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Thu, May 4, 2000
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SEC Chairman Supports Lower Stock Trading Fees
By Dunstan Prial   Associated Press
NEW YORK — Securities regulators and Wall Street officials are lining up to support proposed legislation that would dramatically reduce stock trading transaction fees charged to investors.

The proposed bill, which would also slash registration fees paid by companies planning to issue stock, as well as charges related to mergers and tender offers, is designed to bring fees collected by the SEC more in line with the agency's budget.

Under the current fee system, the SEC collects about five times more than its annual budget. The agency raked in $1.7 billion in fees in 1999. It's budget, meanwhile, came to just $339 million.

The surplus emerged and grew in the 1990s as stock trading volume increased, in part due to an explosion in online trading by individual investors. The extra money goes to the U.S. Treasury Department and is then distributed to other government programs.

"The proposed legislation you are considering today achieves meaningful reductions in fee rates in a comprehensive manner," Securities and Exchange Commission Chairman Arthur Levitt told members of the Senate Banking Committee, which held hearings Monday at the SEC's field office in Manhattan.

The bill under consideration would alter the fee structure so the agency would collect fees totaling just twice the agency's annual budget.

Sen. Phil Gramm, R-Texas, chairman of the Banking Committee, said the only hurdle facing the bill is convincing voters and their Congressional representatives that the legislation benefits small investors as well as large Wall Street trading firms.

"This is basically a working person issue," Gramm said.

Investors stand to save $7 billion over five years if stock trading transaction fees are reduced in accordance with the proposed legislation, titled the Competitive Market Supervision Act, Gramm said.

Those savings could be plowed into mutual funds and retirement plans, Gramm said.

Levitt, in answer to a question from Sen. Rod Grams, R-Minn., said individual investors pay 87 percent of the transaction fees assessed for trading New York Stock Exchange stocks, and 82 percent of the fees for trading Nasdaq stocks.

Levitt added, however, that he feared some politicians might "demagogue" the bill by labeling it a tax break for wealthy Wall Street firms.

J. Patrick Campbell, chief operating officer of the Nasdaq market, was one of several Wall Street officials who testified in favor of the bill.

The fees, Campbell said, "comprise a tax because they are charged in excess of the governmental purpose for which they were enacted. The excess collections should be returned to investors to employ toward the continued growth of the economy."

Officials from the New York Stock Exchange and three Wall Street trade organizations — the Securities Industry Association, the Securities Traders Association and the Specialists Association — also testified in support of the bill.

Levitt used the hearing to plead his case for additional funding to hire and retain qualified SEC staffers. The agency has requested a 12 percent budget increase over 1999. Part of the money will pay for 50 additional employees.

The SEC chairman has complained that the SEC is losing top employees to higher paying jobs in the private sector.

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