NCPA - National Center for Policy Analysis

Excessive Fees On Securities Transactions

February 18, 2000

To fund the operations of the Securities and Exchange Commission, investors pay fees amounting to 1/300 of 1 percent of the value of their transactions. Last year, the fees collected amounted to four times the commission's operating costs.

The excess was dumped in the Treasury -- to be drawn on for non-securities-related programs which could range from farm subsidies to subsidies for arts projects. Critics say it is only fair and honest that the fees be reduced to bring them in line with the SEC's actual needs.

  • The fees brought in $1.6 billion -- amounting to an overcharge to investors of $1.2 billion.
  • While the fees are scheduled to fall to 1/800 of 1 percent in fiscal 2007, critics say that is too long to wait before reforms are made.
  • Accordingly, Reps. Rick Lazio (R-N.Y.) and Edolphus Towns (D-N.Y.) have introduced legislation that would cut the fees by 40 percent -- or to 1/500 of 1 percent on all transactions.
  • Reps. Vito Fossella (R-N.Y.) and Robert Menendez (D-N.J.) have a bill that caps the fees so as not to exceed the SEC budget.

Both bills have bipartisan support, observers say.

In fact, SEC Chairman Arthur Levitt has stated in testimony before a Senate Banking subcommittee that he favors cutting the fees -- and is willing to consider a cap.

Source: Editorial, "A Tax Cut for Investors," Investor's Business Daily, February 18, 2000.


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