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May 31, 2001

Fee Reform Still on Track, Lawmakers Claim

By Gregory Bresiger

Traders have been burned in Congress on two previous occasions by friendly lawmakers who couldn't deliver the goods and reduce a securities tax. Is it going to happen again?

That's what some might have been wondering after the Security Traders Association's recent Congressional conference in Washington, where industry executives had been hoping to announce their top legislative priority - the reduction of Section 31 fees - had passed Congress and was headed to President Bush.

However, two bills, which have bi-partisan support this time, had become bogged down in partisan bickering over other issues as several lawmakers explained.

Salary Raises

"Unhappily both of these agreements have blown up to some degree because of differences that arose recently," said Sen. Kent Conrad (D-ND). The bills are slightly different -- one has salary raises for SEC officials and the other doesn't -- and may have to go to a conference committee. That could mean Section 31 would become tangled up in other, more difficult issues, which do not have bi-partisan support.

Some Congressional observers have speculated that the Section 31 bills -- one version of which easily passed in the Senate -- could face a much more difficult time if they go to committee, where many other bills would be debated.

The bills pending in Congress would reform the schedule of fees on stock sales, effectively reducing fees.

These fees, industry lobbyists argue, have become so large that they have become de facto taxes, generating a two billion dollar yearly windfall for the Securities and Exchange Commission, which is only supposed to collect what is needed to run the commission.

There has been little or no overt opposition to the Section 31 reduction. The industry has made the case that most people today own stocks in America so almost everyone would benefit.

President Bush, unlike his predecessor, would sign Section 31 reforms into law. But will one of these bills reach the president?

"This will take us a little time, but we'll get it done," said Representative Richard Baker (R-LA). "You'll see some action on this. It will just take a little longer than we thought," said Senator Mike Enzi, (R-WY).

Baker, Enzi and Conrad were part of a bevy of lawmakers who said the recent Section 31 problems were temporary and that the STA would see its favored bill signed into law this year.

"We're currently at an impasse, but I expect we'll get it done sometime this year and not in the too distant future," said

Senator Phil Gramm (R-Texas), the chairman of the Senate Banking Committee.

"You have my word that we will try to get this thing done as soon as possible," said Representative Vito Fossella, (R-NY).

Now or Never

STA officials said they were reassured and still expect this session of Congress will not end as the two previous sessions: with Section 31 reforms dead.

"I absolutely believe it's going to happen this time," said STA President Lee Korins, who was about to have dinner with the Speaker of the U.S. House of Representatives in mid-May.

"And I believe it will likely happen in the next two to three weeks," he added.