[House Report 105-274]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-274
_______________________________________________________________________


 
      SECURITIES AND EXCHANGE COMMISSION AUTHORIZATION ACT OF 1997

                                _______
                                

 September 26, 1997.--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. 1262]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 1262) to authorize appropriations for the Securities and 
Exchange Commission for fiscal years 1998 and 1999, and for 
other purposes, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Rollcall Votes...................................................     3
Committee Oversight Findings.....................................     3
Committee on Government Reform and Oversight.....................     3
New Budget Authority and Tax Expenditures........................     3
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     4
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     6

                          Purpose and Summary

     The purpose of H.R. 1262, the Securities and Exchange 
Commission Authorization Act of 1997, is to provide 
authorization for funding the Securities and Exchange 
Commission (SEC) for Fiscal Years 1998 and 1999.
     The Committee believes that these authorizations will 
provide flexibility to the SEC in the event of a market 
emergency. The Committee is authorizing the SEC at a level of 
$320 million and $342.7 million for Fiscal Year 1998 and Fiscal 
Year 1999, respectively. The authorization for Fiscal Year 1998 
is relatively unchanged from the Committee-approved 
authorization of $317 million for Fiscal Year 1997.

                  Background and Need for Legislation

     The SEC is statutorily charged with the supervision of 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.
    The U.S. securities markets are widely regarded as the 
deepest, most liquid, and fairest markets in the world. Last 
year, registered public offerings grew to $1.045 trillion, an 
increase of 36 percent from 1995 offerings, and initial public 
offerings grew to $50 billion, a 67 percent increase from 1995, 
continuing the longest and most vigorous bull market in 
history. The SEC has continued its thorough supervision of 
these markets, notwithstanding this unprecedented growth.
    The Securities and Exchange Commission was last authorized 
by the Committee in 1996 for Fiscal Year 1997 in Title IV of 
the National Securities Markets Improvement Act of 1996 (P.L. 
104-290). The legislation authorized appropriations of $300 
million for Fiscal Year 1997 (section 403) in addition to $20 
million for Fiscal Years 1997 and 1998 specifically for 
enforcement of the Investment Advisors Act of 1940 (section 
302).
    The SEC has requested an increase in the authorization for 
Fiscal Year 1999 of $22.7 million (for a total authorization of 
$342.7 million). The Committee has found the following 
justifications for this increase: (1) hiring additional staff 
in the Office of the Chief Economist to implement the cost 
benefit analysis requirements of section 106 of the National 
Securities Markets Improvement Act; (2) implementing additional 
investor protection measures such as enhancing money market 
fund oversight, developing improved tracking systems to enhance 
inspection activity, responding to the increase in Internet-
related securities violations, and improving disclosure to 
investors by mutual funds; and (3) modernizing the regulatory 
schemes for capital raising.
    The authorization is consistent with the provisions of the 
Bliley-Rogers-Archer SEC-fee reduction agreement as enacted in 
Title III of the National Securities Markets Improvement Act. 
Pursuant to that agreement, the SEC is to be funded 
increasingly by an appropriation each year to offset decreasing 
fee revenues collected by the agency. This mechanism is 
intended to provide the SEC with stable funding, while reducing 
fees imposed on investors that impede the capital formation 
process.
    The Committee is concerned that the reliance on excess fee 
revenue, carried over and applied to the following fiscal 
year's budget, will allow the appropriators to delay increasing 
needed appropriations for the SEC. The National Securities 
Markets Improvement Act anticipates a gradual increase in the 
appropriation for the SEC over ten years while reducing the fee 
revenue that can be used to fund the balance of its budget.

                                Hearings

    The Subcommittee on Finance and Hazardous Materials held a 
hearing on reauthorization of the Securities and Exchange 
Commission on March 6, 1997. The Subcommittee received 
testimony from Chairman of the Securities and Exchange 
Commission Arthur Levitt, Commissioner Steve Wallman, 
Commissioner Isaac Hunt, and Commissioner Norman Johnson.

                        Committee Consideration

    On May 21, 1997, the Subcommittee on Finance and Hazardous 
Materials met in open markup session and approved H.R. 1262, 
the Securities and Exchange Commission Authorization Act of 
1997, for Full Committee consideration, without amendment, by a 
voice vote. On July 23, 1997, the Full Committee met in open 
markup session and ordered H.R. 1262, reported to the House, 
without amendment, by a voice vote.

                             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. 1262 
reported. A motion by Mr. Bliley to order H.R. 1262 reported to 
the House, without amendment, was agreed to by a voice vote, a 
quorum being present.

                      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. 1262, the Securities and Exchange Authorization Act of 
1997, would result in no new or increased budget authority or 
tax expenditures or revenues.

