"THE SEC AT 60"
                REMARKS BY CHAIRMAN ARTHUR LEVITT
        UNITED STATES SECURITIES AND EXCHANGE COMMISSION
          NATIONAL LEGAL CENTER FOR THE PUBLIC INTEREST
                    GENERAL COUNSEL BRIEFING
                        WASHINGTON, D.C.
                         MARCH 29, 1995

     It's good to be here today for this general counsel
briefing.  Although I'm not a lawyer, I do work in Washington,
where -- as Justice Sandra Day O'Connor once said -- there may
actually be more lawyers than people.  So I've grown fairly
comfortable speaking before groups of lawyers.

     This briefing comes at an opportune time.  The Securities
and Exchange Commission just celebrated its 60th anniversary, and
anniversaries are a time for taking stock:  What have we achieved
in threescore years?  Where are we headed?

     Scholars often disagree about the causes of the Great
Depression -- but they rarely disagree about the marketplace
anarchy that preceded it.

     Shareholders signed over proxies to management to vote on
questions in which they had huge conflicts of interest --
unbeknownst to shareholders.

     Cash was paid to reporters at The New York Times and The
Wall Street Journal to plant false information on companies and
false tips on stocks.

     Investors were sold securities without benefit of a
prospectus or offering circular; without ever seeing a balance
sheet; without knowing the first thing about a company beyond its
name and share price.

     In the dark days of depression that followed, people cast
about desperately for solutions.  One United States Senator even
proposed that all short sellers be imprisoned -- which may not be
such a bad idea, when you come to think of it...

     Sixty years later, the American securities industry is in
good order.  In 1934, businesses raised $641 million in our
capital markets; in 1984, $126.8 billion; and last year, that
figure broke a trillion dollars.  Total turnover on our stock
market was $3.5 trillion -- the next largest market, Japan, had
less than $1 trillion.  

     That's a very attractive marketplace for companies searching
for capital.  What is behind that tremendous vote of confidence
by investors?  I'm obviously biased, but I believe that our
system of securities regulation has something to do with it.  By
recognizing investor interests as supreme, the SEC plays a key
role in making our markets attractive to all who benefit from
them.

     One of my predecessors, later Supreme Court Justice, William
O. Douglas described our special role in this way:  "We've got
brokers' advocates; we've got exchange advocates; we've got
investment banker advocates; and we are the INVESTOR'S advocate."

     When I arrived at the SEC almost two years ago, I outlined
four key objectives that would help us fulfill our role as the
investor's advocate: reforming our municipal debt market; raising
professional standards among brokers; enhancing investor
protections; and internationalizing our markets. 

     I'll spend most of this talk giving you a progress report on
those initiatives.  But let me begin with a few words about the
philosophy that UNDERLIES our agenda.  

     I came to the Commission after a long career in business, in
most of it in the industry I now regulate.  That experience has
inevitably shaped my views and priorities.

     It is the premise of this Commission that the securities
industry has flourished in a self-regulatory environment, in
which the SEC effectively works to maintain public confidence in
the markets.  The Commission has a reponsibility to respect the
awesome power of the free market, and, whenever possible, to use
market solutions, such as disclosure, to solve market problems.  

     Regulation can be a blunt instrument, with unintended
consequences.  Wall Street is a free market, and we prefer to use
market forces.  

     We'll regulate where warranted -- but it's my strong belief
that a call for legislation or rulemaking should be only a last
resort to the kinds of consensus actions that have characterized
our approach to the industry.

     Our work in the municipal debt market typifies that
approach.  In my years in the securities industry, I found myself
attending too many fundraisers for candidates I didn't know
seeking office in places I didn't live.  When I came to the
Commission, we asked the industry about ways to sever the tie
between political contributions and the awarding of bond
business.  The result was a voluntary ban on political
contributions, later codified by the industry's self-regulating
body, the Municipal Securities Rulemaking Board.  

     We're now at the next stage of that initiative:  how to
prevent lawyers and lobbyists from acting as surrogates for firms
and making contributions on their behalf.  We raised the issue
with the industry, and already, the Association of the Bar of the
City of New York, under the leadership of Cyrus Vance, has
stepped forward with a voluntary plan to discourage the practice
among its members.  In the months ahead, we'll continue to ask
issuers, firms, and potential surrogates alike to address this
issue and obviate the need for SEC action.

