"SPOTLIGHT ON INVESTORS: THE SEC'S AGENDA FOR 1995"
                REMARKS BY CHAIRMAN ARTHUR LEVITT
        UNITED STATES SECURITIES AND EXCHANGE COMMISSION
        SOCIETY OF AMERICAN BUSINESS EDITORS AND WRITERS
              OMNI SHOREHAM HOTEL, WASHINGTON, D.C.
                           MAY 1, 1995

     Good morning.  I've been in the Far East for two weeks,
working to further internationalize our capital markets -- a goal
I'll speak about shortly.  But this is my first public appearance
in the U.S. since the passing of Hobart Rowen, and I just want to
pause a moment to acknowledge the great loss we've suffered.  I
thought of him often while I was away, because few people
believed more deeply in internationalism.  

     Bart helped modernize and professionalize business
journalism, and in so doing, he performed a huge service not only
to your profession, but also to our nation.  A powerful presence
in life, Bart now leaves a powerful absence -- especially at
gatherings of this Society.  He lives on in the high standards he
set for all of us; we honor his memory by continuing to uphold
them.

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     I'm glad to be here today.  Few audiences have greater
understanding of, or appreciation for, the current developments
in the securities industry.  And so I'd like to use this
opportunity to give you a preview of the issues I see as being
critical in the year ahead.  

     Every SEC Chairman is defined by his priorities (and someday
soon, I hope we'll be able to say "every SEC Chairman is defined
by his OR HER priorities").  I've tried to focus on three broad
areas: enhancing investor protections; reforming the municipal
debt market; and continuing the internationalization our markets. 
The most important of these, and the standard by which I ask you
to judge this Commission, is the extent to which we enhance
investor protections.

     We've accomplished a great deal in each area over the past
year; and I believe these issues will take up their share of
column space and air time in the year ahead.  But before I
preview our agenda in detail, let me speak briefly about the
philosophy that guides it.

     My background in business has inevitably helped shape my
views.  I believe that the SEC has a responsibility to respect the
awesome power of the free market, and, whenever possible, to use
market solutions, such as disclosure, to solve market problems.

     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
the past year and a half.  Just consider some of the things we've
been able to accomplish:

*    The Commission was concerned about "pay-to-play" in
     municipal bond issues; the industry responded with a
     voluntary ban on political contributions.

*    The Commission sought greater transparency for municipal
     bond prices and mark-ups; the Public Securities Association
     and Municipal Securities Rulemaking Board stepped forward
     with proposals to provide investors with better information.

*    The Commission expressed its apprehension about personal
     trading by mutual fund managers; in response, the Investment
     Company Institute developed guidelines to prevent abuses in
     this area.

*    The Commission was and is concerned about the use of over-
     the-counter derivatives by unregistered subsidiaries of
     brokerage firms; the industry formed a panel that worked
     with the Commission to develop a comprehensive oversight
     plan.

     The same pattern holds true for broker education and
compensation, and other key issues.  In each case, we've looked
outside our building for answers; and in each case, we've
obtained the response we needed.  

     This cooperation in the public interest will continue.  To
the extent that relatively stable markets allow us to implement
strategic decisions in the year ahead, this Commission will
maintain its spotlight on individual investors and their needs,
including shorter, simpler documents in plain English; we'll work
to increase disclosure in the municipal bond market; and we will
do everything we can to maintain America's pre-eminence among
international capital markets -- including a thorough reappraisal
of the burdens the SEC imposes on American businesses.  

     These goals reflect this Commission's absolute commitment to
the interests of America's investors, who are the backbone of our
markets.  And so it's appropriate that of our three priority
areas, the first I'll describe is investor protection.

     In 1995, we aim to improve the way investors interact with
the securities markets, by changing the materials they read,
their level of involvement in the regulatory work of the SEC, and
the protections they have in the markets.

