 1980 changed America, but Customs 
brings in much more money than it costs to run Customs. The INS brings 
in much more money. I think this has always been a bookkeeping matter, 
and it does come out of the allocation. If this were to hold true, in 
addition to the allocation we would have to cut the FBI dramatically in 
addition to INS and the others.
  Mr. OXLEY. Mr. Speaker, will the gentleman yield?
  Mr. WOLF. I yield to the gentleman from Ohio.
  Mr. OXLEY. Mr. Speaker, I simply point out that I do not think at the 
end of the day that this is going to be an appropriations issue. It 
will be an issue that those fees will generate the amount of money 
necessary to run the SEC. That is what the legislation that passed in 
1996 says. I have no reason to think that that will be any different 
and that the effect on the appropriations process will be minimal if 
any.
  Mr. LaFALCE. Mr. Speaker, will the gentleman yield?
  Mr. WOLF. I yield to the gentleman from New York.
  Mr. LaFALCE. Mr. Speaker, one of the difficulties I had with the 
reduction of the securities fees bill were that people were just 
interested in reducing the fees, whether it was section 31, section 6, 
13, 14, et cetera. They were not interested in beefing up the 
authorization of the SEC. They were not interested, unfortunately, in 
the earnings manipulations that were taking place.
  Most of these fees do go into general revenues, and, therefore, are 
dependent on both authorization and appropriations; and the gentleman 
from Virginia (Mr. Wolf) is correct in that respect.
  Mr. WOLF. Reclaiming my time, I want to thank the gentleman for his 
comments, too; and I want to thank both of the gentlemen for the pay 
parity. I have written the administration, written Mitch Daniels and 
asked him to send up a supplemental or something with regard to pay 
parity.
  Mr. LaFALCE. The position of the administration on this issue is 
outrageous.
  Mr. WOLF. Mr. Speaker, I agree.
  Also, I will tell you, we are getting a little bit off the issue, but 
what concerns me is this money will come out of the FBI. The FBI today 
is underfunded.

                              {time}  1630

  Mr. LaFALCE. Mr. Speaker, in Buffalo, New York, they have computers 
that are worse than my laptop at home, and yet they are involved in 
anti- and counterterrorism with absolutely outdated computers.
  Mr. WOLF. The gentleman is exactly right. That is why I am committed 
to bringing a bill and making sure that we give the FBI, and I know the 
gentleman from Ohio was a former FBI agent, to give them the resources, 
because quite frankly the gentleman from New York is right, outdated. 
That is why I was so concerned that we are in essence taking this away 
from the other categories in the bill which would be a defeat for the 
war on terrorism. I know the gentleman from Ohio (Mr. Oxley) will work 
this out.
  Mr. OXLEY. Mr. Speaker, will the gentleman yield?
  Mr. WOLF. I yield to the gentleman from Ohio.
  Mr. OXLEY. Mr. Speaker, I would literally be the last person in this 
Congress to cut FBI funding. In my estimation this does not do that. 
Those fees, the cost to the SEC comes out of those fees; and I want to 
make certain that that is the case.
  Mr. WOLF. Mr. Speaker, I thank the gentleman for his response.
  Mr. LaFALCE. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Texas (Mr. Bentsen).
  (Mr. BENTSEN asked and was given permission to revise and extend his 
remarks.)
  Mr. BENTSEN. Mr. Speaker, I thank the gentleman for yielding me the 
time, and I rise in strong support of the bill. I had not intended to 
talk about the budget aspects; but since our friend from Virginia 
brought up the issue of the budget, one, I want to concur with the 
comments of the chairman and the ranking member of the Committee on 
Financial Services. And I might say to the gentleman from Virginia, 
since the capital markets operate on confidence and the fact that there 
is a malaise over the capital markets now and a great deal of lack of 
confidence, were we not to provide the Securities and Exchange 
Commission with the resources that they need to rebuild confidence in 
the marketplace, I think the chairman of the Subcommittee on Commerce, 
Justice, State and Judiciary's concern about 302(b) allocations would 
be far greater in the future because he is going to see a continued 
deterioration of the general economy, a continued degeneration of our 
general revenues, and he is going to have a lot bigger problems to deal 
with than trying to fund the FBI and fund other agencies than worrying 
about whether or not we are going to provide the SEC with the resources 
that it needs.
  Furthermore, as the gentleman from New York raised and our chairman 
from Ohio raised, the fact is that for too long the SEC fees have been 
a way to fund other portions of the government; and at a time when we 
need to put more resources, particularly in the accounting division, 
the corporate finance division, the enforcement division of the 
Securities and Exchange Commission, this is when we need those fees 
back, and that is what this bill is doing, in addition to the parity 
issue, in authorizing the funding for it.
  So while we can feel the pain of the chairman of the Subcommittee on 
Commerce, Justice, State and Judiciary's allocation problem, that has 
nothing to do with the origin of this bill. It has nothing to do with 
the needs of the Securities and Exchange Commission because they have 
raised the funds from the investors and the participants in the 
marketplace. That marketplace is under a cloud right now. Were we not 
to provide those resources to ensure that there is efficient, 
sufficient enforcement of the rules of the marketplace, or the rules of 
the field, then we would suffer across our entire budget; but more 
importantly, we would be suffering across our general economy. And not 
a day goes by that there is not another story in the financial press 
about another earnings restatement, about new indictments of 
individuals who have been cooking the books of public companies; and 
now in this last week we have seen the markets go down because foreign 
investors who heretofore had seen value in investing in U.S. markets 
had decided that that value may no longer exist and so they are pulling 
their money out and putting it back in Europe and Asia, exacerbating 
our current account balance, which again could have profound 
macroeconomic effects on our general economies.
  So I commend the chairman and the ranking member for bringing this 
bill up. I hope the House will pass it and let us not worry about the 
budget debates when concerned with this bill.
  Mr. OXLEY. Madam Speaker, I am pleased to yield 3 minutes to the 
gentleman from Louisiana (Mr. Baker), the chairman of the Subcommittee 
on Capital Markets, Insurance and Government Sponsored Enterprises.
  Mr. BAKER. Madam Speaker, I thank the chairman for yielding me this 
time, and I rise to support the adoption of the resolution which he has 
brought to the House this afternoon and wish to speak to the issues 
raised by the gentleman from Virginia earlier in the afternoon.
  The House did act last year to reduce the fees on transactions 
relating to stock transfers, and secondly, in the content of this 
resolution, does make provision for pay parity, both of which do bring 
about expenditure of Federal