     We have two other overriding goals in the municipal market:
ensuring that issuers provide important information about their
financial status on a continuing basis, and making municipal bond
prices and mark-ups more transparent.  In these cases, too, we're
working with the industry to meet our goals.

     The municipal market is not the only site of unacceptable
practices.  The SEC is moving on several fronts to raise
professional standards in the brokerage industry.  A joint study
we did with the exchanges in 1994 focused on the problem brokers
in the country's largest firms.  A number of these examinations
resulted in referrals to enforcement.  For us, this was a call to
arms.  

     We've increased examinations of and sanctions against
problem brokers, and we have already begun a second sweep of the
industry.  But we also recognize that the best time to fight
fraud is before it begins, and so we've worked with the industry
to develop the first-ever continuing education program for
brokers, which we announced just last month; and we've encouraged
the industry to consider methods of broker compensation, and
whether some of them actually encourage poor sales practices.

     These measures are specifically targeted to protect
individual investors, who own roughly half of American
securities.  Many of these investors entered the market through
mutual funds, which have grown enormously in popularity.  In
1980, one out of sixteen American households owned mutual funds;
today, it's one out of four.  

     But during those same years, funds have become far more
complex.  The number and types of funds have proliferated, as has
the use of increasingly complex and sometimes risky instruments,
including derivatives.

     That's why we're working to ensure that mutual fund
prospectuses are not only comprehensive, but comprehensible. 
George Orwell blamed the demise of the English language on
politics; he obviously never read a prospectus.  

     The law of unintended results has come into play:  The SEC's
passion for full disclosure has created fact-bloated reports, and
prospectuses that are more redundant than revealing.  So we're
now taking a different tack:  We've asked funds to pilot a
"Profile prospectus," which includes a concise summary of key
information in plain English.

     We're exploring ways to provide investors with better tools
for understanding a fund's risk level -- just yesterday, we
issued a public request for comments on ways to better convey
risks in prospectuses.  At the same time, we're monitoring the
industry's attempts to govern certain investment company
practices, including personal trading by fund managers.

     Through the steps I've outlined thus far, we're asking the
securities industry to improve the American marketplace.  But
we'd be remiss if we didn't ask investors, and the Commission
itself, to do THEIR part as well.  And so we're reaching out to
educate and inform individual investors as never before.  I know
from my own experience as a broker and manager that there's only
one voice that has a stronger impact on the industry than
government, and that's the CUSTOMER.  

     For the first time, the Commission has been taking its case
directly to investors through brochures, speeches, television and
radio; we've even instituted our own electronic bulletin board
accessible through the Internet.  Our mission is not to see that
investors win or lose the game, but rather to help them
understand the rules, and to ensure that the field on which they
play is fair.  

     At the SEC we've also undertaken some introspective programs
to ensure that WE'RE doing our job as best we can.  We've
streamlined the reporting structures of our regional offices, and
even eliminated one, to most efficiently allocate our limited
resources.  Just last week, we consolidated our inspections
functions into one office.

     Most importantly, we're working to remove impediments to the
capital formation process.  I've asked our newest Commissioner,
Steve Wallman, to lead an Advisory Committee on Capital Formation
and Regulatory Processes.  Over the next six months, the
Committee will undertake a review of SEC rules and recommend
remedies if any are found to impose an undue burden on America's
public companies.

     Although the initiatives I've discussed thus far are
domestic, they have the effect of making our capital markets more
attractive to foreign companies.  Indeed, while cross-border
listings in other major markets have either hit a plateau or even
declined in recent years, foreign issuer participation in the
U.S. markets has grown dramatically in the 1990s -- more than 430
foreign companies entered the U.S. public market for the first
time, bringing the total number of foreign listings to 662.

     We're working to make our markets more accessible than ever
before.  We've simplified paperwork and reduced costs for ALL
issuers, foreign and domestic, large and small, who seek to raise
capital in American markets.  Our goal is not to lower U.S.
standards, but to establish high INTERNATIONAL standards.  And
with every company we persuade to list here, we're increasing the
investment choices available to American investors.

