"A Renewed Precedent: The Securities Bar and the SEC"

                Remarks by Chairman Arthur Levitt
        United States Securities and Exchange Commission

                    Practicing Law Institute
         29th Annual Institute on Securities Regulation

                        November 6, 1997



     Thank you.  I am honored to be here today.

     We are gathered today in the city that serves as the capital

of global finance, and in the country that serves as the world's

model for raising capital fairly, efficiently, and successfully -

- in a way that helps our economy and our people prosper.

     It is, of course, axiomatic that American capital markets

are the engine of our economy.  Today I want to reflect on an

idea that is somewhat less obvious, but in my judgment is equally

true -- the fact that lawyers play an indispensable role in

making our capital markets and our system of securities

regulation fair and strong.  And I want to take the opportunity

that has been afforded me here today to ask you to join with me

and my colleagues at the Commission in ensuring that our markets,

or laws, and our regulations remain fair and strong.

     The legal profession -- with its disciplined thinking about

the reasoned application of the laws -- plays a pivotal role in

the international securities markets.  In this era of profound

and positive change, your role, as securities lawyers, is more

vital than it has ever been.

     It's easy nowadays -- but, I hasten to add, unwise -- to

fall into the fashionable pastime of lawyer-bashing.  Sometimes

-- as my municipal bond lawyer friends are quick to remind me --

I've given in, myself,  as a non-lawyer, to the temptation to

tell a lawyer-joke or two.

Whether critical or constructive, these stones are cast because,

to be frank, the legal community is an easy target.  Even lawyers

tell lawyer jokes.

     But you know, and I know, that when people confront

difficult problems, they often turn to lawyers to solve them.

Indeed, the more insurmountable the problem, the more essential

is the advice and counsel of a skilled and experienced lawyer.

Those of us who have relied on lawyers -- and who have seen them

so often accomplish the impossible -- understand and greatly

admire the talent they demonstrate in zealously representing

their clients, while promoting justice in our society --  and in

promoting fair play in our markets.  Nothing could be more

important.

     If there's one thing I've learned during my four-plus years

at the SEC, it is the integral role played by members of the

securities bar.   You oversee the regulatory framework that

governs how our society raises capital.  The hundreds of

attorneys who work alongside me at the SEC, and the thousands of

you who practice outside the agency, are vital in maintaining the

integrity of our market system.

     Our nation's regulatory system has always relied on the

sound judgment of succeeding generations of professionals to

fulfill a vital public trust.  In our capital markets, the role

of the bar is even more important.  You are the gate-keepers for

access to investment capital.  You are the guardians of full and

fair disclosure.  And you are the most important police force for

market integrity.

     When I arrived at the SEC four years ago -- as only the

third non-lawyer to serve as Chairman -- some of you may have

worried that I would not fully appreciate your role.  If I didn't

then, I certainly do today.

     I may not have a law degree, but -- after seemingly endless

hours immersed in the subtleties of securities law -- I've

received an extraordinarily concentrated education.  Most of you

spent three years in law school, taking a variety of subjects,

one or two of which may have focused on securities law.  At the

SEC, I've been getting four years of "on the job training" in

just one subject:  the operation and regulation of the world's

pre-eminent securities marketplace.

     I'm here today to ask you to renew the critically important

ties that bind together the securities bar and the Commission.

In turn, I want to assure you that -- in our partnership -- you

can expect, from us, an openness on the many policy debates that

lie ahead.

     We have a lot to learn from each other.  As market

participants and as regulators, we must always adapt to the

constant changes of the marketplace.

     Today, I'm pleased to announce an initiative that will help

strengthen our partnership.  The SEC intends to convene a series

of roundtable discussions -- starting with the topics of advanced

technology and its impact on our regulation of the securities

markets;  the needs of end-users of information in an electronic

age;  and finding avenues to improve capital formation -- that

will bring together representatives from industry, the corporate

community, and the legal profession.

     Such a partnership is especially important today, as we try

to adapt to the accelerating pace of social, economic, and

technological change.  We remain guided by enduring principles --

yet we need new ideas to fulfill those old ideals.

     None of this is easy, as you all know.  In an adversary

system, where part of your obligation is the zealous

representation of your client's interests, it is common for the

SEC and members of the bar to clash sometimes.  But our common

obligation to the public interest is far more significant and

substantial.

     Our approach to regulating the capital markets has been,

since the 1930s, shaped by a consistent set of  principles --

full and fair disclosure,  transparent markets, basic standards

of fairness for investors, and punishment of fraudulent conduct.

