OMB's new policy, announced in a revision to its Circular A-130, urges federal agencies to maximize the amount of information made available to the public and minimize the fees charged for such information. The OMB circular calls for a diversity of vendors of government information, both public and private, and warns that government information must be provided equitably to all interested parties. Where fees are charged for information, those charges are to be set "at a level sufficient to recover the cost of dissemination but no higher" unless statutory requirements are at variance with the policy.76 The Committee requests that the Commission examine the current EDGAR dissemination strategy against the objectives of the new OMB circular, and whether any changes in policy or amendments to Section 35A are needed. FEES COLLECTED BY THE COMMISSION Pursuant to its statutory mandate, the Commission collects fees for the filing of documents, for transactions on the stock exchanges, and for certain other activities under its regulatory jurisdiction.77 The amount of fees collected by the Commission is directly related to the level of market activity. For example, because a fee is received for each transaction in an equity security registered on a stock exchange, fees collected for these transactions rise or fall as the volume of such securities transactions rises or falls. Similarly, because fees are collected for the filing of certain documents for of ferings of securities, tender offers, and other transactions, fee collections rise or fall with the level of such activity. In recent years, the Commission has been a net contributor to the U.S. Treasury, and it anticipates that it will remain so during the coming year. In fiscal year 1992, the Commission generated a total surplus of $180.39 million for the General Fund of the Treasury. The Commission estimates that in fiscal year 1993, total fee collections will be $440 million, generating a $187 million surplus above its funding of $253 million.78 These numbers do not include civil penalties, which were $221 million in fiscal year 1992, or disgorgement of wrongful profits to investors.79 Aggregate fees collected by the Commission are obviously dependent upon the fee rates established under the federal securities laws, as well as upon the level of fee-generating activity. In recent years, the registration fee rate under Section 6(b) of the Securities Act has been increased by Congress, creating an additional surplus for the General Fund, available for disbursement to fund a variety of federal spending programs. This fee has risen without reference 76 OMB Circular A-130 at 9. 77 Commission fee revenue has four sources: (1) registrations of securities (pursuant to Section 6(b) of the Securities Act); (2) securities transactions (pursuant to Section 31 of the Exchange Act); (3) tender offer and merger filings (pursuant to Section 13(e) of the Exchange Act); and (4) proxy filings (pursuant to Section 14(g) of the Exchange Act). Of these components, the Section 6(b) fees have been the most volatile. As originally enacted, the provision provided that an applicant filing a registration statement must pay a fee of 1/50 of one percent of the maximum offering price of the securities, with a minimum fee of $100. Pursuant to a series of appropriation acts, this fee was raised to 1/40 of one percent in 1990 and 1991 and to 1/32 of one percent in 1992 and 1993. The current Administration proposal is to increase it yet again to 1/24 of one percent. See infra note 79. 78 Schapiro testimony, written statement at 21. See also, Breeden testimony, written statement at 2. 79 Breeden testimony, written statement at 2. to the impact any such continuing rise may have on the cost of capital over time and without reference to any reasonable relationship between the fees collected and the services and regulation provided by the Commission in its securities registration process.80 FULL-COST RECOVERY The Commission is a net contributor to the Federal Treasury well above its appropriated budget. (See chart following showing fee collections as percentage of funding.) The fees collected by the Commission go to the Treasury as general revenues. The Commission gets no use of or credit for these monies. This imbalance has only worsened over time. The problem was clearly laid out in a Floor colloquy between Representative Rinaldo of this Committee and Representative Rogers and Smith of the House Appropriations Committee. Noted Representative Smith, Chairman of the Appropriations subcommittee responsible for Commission appropriations;81 Mr. SMITH of Iowa. Mr. Chairman, the SEC provides one So in the budget process, all the money that it costs is allo- 80 In October 