[[Page H3908]]

resources. Even after the consideration of both those effects, the 
adoption of pay parity and the reduction in the fees collected for SEC 
transactions, the projected budget receipts next year for the SEC from 
all fees will exceed $1.5 billion. Even with the pay parity provisions 
contained in this resolution, the expenditures for the agency, once 
enhanced at this new operational level, will only equal $776 million. 
The difference is still an $800 million surplus in fees received versus 
expenditures made.
  Obviously, it is the 302(b) allocations which are causing the 
difficulty for the Subcommittee on Commerce, Justice, State and 
Judiciary's Chair; but it has nothing to do with there being a lack of 
revenue coming from SEC activities. I think it was perfectly 
appropriate through the Congress to reduce fees and certainly essential 
that we adopt the pay parity provisions which will enable the SEC to 
keep qualified, professional regulators on the level of compensation of 
all other financial regulators.
  So to that end, I think it is extremely important for the House to 
act to adopt this resolution and provide the SEC with the important 
needed resources; and we will address those appropriations concerns as 
we move into the fall, and hopefully our chairman will be able to 
reconcile these differences with the Committee on Appropriations 
members so that the provisions made available to the SEC today will 
enable them to act appropriately on any and all complaints.
  If there is anything significant and important this Congress can do 
with regard to the current market instability, it is to provide closure 
with regard to the investigatory capability to get to the bottom of 
wrongdoing, to hold those accountable responsible; and I think this 
action today, enabling the SEC to have all the adequate supervisory 
staff they need, is an essential step in helping bring back confidence 
and customer confidence in making investments in our capital markets, 
which are the strongest, deepest, broadest of any in the world; and I 
think this action is extraordinarily important to bring about that 
resolution.
  I thank the Chair for yielding me the time.
  Mr. LaFALCE. Madam Speaker, I yield 4 minutes to the distinguished 
gentleman from California.
  (Mr. SHERMAN asked and was given permission to revise and extend his 
remarks, and include extraneous material.)
  Mr. SHERMAN. Madam Speaker, I want to join the last speaker in his 
analysis, showing that the fees paid by individual investors is more 
than enough to provide for beefed-up SEC enforcement. But what the 
other party does is they use those fees collected from individual 
investors as a profit center to then fund tax cuts for the wealthiest 1 
percent of Americans, and when we suggest that the fees paid by 
individual investors should be used to protect those investors, we are 
told that takes money away from the war against terrorism. Shame. We 
ought to be collecting adequate revenues to keep our country safe from 
terrorism, and the fees paid by individual investors are more than 
enough to provide every penny this bill authorizes and, frankly, more.
  I come to the floor to bring to the Congress' attention one section 
of this bill, section 3, that says it is the sense of Congress that the 
SEC should conduct an annual review of the annual financial statements 
of the 500 largest issuers. Why is this provision necessary? The SEC 
has two approaches to reviewing financial statements.
  If one is a small company trying for the first time to raise 10 or 
$20 million, then they file their red herring, their first draft. The 
SEC reviews it carefully; they issue a comment letter. If there is 
anything confusing, misleading or incomplete, they have to bring their 
filing up to specifications and only then do they go to the public; but 
if they are one of the biggest and richest companies in America, if 
they are already a publicly traded corporation, if they are raising or 
responsible on the market for 60 or 80 or $100 billion in 
capitalization, if they are Enron, then the SEC just does not read what 
they file, as they did not read Enron's financial statements for 1997, 
1998, 1999. They did not read those statements until the collapse.
  What would have happened if they read those statements? They would 
have seen a number of footnotes in the financial statements that are 
utter gobbledy gook. I know to the average layperson all of the 