Those principles have made our markets the most trusted and the

most successful in the world.  Yet, just as our markets have

modernized, our application of those principles must modernize.

     Today, our economy is being transformed by far-reaching and

fast-paced currents of  innovation.  Silicon chips and fiber

optic cables allow capital to move across borders at lightning

speed.  These trends, which offer vast new opportunities, also

present crucial new challenges.

     The rapid introduction of new technologies helps markets

function with an efficiency that was unimaginable just a few

years ago. Transactions that were once time-consuming and tedious

have become instantaneous and inexpensive -- initiated and

executed at the touch of a button.

     Globalization is making it just as easy -- but not

necessarily as safe -- to execute an order in Bangkok  as it is

in New York.  Capital flows affect the destinies of entire

nations.  The recent volatility in our capital markets revealed

one of the costs of globalization, when weakness in one market

can be magnified -- logically or not -- in markets everywhere.

     Propelled by powerful technologies;  liberated by the end of

the Cold War threat to capitalism;  and energized by the global

mobility of capital -- the economy of the future is increasingly

being shaped by decisions we are faced with today.

     Change is difficult.  Change can be disorienting.  Yet

change -- if  harnessed for constructive purposes -- can present

us with new opportunities to unleash our economic creativity.

President Clinton is fond of saying that we must "make change our

friend."  I think that captures, just right, the task facing us

all.

     And that's where you come in -- all 1,200 of you here today,

and all your colleagues around the country.  No nation can

monitor change, much less try to manage it, unless it asserts all

its knowledge -- about capital, about government, about society,

and about the law.

     At the SEC, we have always tried to mobilize the best of our

society's expertise in the cause of maintaining fair markets --

and, in that, we have relied constantly on the keen judgment of

the legal profession.  Our society thrives when we mobilize the

alliance between those who apply capital constructively and those

who assert ideas constructively.

     This is the principle behind our new series of Roundtables:

If regulators are doing their jobs, they must draw on the

analytical power -- and the wisdom -- of the bar in developing

the law.

     I'm especially proud of the changes that the SEC has been

pushing over the past four years.  We've sought to keep up with

the pace of change in the markets by stepping up our review of

how we regulate those markets.

     In five specific areas, I seek your partnership in advancing

new ideas to help rationalize our system of regulation.  Those

five areas are:  modernization;  advanced technologies;  the

EDGAR information system;  the offering process;  and mergers and

acquisitions.

     o  First, consider modernization.  Our regulations on

corporate finance, for instance, are based on full and fair

disclosure to the public of accurate information.  Any new

technology that makes it easier and more cost-effective to learn

more about an issuer is a helping hand.  Regulations that fail to

recognize this are unwise and unworkable -- not just for

companies and the markets -- but for the investor.

     The challenges of the evolving marketplace require more

flexibility for the regulators at the SEC, and Congress has

wisely recognized this need.  In the National Securities Markets

Improvement Act of 1996, Congress gave us broad exemptive

authority under the securities laws.  That is an awesome

responsibility, and even before obtaining exemptive authority we

began a broad re-examination of every aspect of the laws we

administer in the area of corporation finance.

     That does not mean, of course, that our regulatory system is

broken.  In fact, I believe that it works remarkably well.  But

periodic re-examinations are healthy, and -- as with most things

in life -- there is room for improvement.  The advice we receive

from the legal community has been a critical element in the

improvements we have made, and in the changes we are considering.

     Today, I ask you to renew your efforts to help us find such

improvements.  Let us know if you identify a needless burden or

redundancy.  At the same time,  you should let us know if you

think there is an important gap in our system of investor

protection.  Many of you live and breathe our rules and

regulations, and we're committed to responding to your concerns.

     Let's build on the work we started in 1995, with the SEC's

Task Force on Disclosure Simplification, which was chaired by

Phillip Howard, the distinguished lawyer and the author of the

best-seller, The Death Of Common Sense.  The Task Force

recommended that we eliminate fully one-quarter of the rules and

half the forms relating to capital formation and secondary-market

disclosure.  We've already done away with 45 rules, and six

forms, and more will follow.  Based on task-force

recommendations, we have amended other rules, such as Rule 144,

which provides a safe harbor for the resale of securities

received in a private offering.  Reducing the period that an

investor must hold those securities, before re-selling them,

should benefit everyone -- investors, businesses, and the markets

themselves.

     o  Second, consider advanced technologies.  We are working

to ensure that our rules make sense in the face of new

technologies, such as the Internet and the desktop computing

revolution.  As many of you know, we have twice provided

interpretive guidance on the use of electronic media to satisfy

disclosure obligations under the securities laws. Because of this

guidance, it is no accident that there were a number of "firsts"

this year.  For the first time, companies used multi-media

prospectuses, both via the Internet and on CD-ROM.  Major

companies delivered proxy statements and annual reports "on line"

to consenting shareholders. Our staff also provided guidance for

the accomplishment of a number of other "firsts" -- including

permitting companies, as they seek to raise capital, to seek out

potential investors through an electronic "road show."

