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Statement of the
Investment Company Institute
On S. 143
The "Competitive Market Supervision Act of 2001"
Submitted to the Committee on Banking
February 14, 2001
The Investment Company Institute1 appreciates the opportunity to submit testimony to the Committee in strong support of S. 143, the "Competitive Market Supervision Act of 2001." The Institute would like to commend Chairman Gramm, Senator Schumer, and the other members of the Committee for their continuing efforts to facilitate staff retention by the SEC and better align the fees imposed under the federal securities laws with the costs incurred by the Securities and Exchange Commission (SEC) in implementing and enforcing such laws.
Mutual funds are an integral part of the U.S. economy and have become one of America's primary savings and investment vehicles. More than 88 million investors in over 50.6 million U.S. households own mutual fund shares today. Since 1990, the percentage of U.S. retirement assets held in mutual funds has more than tripled to $2.4 trillion. Moreover, most mutual fund investors are ordinary Americans; the median household income of fund shareholders is $55,000.
The Institute has always supported, and will continue to support, providing the federal government with adequate financial resources to ensure effective regulatory oversight of mutual funds. We believe, however, that fees charged under the federal securities laws should be reflective of their intended purpose to offset the costs associated with activities of the SEC. The Institute remains concerned that, in the absence of legislation such as S. 143, SEC fees will generate revenues significantly in excess of those required to fund SEC operations. Indeed, we note that while the SEC's budget for the current fiscal year is $422 million, it will collect more than $2 billion in fees. In essence this excess revenue amounts to a needless tax on investors who are saving for retirement, sending their children to college, or otherwise providing for their future. According to information provided by this Committee, the amount of this needless tax is expected to be about $8 billion over 5 years and $14 billion over 10 years. S. 143 will eliminate this needless tax on investors by reducing fees collected by the SEC to an amount commensurate with the SEC's appropriated budget.
Importantly, S. 143 is drafted to guarantee that the SEC receives 100% of the funds it needs to operate. Indeed, if fee collections fall below 100% of the SEC's appropriated budget, the legislation will permit temporary fee increases as necessary to ensure that the agency has adequate financial resources to continue effective regulatory oversight and to continue important investor protection initiatives. The Institute supports this important provision.
In addition to ensuring that the SEC is provided adequate financial resources to fulfill its regulatory responsibilities, S. 143 will better enable the SEC to maintain adequate staffing resources. The SEC has experienced a staff attrition rate nearly twice that of the overall federal government. S. 143 would enable the SEC to combat this high attrition rate of its professional staff by permitting the SEC to set employee pay levels at levels comparable to those paid by other financial regulatory agencies. This provision will enable the SEC to attract and retain qualified staff, and thus ensure its continued excellence in its regulatory oversight role.
The Institute believes S. 143 will benefit the millions of Americans invested in mutual funds and especially applauds provisions that: (1) reduce the heavy tax paid by consumers through excessive fees charged to mutual funds under the federal securities laws; and (2) reform the SEC's pay structure to enable it to attract and retain qualified staff. As such, S. 143 will better enable the SEC to fulfill its mission of protecting investors and maintaining the integrity and the efficiency of the nation's securities markets. The Institute endorses and urges the passage of S. 143 for these reasons. We appreciate your consideration of our views and look forward to working together to ensure that S. 143 becomes law during the 107th Congress.