WASHINGTON -- Securities and Exchange Commission chairman Arthur Levitt Jr. asked senators yesterday to pass stopgap legislation to assure full funding for his agency by the start of fiscal 1995.

"It's really essential that we get this done by Oct. 1 ," otherwise "we would have to begin to send notices out" to reduce staff, Levitt told members of the Senate Banking Committee at a hearing. "Even though it would be remedied" eventually, inaction now "would have a devastating impact on staff," he said.

Levitt made his plea the day after the House passed legislation authorizing the SEC to collect about $190 million in user fees to meet the agency's $306 million fiscal 1995 budget. Without the legislation, the agency would run out of money next February.

President Clinton signed a spending measure in August that gave the SEC $125 million for fiscal 1995, less than half of what the agency requested. The action came after the Senate banking panel rejected a provision that would have funded the balance of the budget with revenue from fees paid by issuers and underwriters of registered securities.

Senate committee members shared concerns of the House Ways and Means Committee, which jumped into the debate during the summer by asserting jurisdiction for the first time after years of threatening to do so.

The House committee claimed that because the level of fees collected is higher than the services provided, the levies are actually taxes rather than fees. The measure approved by the House on Tuesday was cleared first by the Ways and Means panel.

Senate Banking Committee member Lauch Faircloth, R-N.C, said yesterday that the commission "collects a lot more fees than it spends on securities law enforcement and regulations. This goes into the general fund to support the welfare state and all other things. These extra fees are nothing more than one more tax on capital."

Faircloth asked Levitt whether the securities industry would "be more competitive if we were to make the SEC a self-funding agency and not set fees any higher than the money we need to run the SEC."

Levitt responded that "it certainly would. I think it is so important to move in that direction. It relates not only to fairness in the system that we regulate, I think all of the self-regulating organizations, the brokerage firms, and America's investors feel this way."

These interests "would be served by change so that the revenues of the commission are more predictable and based upon actual services that are delivered and fees that are derived from delivering those services," Levitt said.

"We have been working with [the House] to try to find a workable path here," said Sen. Donald Riegle, D-Mich., chairman of the Senate committee. Levitt said he hoped a long-term solution can be reached next year.

The House fee measure now must clear the Senate in two parts. An appropriation of $192 million for the SEC has been added to the spending bill for the Defense Department, which is expected to easily pass the Senate.

A second measure would authorize the $192 million appropriation to be offset by the fees. This bill would be taken up after the defense appropriations bill passes, according to Kathryn Fulton, the SEC's director of legislative affairs.

The bill authorizes the commission to collect, for an additional year, the fee at its current rate of 1/29 of 1% of the maximum offering price of registered stocks and bonds.

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