[House Report 106-1034]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                    106-1034

======================================================================



 
                FAIRNESS IN SECURITIES TRANSACTIONS ACT

                                _______
                                

  December 15, 2000.--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

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2441]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 2441) to amend the Securities Exchange Act of 1934 to 
reduce fees on securities transactions, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     9
Committee on Government Reform Oversight Findings................     9
New Budget Authority, Entitlement Authority, and Tax Expenditures     9
Committee Cost Estimate..........................................     9
Congressional Budget Office Estimate.............................     9
Federal Mandates Statement.......................................    12
Advisory Committee Statement.....................................    12
Constitutional Authority Statement...............................    12
Applicability to Legislative Branch..............................    12
Section-by-Section Analysis of the Legislation...................    12
Changes in Existing Law Made by the Bill, as Reported............    13
Minority Views...................................................    15

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Fairness in Securities Transactions 
Act''.

SEC. 2. FEE REDUCTION.

  (a) Reductions of Fees.--Section 31 of the Securities Exchange Act of 
1934 (15 U.S.C. 78ee) is amended by striking ``\1/300\ of one percent'' 
each place it appears and inserting ``\1/500\ of one percent''.
  (b) Prevention of Shortfalls in Commission Appropriations.--Section 
31 of the Securities Exchange Act of 1934 is further amended by adding 
at the end the following new subsection:
  ``(h) Insufficient Fees.--In any year in which the total amount of 
fees collected under this section and section 6(b) of the Securities 
Act of 1933 (including any balance in the account providing 
appropriations to the Commission) are insufficient to provide for the 
Commission's budget authority as provided by an appropriation Act, such 
appropriation Act may provide that the fee under this section shall be 
increased, with all such increased amounts deposited and credited as 
offsetting collections to the account providing appropriations to the 
Commission.''.

SEC. 3. REVISION OF SECURITIES TRANSACTION FEE PROVISIONS.

  Section 31 of the Securities Exchange Act of 1934 (15 U.S.C. 78ee) is 
further amended--
          (1) in subsection (b), by striking the last sentence;
          (2) in subsection (c), by striking the last sentence;
          (3) in subsection (d)--
                  (A) by striking paragraphs (2) and (3); and
                  (B) by striking the following:
  ``(d) Off-Exchange Trades of Last-Sale-Reported Securities.--
          ``(1) Covered transactions.--Each national securities'' and 
        adding the following:
  ``(d) Off-Exchange Trades of Last-Sale-Reported Securities.--Each 
national securities''; and
          (4) by adding after subsection (h) (as added by section 2(b) 
        of this Act) the following new subsections:
  ``(i) Deposit of Fees.--
          ``(1) General revenues.--Fees collected pursuant to 
        subsections (b), (c), and (d) shall be deposited and collected 
        as general revenue of the Treasury, except that the amount 
        deposited and collected as general revenues for any fiscal year 
        shall not exceed the baseline amount for such fiscal year.
          ``(2) Offsetting collections.--Fees collected pursuant to 
        subsections (b), (c) and (d) for any fiscal year in excess of 
        the baseline amount for such fiscal year--
                  ``(A) shall not be collected or spent for any fiscal 
                year except to the extent provided in advance in 
                appropriation Acts; and
                  ``(B) shall be deposited and credited as offsetting 
                collections to the account providing appropriations to 
                the Commission.
          ``(3) Baseline amount.--For purposes of this subsection, the 
        baseline amount for any fiscal year is the amount projected by 
        the Congressional Budget Office pursuant to section 257 the 
        Balanced Budget and Emergency Deficit Control Act of 1985, in 
        its most recently published report of its baseline projection 
        before the date of enactment of the Fairness in Securities 
        Transactions Act, to be collected and deposited as general 
        revenues pursuant to subsections (b) and (c) of this section as 
        in effect on the day before the date of enactment of such Act.
  ``(j) Lapse of Appropriation.--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 under subsections (b), (c), 
and (d) at the rate in effect during the preceding fiscal year, until 
such a regular appropriation is enacted.''.

