CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., May 22, 1973. Hon. BURT L. TALCOTT, Washington, D.C. DEAR BURT: John Moss, Chairman of the Subcommittee on Commerce and Finance, has recently appeared before the Appropriations Subcommittee on which you serve as ranking minority member to testify concerning the Securities and Exchange Commission's budget for fiscal 1974. In his testimony John recommended an appropriation of $35.2 million instead of the $31.2 million recommended by the Office of Management and Budget. The $35.2 million represents the amount requested of OMB by the SEC, plus the cost to the SEC of the government-wide pay increase granted in January of this year. As ranking minority member of the Subcommittee on Commerce and Finance I wanted to inform you that John speaks for both sides of the aisle on this matter. The Securities Industry Study conducted by the Subcommittee during the 92nd Congress made clear the need of the SEC for considerably more resources if it is to do the job that Congress has set out for it. I hope that your Subcommittee will give this request for additional funds favorable consideration. With best regards, JAMES T. BROYHILL. Mr. EVANS. I have a problem seeing how you might have this oversight function working better, if in the eventual determination of the Appropriations Committee they can still cut us back. I think Commissioner Owens is speaking to this. It doesn't really give us the money to do what you ask if they have the final authority, which I think they have. Mr. Moss. It reinforces this committee in representing the needs of the regulated groups, groups regulated by the SEC, in debate on the floor if the committee determines to offer amendments, because we would then be dealing with a current evaluation in-depth, one more comprehensive than the Appropriations Committees are prepared to undertake. I think that is another important value to the procedure proposed by Mr. Broyhill. I might add there is no difficulty in dealing with some of the matters of concern. For instance, the authorization could clearly state that such additional sums as are required to meet increased costs due to increased payroll as a result of the pay raises are also authorized. We would not have to put those in dollar amounts. Mr. LOOMIS. That would be fine. Mr. Moss. We can do many things. We have the opportunity to be flexible. At the same time we also have the opportunity to assert again the priority of interests and of responsibility of this committee. If we can do this in the agencies one by one, I think we will be far more helpful than has been possible in the past. Mr. OWENS. We would support that wholeheartedly. Mr. LOOMIS. I was slightly appalled, perhaps unduly, by the prospect of perhaps $2.5 million a year being transferred from GSA's budget to ours. To us that is a large sum of money. That is the kind of problem I was worried about. Mr. BROYHILL. Let me make another comment or two on this. Of course, if this provision in this bill does become law where you can submit your budget figures simultaneously to the Congress as you submit them to the Office of Management and Budget, then there is need for other than just the Appropriations Committee going over those figures. It would seem to me it would be our responsibility to go into this as well as the Appropriations Committee. Mr. LOOMIS. That is fine. Mr. BROYHILL. You mentioned your concern about the lateness of authorization bills getting through and sometimes there are authorizations that have not been passed and the timeliness and so forth. There is a bill pending before the Rules Committee, H.R. 7130, I believe it is, that does several things. It is an effort to try to reform the appropriations process here. One of the things that is provided in that bill, there again if it should pass, is for requiring that authorization to be passed in a timely fashion prior to the consideration of the appropriation bill. I think that is certainly good from a standpoint of orderly process. I would hope that that bill would be acted on though there are some other concerns that members have about that particular bill, but at least that particular section, I think, would meet with fairly unanimous approval. So, assuming that that took place, then perhaps that concern would be out of the way, too. Mr. LOOMIS. That is correct, it probably would. Mr. Moss. We have a quorum call ordered on the floor of the House. It is now 6 minutes past 12. I wonder if the members could return at 1:30 p.m. Would it be convenient for you gentlemen to return at 1:30? Mr. OWENS. I have a dental appointment but I will cancel. Mr. LOOMIS. I am supposed to be at a plenary session of the Administrative Conference but I can be one of the absentees. Mr. Moss. Can you be here in the morning at 9:30? Mr. OWENS. In the morning would be satisfactory to us. Mr. LOOMIS. That would be fine. Mr. BROYHILL. May I have unanimous consent to put the letter I wrote to the Appropriations Committee in the record following your statement? Mr. Moss. Mr. Broyhill asks unanimous consent to place in the record following the statement previously entered on my behalf a letter to the Appropriations Committee. Without objection it is so ordered. [See p. 317.] The committee stands adjourned until 10 o'clock tomorrow morning and we will hear again from the Commission at 10 o'clock