footnotes are gobbledy gook, but these were incomprehensible to an 
analyst, the CPAs. If the SEC had bothered to read these footnotes, 
they would have demanded clarification. Instead, they did not read them 
at all.
  The SEC, however, at least its chairman, is hostile, believe it or 
not, to the idea of reading the financial statements of the 500 largest 
companies. That is because there is an element at the SEC that believes 
that investors need to be protected from Joe Inventor who is trying to 
raise 5 or $10 million, but that we do not need any protection from 
Kenneth Lay because, after all, those in the tallest buildings of the 
biggest companies are inherently so honest that the SEC does not need 
to review what they file.
  This approach to the SEC's work is wrong, and that is why I am glad 
that this section is in the bill; but when I asked the SEC to tell us 
what it would cost so that the appropriators could provide the 
resources, the response of Chairman Pitt was to say that he was going 
to refuse to provide that information because he disagreed with the 
proposal. Now the proposal will be included in legislation passed by 
the House. The Congress will adopt language saying that it is our sense 
that the SEC do this work.
  The SEC will then probably continue to refuse to tell Congress what 
it would cost to actually read the most important documents filed with 
the SEC, to comment on them and to demand clarification.
  I would like to enter into the Record the letter sent to me on May 21 
by Chairman Pitt, in which he refuses to provide information as to what 
it would cost to read the financial statements of the 500 or 1,000 
largest companies, and I would hope that this provision will remain in 
the bill in conference and that Congress will not allow an SEC chairman 
to refuse to provide us with even an estimate of what it would cost to 
do something that we in the House are about to declare ought to be 
done, but that instead we have an SEC that takes its responsibility to 
protect those who invest in the biggest companies, takes that 
responsibility as seriously as they do their responsibility to protect 
those who invest in the smallest.
  The letter referred to follows:

                                      U.S. Securities and Exchange


                                                   Commission,

                                     Washington, DC, May 21, 2002.
     Hon. Brad Sherman,
     Committee on Financial Services, House of Representatives, 
         Longworth House Office Building, Washington, DC.
       Dear Congressman Sherman: During my testimony before the 
     House Financial Services Committee on March 20, 2002, you 
     requested that I submit for the record an estimate of the 
     increase in reviews. You asked that a cost estimate be 
     provided for annual reviews at three levels of effort 
     covering the top 500, 1000 and 2000 firms. As I noted during 
     the hearings, it is impractical for Congress to attempt to 
     provide the Commission with sufficient resources to do a 
     comprehensive review of the top 500, 1000 or 2000 companies. 
     Apart from the enormous cost of such a process, there is 
     ultimately no assurance that the additional expenditures 
     would ensure the quality of audits or financial reporting.
       As I noted in my testimony, the Administration's request 
     for fiscal year 2002 supplemental funding includes $20 
     million to finance 100 new positions for the Commission. Our 
     plan would be to allocate 30 positions to the Division of 
     Corporation Finance to expand, improve and expedite our 
     review of periodic filings. Our Division of Corporation 
     Finance has undertaken to monitor the annual reports 
     submitted by all Fortune 500 companies that file periodic 
     reports with the Commission in 2002. This new initiative, 
     which we announced in December, significantly expands the 
     Division's review of financial and non-financial disclosures 
     made by public companies. The additional funds would allow 
     the Division to perform full reviews of more public 
     companies' annual filings.
       Thank you for your support of the Commission's programs. 
     Should you have additional questions, I would be pleased to 
     be of assistance.
           Your truly,
                                                   Harvey L. Pitt.