SEC. 4. EFFECTIVE DATE.

  The amendments made by this Act--
          (1) shall take effect on October 1, 2000; and
          (2) shall cease to be effective on October 1, 2006.

                          Purpose and Summary

    The purpose of H.R. 2441 is to provide monetary relief to 
investors and market participants that pay the section 31 
transaction fee. The legislation provides an interim rate 
reduction until a statutorily mandated reduction becomes 
effective in fiscal year 2007.
    H.R. 2441, as reported, lowers the transaction fee rate 
from \1/300\th of one percent to \1/500\th of one percent 
through the end of fiscal year 2006. Because the current 
budgetary treatment is different for exchange-traded securities 
than for off-exchange-traded securities (transaction fees from 
exchange traded securities are deposited as general revenue; 
all other transaction revenue is deposited as offsetting 
collections), a rate reduction applied equally under current 
law would result in a decrease to general revenue to the 
Treasury because of the resultant decrease in revenue from 
exchange traded securities. In order to remain revenue neutral, 
the legislation makes changes to the fee structure. Under 
H.R.2441, all transaction fee revenue collected is deposited as 
general revenue, except that any amount collected in excess of 
the most recently published Congressional Budget Office (CBO) 
baseline at the time of enactment is deposited as offsetting 
collections.
    Based on the March 2000 CBO baseline, preliminary estimates 
indicate that the legislation will provide over $460 million in 
offsetting collections in fiscal year 2001. This will ensure 
that the appropriators will have the funds necessary to meet 
the Security and Exchange Commission's (SEC's) budget request 
of $423 million.
    The legislation also addresses a concern regarding the 
conversion of the NASDAQ market to an exchange. Currently, 
transaction revenue collected from securities traded through 
the NASDAQ is deposited as offsetting collections. However, the 
NASDAQ has filed an application to become an exchange, at which 
point the fees collected from securities traded on the NASDAQ 
would be deposited as general revenue under current law. 
Because H.R. 2441 does not differentiate between where the 
securities are traded for purposes of depositing and crediting 
section 31 transaction fees, the conversion of NASDAQ to an 
exchange will not affect the funding structure put in place for 
the SEC by the legislation.