on Monday morning. [Whereupon at 12:10 p.m., the subcommittee adjourned, to reconvene at 10 a.m., Friday, June 8, 1973.] SECURITIES EXCHANGE ACT AMENDMENTS OF 1973 FRIDAY, JUNE 8, 1973 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE AND FINANCE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D.C. The subcommittee met at 10 a.m., pursuant to notice, in room 2322, Rayburn House Office Building, Hon. John E. Moss, chairman, presiding. Mr. Moss. The subcommittee will be in order. We are pleased to welcome back our old friend, Manuel Cohen, former Chairman of the Commission, who is returning in order to accommodate some of the members of the committee who desired to direct some questions to him. FURTHER STATEMENT OF MANUEL F. COHEN, FORMER CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION Mr. COHEN. Let me say it is not a one-way street. I enjoyed being here the other day and I am glad to be back. Mr. Moss. Mr. Helstoski. Mr. HELSTOSKI. I think the testimony of Mr. Cohen has been rather extensive, so I indicated to Mr. Curtis I would not have any questions today. Mr. Moss. I wonder if we could arrange to accommodate Mr. Breckinridge, Mr. Goldwater, and Mr. McCollister if they were to prepare some written questions, would you respond to them? Mr. COHEN. Yes. Is there a particular time limitation in providing responses? Mr. Moss. No. Mr. COHEN. I will be glad to accommodate the committee in any way the committee wishes. Mr. Moss. Mr. Eckhardt. Mr. ECKHARDT. Yes; I have a few questions that have been brought to my attention by Solicitor General Griswold's testimony yesterday. With respect to the Solicitor General's authority to determine those cases which will be permitted that participation will be permitted to the SEC in the Supreme Court, the Solicitor General based the reasons for the screening by his staff, I think some 14 persons, on three points. The first of those points was that, essentially this, I am phrasing it in my own terms, that the Solicitor General should be able to determine, policywise, what the Government position is. He pointed out in his full testimony that there were times when conflicts arose between regulatory agencies or departments. He also cited in his testimony a rather recent Supreme Court case, Affiliated Ute Citizens v. United States, at 406 U.S. 128, which, it seems to me, illustrates perhaps what he is talking about. As I understand that case, it was one in which certain Indians were granted, under congressional statute, certain interests in land and, subsequent to this grant, a corporation was established to deal with these lands which issued stock. That stock was a rather peculiar type of stock that was required first to be offered to Indians within the tribal group and it was not permitted to be sold to outsiders at a lower figure than that which was in good faith to persons first in the Ute nation or of Ute extraction. One portion of the case involved an alleged violation of the Securities Exchange Act on grounds that there had been misrepresentation, that the stock had not been disseminated in a manner in accordance with the rules of the SEC. Ultimately the claim of the Indians was for recovery of the difference in the value of the stock at the time of sale and what they received for it. They did receive recovery from certain bank officials that were exchanging stock. But another part of their claim was against the United States on the basis that the United States was in a trust relationship with the Indians and should have exercised further warnings, protected their interests, disseminated information that there was a violation of the act, as I read the case. Ultimately, most of that claim was not granted because a good part of it, if not all, arose after an act in which the Indians were removed from the trust relationship with the United States. Nevertheless, there was this strong question in the case, and it certainly was not a frivolous claim against the United States. Of course, the Solicitor General came into the case really in two ways. He permitted the SEC to file an amicus curiae brief and represented the U.S. interest. It seems to me there is an incipient conflict of interest there because had the SEC's contention and the contention of the plaintiffs failed with respect to the question of whether or not the stock was improperly disseminated in violation of SEC rules, the ultimate claim against the United States would have been destroyed. I would like to ask your response as to whether or not under circumstances of this nature, it would be more desirable for the SEC and its attorneys to present its case fully and completely and without being monitored or approved by the Solicitor General. Mr. COHEN. Mr. Eckhardt, I noted in my prepared testimony a situation, without naming it, which is almost foursquare with that particular situation; that was one in which an issue arose in a private lawsuit brought by a person against the New York Stock Exchange in which he was alleging a violation of the antitrust laws. When the case finally reached the Supreme Court, the SEC had an interest in the matter because certain of the allegations were based on activities of the New York Stock Exchange which are subject to the jurisdiction of and surveillance by, the Commission and, of course, the Antitrust Division had an interest in the matter. The Antitrust |