     We need to learn more from market participants about how new

technologies are changing the industry.  You can provide us with

that vital information, because you're closest to the needs of

your clients.

     Nowhere have technology and globalization had a greater

impact than on the operation of our securities markets.

Significant improvements have recently been made in transparency

and pricing.  Several months ago, the Commission issued a

"concept release" to begin a comprehensive re-evaluation of its

regulation of exchanges and other markets.  The release asks

fundamental questions about how markets in this country are

regulated in light of two decades of accelerating technological

change.

     To provide one example:  In the past, we regulated

alternative trading systems as broker-dealers.  It wasn't a

particularly good fit, but at the time it was practical:  These

trading systems were new and small, and to have regulated them as

an exchange would have effectively put them out of business.

Today, the average daily trading volume on these  systems is 1.5

times greater than the volume of the American Stock Exchange and

the four regional exchanges combined.  These systems are now

major-league players in our financial markets.  It may be time to

take another look at how we regulate these entities.

     o  Third, we ask for your input into our EDGAR information

system. EDGAR has been one of our biggest success stories: Our

web site contains over a billion pages of corporate information,

about virtually every public company in America.  Since its

inception, users have "hit" the site more than 100 million times.

Each day, about 2.5 million pages of text are downloaded.   Many

of you who file on EDGAR will be happy to hear that the system is

up for a major upgrade.  Although EDGAR is not very old, the

advent of new technologies can  make it more flexible and easier

to use.  I hope that the legal community, along with other end-

users of financial information, will continue to advise us on how

to make our electronic systems more valuable.

     There are surely other changes to come, as well.  While our

existing rules are always evolving to meet the demands of an

innovative marketplace, we cannot be afraid to ask whether a

somewhat different approach might work better.

      o  That leads me to the fourth point where we seek a

partnership with you.  As many of you know, we have been re-

evaluating the offering process itself.  Here, again, today's

system functions well.  Yet there are some anomalies that deserve

to be re-thought

     To protect the primacy of the prospectus, for instance, the

"quiet period" preceding an offering often demands "radio

silence" about the issuer and its business.  That was difficult

in 1933.  It's nearly impossible today.  We need to consider

whether there are new ways to protect the integrity of the

offering process while accommodating the needs of a marketplace

with a limitless appetite for information.

     At the SEC, we've been thinking about how to solve these

problems for some time now.  We created an Advisory Committee on

Capital Formation and Regulatory Processes with a broad mandate,

to study ways to improve how we regulate the offering process.

After it reported in July 1996, the Commission asked for comments

not only on the Committee's model, but also on other ways to

modernize regulation of the offering process.  Modernizing the

process may cause some momentary discomfort -- because all

change, however positive it is, can seem uncomfortable, at first.

But our modernization efforts are  intended to make our system

more understandable, and thus more accessible, to everyone.

     o  The fifth area of partnership, where we need your

innovative thinking, is in the way we set rules on corporate

mergers and other business combinations.  As M&A volume has

soared to record levels, and as the headlines are filled with

news of still more mega-combinations, we need to examine how

these rules operate.  A company, for example, may feel limited

under current rules in communicating with its shareholders about

a proposed merger, at least until after they prepare a lengthy

disclosure document.  I wonder whether shareholders wouldn't be

better served if companies felt more comfortable discussing the

merits of a proposed transaction sooner rather than later.

     There's one sure way to improve disclosure fairly quickly,

and without substantial revisions to existing regulations.  That

is, simply, by improving the presentation of information.  In

many cases, stale precedents and turgid models with dry

descriptions of terms or transactions have been "tweaked"  so

many times over the years, by so many different people, that they

have become incomprehensible -- even to sophisticated financial

professionals.  Phrasing a prospectus in impenetrable language

undermines the very purpose of the federal disclosure rules, and

undermines the effectiveness of our entire legal structure.

Disclosure tells us nothing if it fails to communicate.