                  Background and Need for Legislation

    The Federal Securities laws provide for several types of 
fees to be charged for various securities activities. These 
fees, which include registration, transaction, and merger and 
tender offer fees, are ``user'' fees intended to recover the 
government's cost of providing Federal securities regulation 
through the Securities and Exchange Commission.
    Beginning in the early 1980's, the total revenue collected 
by the government from these fees began to exceed the cost of 
funding the SEC.
    Notwithstanding the surplus being generated by the fees, 
Congress authorized increases to the fee rate for securities 
registration (which is authorized under section 6 of the 
Securities Act of 1933, and is thus sometimes referred to as 
the ``section 6(b) fee'') annually beginning in 1990. The 
revenue collected above the statutory registration rate was 
deposited and credited as ``offsetting collections'' to the 
account that provided for appropriations for the SEC. This 
eased the budgetary pressure on discretionary spending for 
Congressional appropriators by providing them with funds that 
they could use outside the limits (caps) imposed by the Budget 
Enforcement Act.
    As the surplus from the fees began to grow dramatically, 
concerns were raised that the user fees had become a revenue-
generating tax--as opposed to being merely a cost recovery 
mechanism for SEC regulation--and an unnecessary burden on 
capital formation. In 1995, the revenue collected from these 
fees was more than double the SEC budget. Because the 
appropriations committees were relying on the offsetting 
collections to provide a substantial percentage of the revenue 
needed to fund the SEC budget each year, and the level of 
offsetting collections was never predictable, there were 
concerns about the resulting uncertainty in funding the SEC.
    Congress addressed this problem by changing the fee and SEC 
funding structure in the National Securities Markets 
Improvement Act of 1996 (P.L. 104-290) (NSMIA). The fee 
provisions in that Act were intended to reduce the total 
revenue collected from the fees over time to approximate the 
cost to the government of securities market regulation, and to 
provide a more stable long-term funding structure for the SEC 
by reducing the reliance of the appropriators on fee 
collections as a funding mechanism.
    NSMIA decreased the registration fee rate incrementally 
each year until it returned to the level that existed prior to 
the yearly increases in the rate that Congress began to 
authorize in 1990. Additionally, the Act authorized the 
transaction fee (which is authorized under section 31 of the 
Exchange Act, and hence is also called a ``section 31 fee'') to 
be extended to off-exchange traded securities. This was done to 
eliminate any competitive disparities between exchange-traded 
securities, which had always been assessed the fee, and non-
exchange-traded securities, which were not subject to 
transaction fees.
    Based on the Congressional Budget Office estimates at the 
time, it was anticipated the revenue collected and deposited as 
offsetting collections, pursuant to the changes under the Act, 
would decline and therefore require Congressional appropriators 
to gradually increase their appropriation to fully fund the 
SEC. The combination of the decreasing 6(b) registration fee 
rate and the new application of the section 31 transaction fee 
to off-exchange traded securities was estimated to provide 
total offsetting collections of $244 million in 1997, 
decreasing annually to $141 million in 2006.
    In adopting NSMIA, Congress relied upon 1996 CBO baseline 
projections for market volume. In fact, actual registration and 
transaction volume has exceeded the CBO's estimates by 
multiples.For example, in 2000, total fee revenue collected was 
$2 billion, while the SEC budget was $377 million. The 1996 projections 
estimated total collections of $778 million. Although registration 
volume increased significantly, the bulk of the unexpected revenue was 
derived from the section 31 fee. The fiscal year 2000 revenue collected 
from the transaction fee has more than quadrupled, totaling more than 
$1 billion; the 1996 estimates predicted $273 million. The CBO's March 
2000 baseline estimates predict that transaction volume will continue 
to escalate and generate over $3 billion in 2006. Revenue from 
registration fees is estimated to produce an additional $876 million in 
2006.
    Many Members of Congress agree that the section 31 
transaction fee rate, as amended in 1996, was never envisioned 
to generate the level of revenue being collected. In 1998, 
legislation (H.R. 4213) was introduced to address the problem. 
No action was taken on that legislation.
    Transaction volume is expected to continue to increase, and 
concerns were again raised in the 106th Congress that the 
section 31 transaction fees do not reflect their statutory 
purpose of a cost recovery fee. Legislation was introduced in 
the House to address the problem.

                                Hearings

    The Subcommittee on Finance and Hazardous Materials held 
two hearings on H.R. 2441, the Fairness in Securities 
Transactions Act on July 27, 1999 and September 28, 1999. The 
July 27, 1999 hearing examined the impact of the growth in the 
securities markets on transaction fee revenue. The Subcommittee 
received testimony from: Mr. William J. Brodsky, Chairman and 
C.E.O., Chicago Board Options Exchange; Mr. Andrew Cader, 
Senior Managing Director, Spear, Leeds & Kellogg, representing 
the Specialist Association of the New York Stock Exchange; Mr. 
Steve Nelson, Vice President of Special Projects, Herzog Heine 
Geduld, representing the Securities Industry Association; and 
Mr. Art Kearney, Director of Equity Capital, John G. Kinnard & 
Co., representing the Security Traders Association.
    On September 28, 1999, the Subcommittee received testimony 
on H.R. 2441 from the following witnesses: The Honorable Rick 
Lazio, United States House of Representatives; The Honorable 
Robert Menendez, United States House of Representatives; and 
Mr. James M. McConnell, Executive Director, Securities and 
Exchange Commission.