     The internationalization process means that the Commission
is paying much more attention to geography.  We all know that
two-thirds of the world is covered by water.  But it was only
recently that I learned that the remaining third is covered by
the Plaintiff's Bar.

     A new Congress is in session, and it is committed to
reforming not only private rights of action in litigation, but
also the Glass-Steagall barriers between commercial and
investment banking.  We feel these areas are ripe for reform, but
that investor protection and market stability must not be
compromised.

     The Commission has traditionally held that private rights of
action are fundamental to the success of our securities markets;
that they are an essential complement to the SEC's enforcement
program; and that they play a huge role in helping to ensure full
and complete disclosure by companies seeking to tap the resources
of our nation's investors.

     At the same time, it is clear that there are abuses in the
system, and that it could serve our markets, our investors, and
indeed our nation far better than it does.  Unfortunately, the
debate has been so injected with ideology, and so radicalized,
that most conversations about it tend to exceed FCC-recommended
decibel levels.  

     I learned this in January of 1994, when I first tried to
call attention to some of these problems.  A blizzard of letters
descended on my office, some favoring my canonization, the vast
majority calling for my immediate resignation.  The words
"litigation reform" evoke the kind of passion usually reserved
for politics, religion, football, and stock option accounting.  

     The questions raised in the debate over litigation reform
are difficult ones for the Commission, because there are
investors on BOTH sides.  On the one hand, we want to preserve
the legitimate rights of investors to seek redress when they are
defrauded or otherwise injured.  On the other hand, we must also
be sure to protect companies and their investors from the
draining costs of frivolous litigation.

     We will continue to participate in the legislative process
and debate.  But let's not forget that there are other avenues
besides legislation through which meaningful improvement to the
existing system can be achieved.

     The SEC is already in the process of examining its existing
safe harbor for the disclosure of forward-looking information, an
action that could have significant impact on litigation
practices.  The question is how to provide real protection to
issuers without sacrificing protection of investors.  We issued a
concept release in October, and we're now studying the comments
we received at our recent public hearings on the issue.  We hope
to announce our proposals fairly soon.

     At the same time, we've begun to file AMICUS briefs in
support of motions to dismiss.  We've also created a Litigation
Analysis Unit in the Office of the General Counsel, to evaluate
the claims and the legal support for private cases, and where
appropriate, to provide our views to investors, corporations,
lawyers, and judges.  

     The other major piece of securities-related legislation
being contemplated by Congress is financial services reform. 
Some 60 years ago, the Glass-Steagall Act tore down the bridge
between commercial and investment banking.  And because banks
were barred from most securities activities, it was logical also
to exclude them from the federal securities laws.

     That logic no longer applies.  Expansive banking agency
interpretations over the years have given banks a beachhead in
securities terrain.  What's needed, we believe, is a system of
functional regulation in which all SECURITIES activities are
overseen by an expert SECURITIES regulator, whether they occur in
bank affiliates or traditional brokerage firms; and all BANKING
activities are overseen by an expert BANK regulator, whether they
take place in a traditional bank or an affiliate of a brokerage
firm.  

     This raises the specter of turf wars among financial
regulators.  But we've got to start worrying less about turf, and
more about common ground.  It's the SEC's position that, in
contrast with the current medieval system of realms, domains, and
fiefdoms, each with its own lord and laws, we need a system that
follows the logic of our markets, organizes activities according
to function, and can grow with those markets, instead of being
shed every so often like an old skin.  

     I've raised many issues with you today, perhaps too many. 
But our markets are racing forward, and Congress is moving
towards some fundamental changes.  

     We have the most successful capitalist system in history,
and the market has reached unprecedented heights.  Change can be
disruptive under those circumstances.  But we became pre-eminent
as a nation not by RESISTING change, but by EMBRACING it.

     Change has always been the hallmark of our markets, and the
SEC has succeeded by recognizing that fact and responding to it. 
The Commission would rather look ahead than behind; when faced
with the prospect of change, we would rather be its catalyst than
its victim.  And so, despite the uncertainties ahead, there is
one thing of which you CAN be sure -- that the SEC will be as
vigilant, as responsive, and as effective in guarding U.S.
markets in the NEXT sixty years as it has in the LAST sixty.

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