  Mr. LaFALCE. Madam Speaker, I yield myself such time as I may 
consume.
  Let me simply make a few comments. I think that we should have been 
much more aware of the problems in our financial markets before the 
revelation of Enron. There had been

[[Page H3909]]

countless earnings restatements that were mandated by the SEC, and this 
was just on the few cases they were able to review. We should have been 
clamoring for an increase in the budget of the SEC long before now.
  At the very beginning of 2001, when our committee obtained 
jurisdiction for the first time over securities, I began calling not 
for a 2 or a 3 or a 4 percent increase in the budget but for a 200, a 
300, a 400 percent increase in the budget. I did this in our committee. 
I did this before the Committee on Rules. I did it on the floor of the 
House.
  After Enron, I was at least hopeful that the President of the United 
States in his State of the Union address would recognize the gravity of 
the problem, and he barely mentioned Enron, not by name, but he barely 
mentioned the nature of the problem. I was then hopeful that in his 
budget submission to the Congress he would call for a huge significant 
increase in the resources. He did not. He called for but a 6 percent 
increase in the resources of the SEC.
  That is woefully inadequate, as virtually everyone has come to 
realize. Certainly the gentleman from Ohio (Mr. Oxley), the chairman of 
the Committee on Financial Services, realizes that is woefully 
inadequate; and that is why he has been promoting this bill.
  A few weeks or so ago, I had the pleasure of having dinner with the 
chief economic adviser to the President of the United States, Mr. 
Lindsay, and the gentleman from Ohio (Mr. Oxley), the chairman of the 
Committee on Financial Services, was present; and I questioned him 
about the adequacy of that 6 percent increase that the President had 
called for and he defended it. He defended it.
  The position of the administration is absolutely outrageous. They 
still have their heads in the sand on this issue.

                              {time}  1645

  It is time for them to get their head out of the sand, and maybe 
unanimous passage of this bipartisan bill will help do that. I urge 
everyone to support it.
  Madam Speaker, I yield back the balance of my time.
  Mr. OXLEY. Madam Speaker, I yield myself such time as I may consume; 
and, in conclusion, let me just point out something to the gentleman 
from California.
  The 16 percent figure of review of the top 500 companies is nothing 
new. I cannot remember ever, in the history of this country, any SEC 
ever viewing all 500 companies; and I think it is important to point 
that out for the record. It was not this particular SEC but many 
previous SECs that were in that same category.
  Mr. GILMAN. Madam Speaker, I rise today in support of H.R. 3764 and 
would like to thank the gentleman from Ohio, my friend and colleague 
Congressman Oxley,  for introducing this initiative. I urge my 
colleagues to support this worthy legislation.
  This act will appropriate the necessary funds to the Securities and 
Exchange Commissions, in both its Division of Corporate Finance and 
Division of Enforcement. Moreover, it will allocate the necessary funds 
to implement sections of past legislation. It will also work to 
establish an annual review of the annual financial statements filed 
with the Commission by the largest 500 reporting issuers. This 
legislation will no doubt work toward increasing the transparency in 
the business practices of our nation's largest companies.
  It is obvious that today our nation's financial regulators must be 
given the appropriate resources to properly monitor our nation's 
corporate sector. The Enron saga and more recently the Imclone fiasco 
have demonstrated the grave situation existing within our financial 
world. This act is undoubtedly a step in the right direction in our 
battle against unethical business practices driven by the vices of 
greed and dishonesty.
  It is imperative that we take these steps to further fund the 
Securities and Exchange Commission. It is clear that these provisions 
are essential given the recent developments regarding several large 
American companies and the unethical business practices which have 
taken place. Accordingly, I urge my colleagues to support these 
measures.
  Mr. OXLEY. Madam Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mrs. Biggert). The question is on the motion 
offered by the gentleman from Ohio (Mr. Oxley) that the House suspend 
the rules and pass the bill, H.R. 3764, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. LaFALCE. Madam Speaker, on that, I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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