August 2, 1993
TO: BOARD OF GOVERNORS NO. 67-93
MEMBERS - ONE PER COMPLEX NO. 50-93
RE: SEC CHAIRMAN AND INSTITUTE TESTIFY AT SENATE HEARING ON SEC
FUNDING
__________________________________________________________
On July 29, the Subcommittee on Securities of the Senate Committee on
Banking, Housing and Urban Affairs held a hearing on the Securities and Exchange
Commission's authorization request for fiscal years 1994-1995. SEC Chairman
Arthur Levitt, accompanied by Commissioners Schapiro, Roberts and Beese,
testified. Robert C. Pozen, General Counsel and Managing Director of FMR
Corporation, testified on behalf of the Institute.
SEC Testimony
Chairman Levitt testified that increased funding for the SEC is necessary
to (1) protect investors, (2) maintain the integrity and honesty of U.S. capital
markets, (3) ensure that there is a reasonable and cost-efficient regulatory
structure so that the U.S. marketplace remains attractive for global capital
formation, and (4) continue and expand the SEC's efforts to encourage and
stimulate capital formation, particularly by small businesses.
Chairman Levitt also stated that additional funding is needed for
inspections of investment companies. He stated that "[a] growing number of new
fund complexes, including many that recently have been organized by banks, have
not been inspected, except for their money market funds."
In addition, Chairman Levitt expressed support for S. 423, the "Investment
Adviser Oversight Act of 1993", which would provide the SEC with additional
resources through the imposition of an annual fee on investment advisers based
on assets under management.
Finally, Chairman Levitt testified that "the best way to make certain that
the Commission's resources are adequate to ensure investor protection is through
a full cost recovery mechanism -- in other words, self funding."
Institute Testimony
In its testimony, the Institute stressed the need for increased funding for
the SEC and, in particular, the Division of Investment Management. The Institute
stated that, "An examination of the growth rate of the mutual fund industry, as
compared to the growth of the Commission's resources devoted to regulation of the
industry, illustrates the need for increased funding to assure the Commission's
continued ability to provide effective oversight of the industry in the years
ahead."
The Institute also noted that the gap between the size of the investment
company industry and SEC resources available to regulate it threatens to grow
despite the fact that investment companies pay substantial registration fees to
the SEC. Therefore, the Institute expressed support for legislation that would
allow the SEC to become "self-funded" -- to use revenue generated from
registration fees to regulate the entities paying those fees.
The Institute also testified that additional resources are needed to
improve the SEC's oversight of investment advisers. In this regard, the
Institute expressed support for S. 423.
* * * *
Other witnesses at the hearing were Benjamin Vandergrift, partner at
Pillsbury, Madison & Sutro, who serves as Chair of the Subcommittee on SEC
Administration, Budget and Legislation of the Federal Regulation of Securities
Committee of the American Bar Association, and Sarah Teslik, Executive Director
of the Council of Institutional Investors.
A copy of Chairman Levitt's and the Institute's testimony is attached.
Amy B.R. Lancellotta
Associate Counsel
Attachments