                        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, the 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, July 29, 1997.
Hon. Tom Bliley,
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. 1262, the 
Securities and Exchange Commission Authorization Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Rachel 
Forward.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 1262--Securities and Exchange Commission Authorization Act of 1997

    Summary: H.R. 1262 would authorize appropriations for 
fiscal years 1998 and 1999 for the Securities Exchange 
Commission (SEC). Assuming appropriation of the authorized 
amounts, CBO estimates that enacting H.R. 1262 would result in 
net new discretionary spending of $30 million over the 1998-
2002 period. The legislation would not affect direct spending 
or receipts; therefore, pay-as-you-go procedures would not 
apply. H.R. 1262 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
of 1995 (UMRA), and would not affect the budgets of state, 
local, or tribal governments.
    Estimated Cost to the Federal Government: For the purposes 
of this estimate, CBO assumes that H.R. 1262 will be enacted by 
the end of fiscal year 1997 and that the authorized amounts 
will be appropriated by the start of each fiscal year. Outlays 
have been estimated on the basis of historical spending 
patterns for the SEC. Gross spending of the SEC would be 
authorized to increase under H.R. 1262, from about $300 million 
in 1997 to about $340 million in each of the next two fiscal 
years. That increase would be more than offset, however, by an 
expected increase in fee collections by the agency. As a 
result, CBO estimates that the net SEC spending would decline 
from the $47 million estimated for the current year. Net 
discretionary spending for 1996 was $42 million.
    Under current law, the SEC collects both a securities 
transaction fee and a securities registration fee and is 
authorized to spend a certain amount of the fees to the extent 
provided in advance in appropriations acts. The bill would 
authorize funding levels of $320 million for 1998 and $343 
million for 1999, but most of those amounts would be offset by 
collections of fees, as shown in the following table.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                     1996     1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
SEC spending under current law:                                                                                 
    Estimated budget authority 1,2...............      346      261       27        0        0        0        0
    Less: offsetting collections.................     -243     -250        0        0        0        0        0
                                                  --------------------------------------------------------------
      Net budget authority.......................      103       11       27        0        0        0        0
    Estimated outlays............................       42       47       62        6        0        0        0
Proposed changes:                                                                                               
    Authorization level..........................        0        0      320      343        0        0        0
    Less: offsetting collections.................        0        0     -316     -311        0        0        0
                                                  --------------------------------------------------------------
      Net authorization level....................        0        0        4       32        0        0        0
    Estimated outlays............................        0        0      -41       26       45        0        0
SEC spending under H.R. 1262:                                                                                   
    Net authorization level......................      103       11       31       32        0        0        0
    Estimated outlays............................       42       47       21       32       45        0        0
----------------------------------------------------------------------------------------------------------------
\1\ The 1996 and 1997 levels are the amounts appropriated for those years. For 1996, SEC had the authority to   
  spend all of the $243 million in fees that were credited as offsetting collections to appropriations, plus an 
  additional $103 million. The 1997 spending authority includes $223 million from offsetting collections, plus  
  an additional $38 million.                                                                                    
\2\ In 1997, the SEC is authorized to spend only $223 million of the fees that are credited as offsetting       
  collections to appropriations. Because CBO estimates 1997 collections of $250 million and because the SEC is  
  authorized to spend--after this year--any amounts collected in 1997 that are in excess of $223 million, the   
  remaining $27 million of estimated fees is available for spending in 1998.                                    

    The costs of this legislation fall within budget function 
370 (commerce and housing credit).
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: H.R. 1262 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Rachel Forward.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

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

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

                         Section 1. Short Title

    Section 1 states the short title is the Securities and 
Exchange Commission Authorization Act of 1997.

               Section 2. Authorization of Appropriations

    Section 2 amends Section 35 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78kk) and authorizes appropriations for the 
SEC for two years at the following levels: $320,000,000 for 
Fiscal Year 1998 and $342,700,000 for Fiscal Year 1999. Section 
2 also places limitations on funding levels for certain 
miscellaneous expenses.

         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):

           SECTION 35 OF THE SECURITIES EXCHANGE ACT OF 1934

[SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

    [There are authorized to be appropriated to carry out the 
functions, powers, and duties of the Commission $300,000,000 
for fiscal year 1997, in addition to any other funds authorized 
to be appropriated to the Commission.]

SEC. 35. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--In addition to any other funds authorized 
to be appropriated to the Commission, there are authorized to 
be appropriated to carry out the functions, powers, and duties 
of the Commission--
          (1) $320,000,000 for fiscal year 1998; and
          (2) $342,700,000 for fiscal year 1999.
    (b) Miscellaneous Expenses.--Funds appropriated pursuant to 
this section are authorized to be expended--
          (1) not to exceed $3,000 per fiscal year, for 
        official reception and representation expenses;
          (2) not to exceed $10,000 per fiscal year, for 
        funding a permanent secretariat for the International 
        Organization of Securities Commissions; and
          (3) not to exceed $100,000 per fiscal year, for 
        expenses for consultations and meetings hosted by the 
        Commission with foreign governmental and other 
        regulatory officials, members of their delegations, 
        appropriate representatives, and staff to exchange 
        views concerning developments relating to securities 
        matters, for development and implementation of 
        cooperation agreements concerning securities matters 
        and provision of technical assistance for the 
        development of foreign securities markets, such 
        expenses to include necessary logistic and 
        administrative expenses and the expenses of Commission 
        staff and foreign invitees in attendance at such 
        consultations and meetings, including--
                  (A) such incidental expenses as meals taken 
                in the course of such attendance;
                  (B) any travel or transportation to or from 
                such meetings; and
                  (C) any other related lodging or subsistence.

                                
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