The Honorable Arthur Levitt, Jr.
Chairman
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

The Honorable Jacob J. Lew
Director
Office of Management and Budget
Old Executive Office Building
17th Street and Pennsylvania Ave., N.W.
Washington, D.C. 20503

Dear Chairman Levitt and Director Lew:

I am writing to request your analysis and comment on H.R. 4213, the Savings and Investment Relief Act of 1998, which was introduced on July 14, 1998, and referred to the Committee on Commerce. There have been no hearings on this bill. Chairman Bliley has promised to process this legislation early in the next Congress but, as reported recently in the Wall Street Journal (see "Law Firm May Reap Bonanza From Trading-Fee Cuts," Tuesday, Sept. 29, 1998, at A24), the proponents have funded a massive effort to bypass the Commerce Committee and the usual regular order to enact this bill in the waning days of this Congress.

Pursuant to its mandate, the Commission collects fee revenue from 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). These fees go to the Treasury as general revenues. They are not related to the agency's operating costs but rather the amount of fees collected is highly volatile, being directly related only to the levels of market activity. In recent years, this has made the Commission a significant net contributor to the Treasury. Twice the House passed legislation that I sponsored to provide a mechanism for full cost recovery of Commission expenses from the fees that the agency collects and to establish a system for the annual downward adjustment of all fee levels, consistent with operative budget laws, to bear a more reasonable relationship to the services and regulation provided as reflected in the agency's annual appropriation. Twice that legislation died in the Senate. If that legislation had been enacted, we would not be having this discussion.

The National Securities Markets Improvement Act of 1996 for the first-time made the longstanding Section 31 fee collected by exchanges also applicable to Nasdaq's dealer-based trading market. The dealers are now seeking this special interest legislation to cap the Section 31 fee. No one else will get any relief on their fees.

I have been asked to cosponsor H.R. 4213. Accordingly, I am transmitting a copy of the bill and accompanying Congressional Budget Office estimate, along with background materials, and request your response by close of business on Tuesday, October 6, 1998, regarding the validity of CBO's analysis and conclusions, the immediate and long-term effects on the Commission's budget, the integrity and equity of the funding structure, and any other issues you deem relevant.

Thank you for your cooperation and attention to this matter.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER

Enclosures

cc: The Honorable Tom Bliley
The Honorable Michael G. Oxley
The Honorable Thomas J. Manton

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