                        Committee Consideration

    On February 15, 2000, the Subcommittee on Finance and 
Hazardous Materials met in open markup session and approved 
H.R. 2441 for Full Committee consideration, as amended by a 
voice vote. On October 6, 2000, the Full Committee met in open 
markup session and ordered H.R. 2441 reported to the House, 
amended, by a record vote of 24 yeas and 16 nays, a quorum 
being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Bliley to order H.R. 2441 reported to the House, 
with an amendment, was agreed to by a record vote of 24 yeas 
and 16 nays (Record Vote No. 37). The names of Members voting 
for and against follow.
    The following amendment was ruled nongermane by the chair--

          An amendment in the nature of a substitute by Mr. 
        Towns, No. 1, crediting all securities transaction fees 
        collected to the account of the appropriators and 
        providing the SEC with an exemption from the civil 
        service pay code.

    An appeal of the ruling of the Chair was tabled by a record 
vote of 25 yeas and 16 nays (Record Vote No. 36). The names of 
Members voting for and against follow.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held legislative and 
oversight hearings and made findings that are reflected in this 
report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
2441, the Fairness in Securities Transactions Act, would result 
in no new or increased budget authority, entitlement 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 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 24, 2000.
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. 2441, the Fairness 
in Securities Transactions Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Ken Johnson.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 2441--Fairness in Securities Transactions Act

    Summary: H.R. 2441 would reduce the fees the Securities and 
Exchange Commission (SEC) is authorized to collect on 
securities transactions conducted through national securities 
exchanges, associations, brokers, and dealers. The rate would 
be cut from \1/300\th of 1 percent of the aggregate dollars 
traded to \1/500\th of 1 percent of the aggregate dollars 
traded. Under the bill, all transaction fees collected up to a 
certain threshold would be classified as governmental receipts 
(that is, revenues). Any transaction fees above this threshold 
would be authorized to be collected only to the extent provided 
in appropriation acts and would be classified as offsetting 
collections (that is, offsets to discretionary spending). The 
provisions of H.R. 2441 would be effective from October 1, 
2000, through October 1, 2006.
    CBO estimates that enacting H.R. 2441 would reduce the 
SEC's transaction fees by $478 million in fiscal year 2001 and 
by a total of $4 billion over the 2001-2005 period (from $10 
billion to about $6 billion).
    Table 1 shows the estimated impact of H.R. 2441 on the 
SEC's transaction fees, assuming that future appropriation 
actions would continue to allow the collection of these fees 
consistent with the authorizing statute.
    Because the collection of fees from 2002 through 2005 would 
be subject to future appropriation action, the reduction 
mandated by this bill would be reflected as a loss of 
offsetting collections credited against future appropriations 
($3.5 billion over the four-year period).
    For 2001, the nature of the budgetary impact of this bill 
would depend on whether the SEC appropriation would be enacted 
before H.R. 2441. If it is, then this bill would affect outlays 
from an already-enacted appropriation, which would be 
considered a direct spending impact (of $478 million). 
Alternatively, if the SEC appropriation were not enacted before 
H.R. 2441, the effect of this bill in 2001 would be like that 
in the subsequent years--a loss of offsetting collections 
credited against future discretionary appropriations.

----------------------------------------------------------------------------------------------------------------
                                                                      Millions of dollars, by fiscal year--
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
CBO Baseline Estimate of SEC Transaction Fees \1\.............     1,303     1,593     1,938     2,346     2,836
SEC Transaction Fees Under H.R. 2441..........................       825       956     1,163     1,408     1,701
Estimated Change in SEC Transaction Fees......................      -478      -637      -775      -938    -1,135
----------------------------------------------------------------------------------------------------------------
\1\ These estimates are sums of the transaction fees that are classified as governmental receipts and the
  transaction fees that are classified as offsetting collections.

