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March 1, 2001

Gramm Wants to Review Securities Laws

By William Hoffman

Senate Banking Committee Chairman Phil Gramm (R-Texas) has decided the time is finally right for a top-to-bottom review of the nation's securities laws.

"Over the years, the markets have changed dramatically, and we need to go back and look at our laws and our regulations," Gramm said in a statement.

"We need to pose the following question: Are the benefits we get from this regulation or this law greater than, equal to, or less than the cost they impose on the market? And if they're less, we ought to look at changing them or getting rid of them," the chairman said.

The committee had not scheduled hearings, named witnesses or announced any goals for the review by presstime.

Old Desire

Gramm has long wanted a complete review of securities laws, going all the way back to the Securities Act of 1933 and the Securities Exchange Act of 1934.

The Securities Industry Association agrees. "It's something that's long overdue," said SIA spokesman Dan Michaelis. The spread and development of technology, increased investor participation, and globalization have radically altered the way stocks are traded. "I don't think any of these things could have been foreseen in 1933 and 1934, when the bulk of these laws were put into place," Michaelis said.

Michaelis said the SIA would like the Banking Committee to consider, among other matters, whether current requirements that brokers deliver hard-copy stock prospectuses before transacting certain business still makes sense in an era in which electronic delivery is widely available, instantaneous and free. Electronic delivery would help the securities industry in its effort to compress the transaction cycle from the current three days to one by 2004.

A spokesperson for Sen. Charles Schumer (D-N.Y.), a member on the Banking, Housing and Urban Affairs Committee, said the senator supported the top-to-bottom review. Schumer is co-sponsor with Gramm of S. 143, a bill to limit Section 31 fee collections and raise the pay of Securities and Exchange Commission employees.

However, Schumer's spokes-person added that the senator would look skeptically on efforts to repeal elements of the 1933 and 1934 acts, or anything that might undermine the national market system established by Congress in 1975. But the spokesperson emphasized that, with no goals set, no one knows what if any results the review might produce.

Rep. Vito Fossella (R-N.Y.) might offer some insights of his own from his seat on the new House Financial Services Committee. Last session, at the request of GOP House leaders, Fossella met with securities industry leaders to discuss reforms.

"The feeling was that we had made good progress on it last year, and if some kind of effort was undertaken [Fossella] probably would like to take a role in it," said Fossella spokesman Craig Donner. For the time being, though, Fossella has his hands full preparing his own (soon to be introduced) Section 31 fee reduction bill, and getting the new committee organized.