     Many of you know that the SEC has proposed new rules for

"plain English" disclosure.  We made these proposals on the heels

of our very successful pilot program, which has more than 70

companies now drafting their corporate disclosure documents in a

way that makes them readily understandable.  We are heartened by

the number of supportive comments we  received in response to the

"plain English" proposals.

     But I also know that there are many skeptics -- including,

perhaps, some people in this room.  Having worked outside of

government for almost my entire career, I know that any

government proposal has room for improvement.  That's why we

solicit public comment on our proposals.  But I must say that I

am not persuaded by the argument, advanced by some members of the

legal profession, that drafting disclosure documents in plain

English may cause companies to omit important facts.

     Nothing in what we have proposed should lead to unrealistic

simplification or material omissions.  Clear writing is a sign of

clear thinking -- and if there's anything that skeptical

investors truly need in the marketplace nowadays, it's evidence

of clear thinking.

     Lawyers hold the key.  You, after all, are trained to think

clearly.  Today, I believe communicating in a straightforward way

is also an essential skill. The next time you write a document,

remember that straightforward writing inspires confidence.

Remember what Shakespeare briskly noted in King John: "An honest

tale speeds best being plainly told."

     We at the SEC are willing to take our own medicine on "plain

English," too.   Our efforts are already yielding dividends.  One

recent example is our suggestion on Rule 14a-8, which governs

shareholder proposals.  The old rule had been modified so many

times it was difficult for even some of our most experienced

attorneys to understand.  The proposed new rule is understandable

to average investors.

     Other changes are in the works, too -- and I seek your help

in refining and implementing them.

     Many  people have come to us with "wish lists" of things

they would have us revise or eliminate, to make life easier for

those who seek to raise capital. It's as if the candy store has

now been opened after 64 years of waiting.  Although we clearly

don't intend to give away the store, I am open to thoughtful

change -- so long as it serves the public interest, not just some

vested interest.  Whatever we do, it must not compromise investor

protection.

     Let me suggest, before I conclude these remarks, one

additional area where, as lawyers, you might consider applying

the full weight of your professional expertise: This is the

implementation of the Private Litigation Securities Reform Act of

1995.  Now that this measure has been enacted, the SEC is

constantly monitoring its implementation, trying to judge how it

is working. One aspect of the new law that, apparently, is not

being widely pursued is the "lead plaintiff" provision -- which

Congress approved with the clear intention of increasing the

likelihood that institutions would exert some meaningful

supervision over the process.  Although the ultimate impact of

the Reform Act remains to be seen, thus far only a  few

institutions seem to be moving to become the lead plaintiff:  In

fact, they did so in only eight of 105 cases filed in the first

year after the Reform Act.  Now, of course, I do not want to urge

you to advise your clients to plunge in, headlong, into every

suit that comes your way.  But, in order to carry out the intent

of the new law, members of the bar should certainly urge their

institutional clients to explore their options more fully. If

there are problems with the use of the lead-plaintiff provision,

please tell us about it.  We at the SEC are eager to help make

the new law work.

     That issue, along with so many others, underscores the

importance of asserting lawyers' keen legal judgment amid all the

various efforts to help strengthen our system of market

regulation.  As lawyers, you have the privilege -- and the

responsibility -- of upholding the highest public trust.  As you

do so, you will strengthen public confidence in the integrity of

our markets, and reaffirm their faith that we can meet the

challenge of an era of change.

     In this era of profound change, as our new "global village"

of finance evolves, we need to assert all the skills within our

society to lift our vision and summon our spirit.  A thriving

marketplace is not an end in itself.  It is a means to an end --

a powerful means of channeling our economy's positive energies

toward building a more prosperous, more fair-minded society.

     As lawyers with an intense interest in the success of our

securities markets, your discussions here will surely help refine

your legal techniques. Yet I ask for more:  I ask for a true

partnership.  I want all of us to focus on ideas that keep our

markets pre-eminent.  We have the world's most highly developed

legal system, and the world's most fair, most successful, and

most admired capital markets.  I submit that it is no

coincidence.

     Today, I have outlined ideas for renewing our relationship.

The SEC and the legal community are natural allies, as we seek to

liberate the constructive forces of our economy.  The Commission

is committed to listening to you, and learning from you, as we

become allies in helping our people -- and our institutions --

adapt to an era when change is a constant.  That change need not

be seen as a threat, but as a creative opportunity.

     As partners in managing change -- working together, as

lawyers and as public servants  -- we share a public burden, and

we must uphold our public trust.  That task is best accomplished,

not as adversaries, but as allies.

     Thank you very much.

                       #     #     #     #