    For this estimate, we assume H.R. 2441 will be enacted 
after a regular 2001 appropriation is in place for the SEC (see 
Table 2).
    H.R. 2441 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: Table 2 shows the 
estimated budgetary impact of H.R. 2441, assuming that the 
SEC's appropriation for 2001 is enacted before this bill. The 
costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                      Millions of dollars, by fiscal year--
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Estimated Budget Authority....................................       478         0         0         0         0
Estimated Outlays.............................................       478         0         0         0         0


                                        CHANGES SUBJECT TO APPROPRIATION

Estimated Budget Authority....................................         0       637       775       938     1,135
Estimated Outlays.............................................         0       637       775       938     1,135
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Under current law, the SEC collects \1/
300\th of a percent of the aggregate dollar value of securities 
traded through national securities exchanges, national 
securities associations, brokers, and dealers. The fee rate 
will decline to \1/800\th of a percent for 2007 and thereafter. 
Fees collected from national securities associations are 
subject to appropriation action and are recorded as offsetting 
collections, while fees from other sources are recorded as 
revenues.
    H.R. 2441 would reduce the transaction fees to \1/500\th of 
1 percent of the aggregate dollar value of securities traded 
during the period between October 1, 2000, and October 1, 2006. 
Based on historical data on the dollar volume of securities 
traded on the major national securities associations and 
exchanges, CBO estimates that the aggregate dollar volume of 
securities traded will amount to about $39 trillion in 2001 and 
about $300 trillion over the 2001-2005 period. On this basis, 
CBO estimates that implementing H.R. 2441 would reduce SEC 
transaction fees by a total of $4 billion over the 2001-2005 
period, relative to the CBO's most recent baseline estimates.
    The bill would classify all transaction fees collected up 
to a certain threshold as revenues. H.R. 2441 would define that 
threshold as the most recent CBO baseline estimate of revenues 
from transaction fees. (CBO currently estimates that such 
revenues will total $486 million in fiscal year 2001 and $3.5 
billion over the 2001-2005 period.) Under the bill, any 
transaction fees collected above that threshold would be 
recorded as offsetting collections, to the extent provided in 
appropriation acts.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays that are subject to pay-as-you-go procedures 
are shown in the following table, assuming the SEC 
appropriation for 2001 is enacted before H.R. 2441. If not, 
this bill would have no pay-as-you-go impact.

----------------------------------------------------------------------------------------------------------------
                                                     By fiscal year, in millions of dollars--
                                 -------------------------------------------------------------------------------
                                   2001    2002    2003    2004    2005    2006    2007    2008    2009    2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays..............     478       0       0       0       0       0       0       0       0       0
Changes in receipts.............                                  Not applicable
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private sector mandates statement: 
H.R. 2441 contains no intergovernmental and private-sector 
mandates as defined in UMRA, and would impose no costs on 
state, local, or tribal governments.
    Estimate prepared by: Federal Costs: Ken Johnson and Mark 
Hadley. Revenues: Erin Whitaker. Impact on State, Local, and 
Tribal Governments: Shelley Finlayson. Impact on the Private 
Sector: Jean Wooster.
    Estimate approved by: Robert A. Sunshine, 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 3(d)(1) of rule XIII 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

    This section provides the short title of the legislation, 
the ``Fairness in Securities Transactions Act.''

Section 2. Fee reduction

    Subsection (a) of section 2 of the legislation provides 
that section 31 of the Securities and Exchange Act of 1934 
(Exchange Act) is amended to reduce the fee rate from \1/300\th 
of one percent to \1/500\th of one percent. This change reduces 
the rate until further reductions mandated by statute occur in 
fiscal year 2007.
    Subsection (b) provides that in any year when total revenue 
collected from both registration and transaction fees is 
insufficient to provide the Commission's budget authority, the 
transaction fee rate under section 31 may be increased through 
an appropriation Act.