1990, the Committee on Ways and Means agreed to allow the Committee on Ap propriations, as a temporary measure pending finalization of a self-funding mechanism, to increase the 6(b) registration fee to offset budget increases in the securities registration process. In order to maintain the jurisdictional distinction between fees and taxes, the Committees included in the record a statement of the services of the Commission included in the securities registration process which the fee would cover, as well as a statement of the Commission activities and services not a part of the securities registration process and not covered by the 6(b) fee increases. See Congressional Record at H13481-2 (October 24, 1990). The President's budget for fiscal year 1994 requests an additional increase in Section 6(b) fees from one thirty-second of one percent (.00031250) to one twenty-fourth of one percent (.0004166667). While actual receipts cannot be predicted with accuracy, since they are dependent on the level of registered offerings, based on the level of such offerings during the first quarter of fiscal year 1993, the fee increase would generate an additional $142 million in revenue. See Breeden testimony, written statement at 2-3. The Committee opposes continued increases of this fee in this manner. See discussion under Full-Cost Recovery infra. 81 See Congressional Record at H4311-12 (June 15, 1988). See also Letter from the bipartisan leadership of the House Committee on Energy and Commerce to the Senate Committee on Appropriations (June 20, 1988) ("We are not suggesting that the Commission should be funded at the expense of deficit reduction. In the case of the SEC, the choice between adequate resources and deficit reduction is not necessary. To insulate the Commission's vital function from shifting budgetary goals, Congress authorized it to collect fees. As a result, the SEC is a net contributor to the Federal Treasury well above its appropriated budget. In fiscal 1987, the fifth consecutive year where revenues collected exceeded the agency's annual appropriation, the Commission collected $278.4 million for deposit into the general fund of the United States Treasury. Its budget was a mere $135 million.") SECURITIES AND EXCHANGE COMMISSION-SOURCES AND AMOUNTS OF FEE COLLECTIONS, 11933 Act Registration Fees through 1989 were collected at a rate of so of 1 percent; in 1990 and 1991 at a rate of 0 of 1 percent; in 1992 and 1993 at a rate of 52 of 1 percent; and in 1994 at a proposed rate of 24 of 1 percent. 2 Public Law 98-38 transferred direct regulation of all broker-dealers to self-regulatory organizations. Prior to this law, the SEC collected registration fees from broker-dealers which totaled $431,187 in 1980; $634,460 in 1981; $465,939 in 1982; $389,383 in 1983; and $423,098 in 1984. These amounts are included in the total fee collections. 3Of the $321 million in registration fees reported for 1992, $6.4 million is pending final classification by filing type. In Senate Report 100-105 (100th Cong., 1st Sess.), the Securities Subcommittee of the Senate Committee on Banking, Housing and Urban Affairs directed the Commission to study the possibility of transforming the agency to self-funded status. The Subcommittee's request was prompted by extensive testimony that the Commission lacked sufficient overall resources and faced difficulty in recruiting and retaining the top quality staff necessary for effective regulation of the securities markets and enforcement of the federal securities laws. A study, prepared by the Office of the Executive Director of the Commission in December 1988, examined the issues in detail and offered specific proposals.82 The Committee therefore approved an amendment providing a mechanism for full cost recovery of Commission expenses from the fees that the agency collects. The amendment establishes a system for the annual adjustment of fees collected by the Commission so that the total amount appropriated to the Commission for any fiscal year will be offset by the amount collected during that fiscal year. This will secure the funding of the agency. The amendment further requires that these fees continue to collect general revenues (the surplus over offsetting collections) during each of the fiscal years 1994 through 1998. Finally, the amendment requires the Commission to conduct a study of the structure and procedures for the collection of fees by the Commission under the amendment, and to report to Congress in March 1995 its recommendations, if any, for changes. Similar legislation was reported by this Committee in July 1989 and included in H.R. 3299, the Omnibus Budget Reconciliation Act. However, the conference agreement dropped the Commission-related