Section 3. Revision of securities transaction fee provisions

    This section amends section 31 of the Exchange Act. The 
section adds new subsection (i) which stipulates that revenue 
collected pursuant to section 31 be deposited as general 
revenue to the Treasury, except that no such amount may exceed 
the baseline amount (as defined by H.R. 2441). Fees collected 
in excess of the baseline amount will be deposited and credited 
as offsetting collection to the account providing 
appropriations to the Commission.
    The section also defines the baseline amount to be the 
amount projected by the Congressional Budget Office in its most 
recently published report of the baseline amount before the 
date of enactment of the legislation.
    Section 3 also modifies section 31(d)(3) to conform to the 
new funding scheme. A new subsection (j) provides that, in the 
case of a lapse of regular appropriation, the Commission must 
continue to collect fees under subsections (b), (c), and (d) of 
section 31 at the rate in effect during the preceding fiscal 
year until such regular appropriation is enacted.

Section 4. Effective date

    Section 4 provides that the changes made by this bill take 
effect October 1, 2000 and cease to be effective October 1, 
2006.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) 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 31 OF THE SECURITIES EXCHANGE ACT OF 1934


SEC. 31. TRANSACTION FEES.

  (a) * * *
  (b) Exchange-Traded Securities.--Every national securities 
exchange shall pay to the Commission a fee at a rate equal to 
[\1/300\ of one percent] \1/500\ of one percent of the 
aggregate dollar amount of sales of securities (other than 
bonds, debentures, and other evidences of indebtedness) 
transacted on such national securities exchange, except that 
for fiscal year 2007 or any succeeding fiscal year such rate 
shall be equal to \1/800\ of one percent of such aggregate 
dollar amount of sales. [Fees collected pursuant to this 
subsection shall be deposited and collected as general revenue 
of the Treasury.]
  (c) Off-Exchange Trades of Exchange Registered Securities.--
Each national securities association shall pay to the 
Commission a fee at a rate equal to [\1/300\ of one percent] 
\1/500\ of one percent of the aggregate dollar amount of sales 
transacted by or through any member of such association 
otherwise than on a national securities exchange of securities 
registered on such an exchange (other than bonds, debentures, 
and other evidences of indebtedness), except that for fiscal 
year 2007 or any succeeding fiscal year such rate shall be 
equal to \1/800\ of one percent of such aggregate dollar amount 
of sales. [Fees collected pursuant to this subsection shall be 
deposited and collected as general revenue of the Treasury.]
  [(d) Off-Exchange Trades of Last-Sale-Reported Securities.--
          [(1) Covered transactions.--Each national securities]
  (d) Off-Exchange Trades of Last-Sale-Reported Securities.--
Each national securities association shall pay to the 
Commission a fee at a rate equal to [\1/300\ of one percent] 
\1/500\ of one percent of the aggregate dollar amount of sales 
transacted by or through any member of such association 
otherwise than on a national securities exchange of securities 
(other than bonds, debentures, and other evidences of 
indebtedness) subject to prompt last sale reporting pursuant to 
the rules of the Commission or a registered national securities 
association, excluding any sales for which a fee is paid under 
subsection (c), except that for fiscal year 2007, or any 
succeeding fiscal year, such rate shall be equal to \1/800\ of 
one percent of such aggregate dollar amount of sale.
          [(2) Limitation; deposit of fees.--Except as provided 
        in paragraph (3), no amounts shall be collected 
        pursuant to subsection (d) for any fiscal year, 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.
          [(3) 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.]

           *       *       *       *       *       *       *

  (h) Insufficient Fees.--In any year in which the total amount 
of fees collected under this section and section 6(b) of the 
Securities Act of 1933 (including any balance in the account 
providing appropriations to the Commission) are insufficient to 
provide for the Commission's budget authority as provided by an 
appropriation Act, such appropriation Act may provide that the 
fee under this section shall be increased, with all such 
increased amounts deposited and credited as offsetting 
collections to the account providing appropriations to the 
Commission.
  (i) Deposit of Fees.--
          (1) General revenues.--Fees collected pursuant to 
        subsections (b), (c), and (d) shall be deposited and 
        collected as general revenue of the Treasury, except 
        that the amount deposited and collected as general 
        revenues for any fiscal year shall not exceed the 
        baseline amount for such fiscal year.
          (2) Offsetting collections.--Fees collected pursuant 
        subsections (b), (c) and (d) for any fiscal year in 
        excess of the baseline amount for such fiscal year--
                  (A) shall not be collected or spent for any 
                fiscal year except to the extent provided in 
                advance in appropriation Acts; and
                  (B) shall be deposited and credited as 
                offsetting collections to the account providing 
                appropriations to the Commission.
          (3) Baseline amount.--For purposes of this 
        subsection, the baseline amount for any fiscal year is 
        the amount projected by the Congressional Budget Office 
        pursuant to section 257 the Balanced Budget and 
        Emergency Deficit Control Act of 1985, in its most 
        recently published report of its baseline projection 
        before the date of enactment of the Fairness in 
        Securities Transactions Act, to be collected and 
        deposited as general revenues pursuant to subsections 
        (b) and (c) of this section as in effect on the day 
        before the date of enactment of such Act.
  (j) Lapse of Appropriation.--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 under 
subsections (b), (c), and (d) at the rate in effect during the 
preceding fiscal year, until such a regular appropriation is 
enacted.

                             MINORITY VIEWS

    Given a flawed process and a flawed bill, all of the 
Commerce Committee Democrats opposed this legislation at full 
Committee markup. I enthusiastically joined that opposition.
    I am a strong supporter of eliminating the excess fees 
collected by the SEC over and above its funding needs. Twice 
under my leadership, with the cooperation and support of the 
Appropriations, Budget, and Ways and Means Committees, the 
House passed legislation to provide the SEC with a stable and 
assured funding mechanism while also gradually reducing surplus 
fee collections to zero. Twice the Senate refused to act on 
that legislation or even negotiate with the House. Had that 
legislation passed, we would not be having this debate now.
    I am a strong supporter of a fully-funded SEC. It would be 
foolish to be otherwise, given the large number of American 
households invested in the stock market, the dramatic changes 
in the structure and functions of the nation's securities 
markets, the role the stock market currently plays in our 
economic growth, and last but not least, the need to maintain a 
strong law enforcement presence to combat the increase in 
securities fraud, especially on the Internet.
    H.R. 2441, as reported by the Commerce Committee on a 24-16 
partisan vote, was opposed by Democrats because it achieves 
reductions in fee collections by targeting only the offsetting 
collections used by the SEC's appropriators to fund SEC 
operations. It makes no attempt to reduce the general revenue 
portion of fee collections, which represent approximately 70 
percent of total fee collections. The bill increases the risk 
that the SEC will face a funding shortfall by giving general 
revenue first claim on any fee collections. Under this bill 
general revenue is credited with all fee collections until a 
general revenue cap is reached. Any collections over the 
general revenue cap go to offsetting collections. This 
provision has the effect of shifting the risk of any collection 
shortfall to offsetting collections. The SEC would thus bear 
the brunt of any shortfall, exposing the SEC to the possibility 
of an emergency budget situation that could severely affect its 
operations.
    The House should reject this not-so-veiled Republican 
attempt to cripple the SEC by potentially shutting off its 
funding.
    I also would express disappointment in the Republicans for 
blocking consideration of the responsible amendment authored by 
Representative Towns, who joins me in these views. The Towns 
amendment offered the securities industry the potential of more 
fee relief than H.R. 2441, without jeopardizing the SEC's 
budget. It also would have given the SEC pay parity with the 
federal banking regulatory authorities to address the serious 
problems that the SEC is having with recruiting and retaining 
highly-qualified staff. Recent press reports indicate that the 
Division of Investment Management has lost one-third of its 
attorneys. This is an outrageous situation that needs to be 
remedied: it undermines both the protection of investors and 
the ability of business to get timely response to its filings 
with the agency.
    I am filing with these views a copy of the letter that 
Representatives Towns, Markey, and I wrote to the Democratic 
Leadership of Appropriations on this matter and I commend it to 
our colleagues on both sides of the aisle.

                                                   John D. Dingell.


                                  
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