provisions due to invocation of Senate procedural rules. Similar 82 See U.S. Securities and Exchange Commission "Self-Funding Study" (January 1989) and accompanying "Legislative Proposals and Fee Options" (January 1989). legislation was also reported by this Committee in 1990 as part of H.R. 1396, the Securities Acts Amendments. However, the Committee on Ways and Means objected to Floor consideration for jurisdictional reasons. The legislation as amended is the result of several years of bipartisan negotiations between the staffs of the Committees on Energy and Commerce, Appropriations, Budget, and Ways and Means, as well as the Congressional Budget Office (CBO) and the OMB. The Committee on Government Operations also was consulted. The legislation has been crafted to be pay-go scorecard neutral for this Committee and Appropriations, and to have no negative deficit impact during the relevant fiscal years (see Section 31A(g)). It also generally follows certain principles negotiated between this Committee and the Committee on Ways and Means and enunciated as general guidance by the Speaker in a statement in January 1991 regarding the jurisdiction of House committees with respect to user fees, regulatory fees, and revenue measures. For a more detailed explanation, see this Report's Section-BySection Analysis. CONCLUSION The Commission must discharge responsibilities that have grown in their urgency and complexity. Historically, resources have failed to keep pace with the regulatory and oversight obligations of the agency. In order to provide the Commission with more adequate funding and the ability to maintain that funding over time, the Committee has concluded that a full-cost recovery mechanism is necessary and appropriate. HEARINGS The Committee's Subcommittee on Telecommunications and Finance held one day of hearings on the reauthorization of the Securities and Exchange Commission. Testimony was received from Mary L. Schapiro, Acting Chairman, U.S. Securities and Exchange Commission, as well as Commissioners Richard Y. Roberts and J. Carter Beese, Jr. COMMITTEE CONSIDERATION On May 27, 1993, the Subcommittee on Telecommunications and Finance met in open session and ordered reported H.R. 2239 by a voice vote, a quorum being present. On June 29, 1993, the Committee met in open session and ordered reported the bill H.R. 2239 with amendment by voice vote, a quorum being present. COMMITTEE OVERSIGHT FINDINGS Pursuant to clause 2(1)(3)(A) of rule XI of the Rules of the House of Representatives, the Subcommittee held oversight hearings and made findings that are reflected in the legislative report. COMMITTEE ON GOVERNMENT OPERATIONS Pursuant to clause 2(1)(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 Operations. COMMITTEE COST ESTIMATE In compliance with clause 7(a) of rule XIII of the Rules of the House of Representatives, the Committee believes that implementation of H.R. 2239 will have no significant net cost to the federal government within the current budget window. CONGRESSIONAL BUDGET OFFICE ESTIMATE Hon. JOHN D. DINGELL, U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE. Chairman, Committee on Energy and Commerce, House of Representatives, Washington DC. DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the attached cost estimate for H.R. 2239, the Securities and Exchange Commission Act of 1993. Enactment of H.R. 2239 would affect governmental receipts, and thus the bill would be subject to pay-as-you-go procedures under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985. If you wish further details on this estimate, we will be pleased to provide them. Sincerely, ROBERT D. REISCHAUER, Director. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE 1. Bill number: H.R. 2239. 2. Bill title: The Securities and Exchange Commission Authorization Act of 1993. 3. Bill status: As ordered reported by the House Committee on Energy and Commerce on June 29, 1993. 4. Bill purpose: H.R. 2239 would authorize the appropriation of $281.9 million for 1994 and $317.7 million for 1995 to the Securities and Exchange Commission (SEC). The bill would require the SEC to adjust its fees each year so that the amounts collected would equal the amount appropriated to the SEC in that year plus an additional amount specified in this bill. Fees collected, up to the amount of the SEC appropriation, would be deposited as offsetting collections to the appropriation account. The remaining collections would be deposited in the Treasury and would be classified as governmental receipts. These changes would shift some receipts from the revenue side of the budget to the outlay side, and would make the amounts collected each year dependent on the amount of that year's appropriation. |