     Last year, I announced that eight major mutual fund groups
had stepped forward to pilot a "Profile Prospectus," that is, a
prospectus that includes a concise summary of salient points, in
standardized form for easy comparison.  We and our state
regulator colleagues now have prototypes in hand, and we expect
investors to see the first Profiles this summer.  At the same
time, we're developing special short form prospectuses for money
market funds, and for the sale of mutual funds through defined
contribution plans.

     We're focusing on mutual funds because of their enormous
popularity as vehicles for investment and retirement.  In recent
years, we've seen plenty of stories about risky portfolio
investments that backfired.  Without risk, of course, there is no
market; our concern is not to ELIMINATE risk, but to make sure
people have a sense of the DEGREE of risk before they turn over
their money.  

     This is a question of communication.  Funds typically
describe risk with highly technical definitions of inverse
floaters and derivatives.  This may be useful in curing insomnia,
but doesn't improve understanding of the fund's overall risk
level.  We can and must do better.  It's my aim to have
prospectuses speak a new language -- the ENGLISH language.  Later
this year, we'll begin to hold workshops for lawyers who write
disclosure documents; we believe that if they express themselves
more clearly, investors will benefit.

     But we're not going to solve this problem merely by talking
to lawyers.  Last month, for the first time in SEC history, we
also turned directly to investors to ask how funds could better
explain risk.  As Eric Savitz, Russ Wiles, and other columnists
have noted, this is no easy task, but it's clear that it's worth
doing.  I expect that, before the end of this year, we will
determine how we can best help investors understand risk and
avoid unpleasant surprises.

     This Commission believes in direct contact with investors.
We've decided that the Federal Register is NOT the best way to
communicate with the American people.  Where once we interacted
largely with brokers and bankers, the SEC is now reaching out to
investors proactively, through brochures, speeches, television,
and radio.  Where once we looked out at audiences and saw
starched shirts and pinstriped suits, today we also see flannel
shirts and denim jeans.  In the last year alone, with the help of
brokerage firms, local media, and state regulators, we've held
investors' town meetings across the country, from Los Angeles to
Boston, and from Chicago to Houston.  We've had an increasingly
enthusiastic response -- I held two in Texas last month that were
attended by more than 1,500 people.

     This focus on investors is not a fluke, but a real change in
emphasis by the Commission.  We're even on the Internet, and next
Wednesday I'll be participating in my first on-line forum with
"Business Week", to answer investors' questions.  In the coming
months, you can expect the SEC continue to solicit comment and
guidance from our most important constituency -- your readers,
viewers, and listeners.

     Also coming up very soon is the move from five-day
settlement of trades to three-day settlement, commonly referred
to as "T + 3."  This will take place next month.  We've been
working closely with the industry to ensure that the transition
takes place as smoothly as possible.  The media have been helping
to get the word out to investors, and we will both focus on this
even more in the final weeks ahead.  Changes of this magnitude
are never easy, but the end result will reduce the systemic risk
we saw in October of 1987 with millions of outstanding, or
unsettled, trades -- and that will benefit ALL of us.

     To better protect investors, we'll also continue to move
forward with initiatives to assure that customers' orders in the
over-the-counter market are handled efficiently and fairly by
broker-dealers.  When a customer gives an order to a broker to
act as his agent, we want to assure that the broker places the
customer's interest above its own.  Thus, we will continue to
press for full limit order protection in that market, and for
order handling rules that assure that the public interest comes
first.

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     The second set of developments I'd be watching very closely
if I were a business journalist are those currently taking place
in and around Orange County, California.  The events there
represent a defining moment for the municipal market; the outcome
will likely determine a variety of crucial issues for this
vibrant marketplace, and its millions of investors and hundreds
of cities and towns, in the year ahead. 

     The consequences of any default would be hard to imagine. 
I've read some silly things of late, some people on the fringe
who imagine that only Wall Street would be hurt by a default. 
They are wrong -- Wall Street has been through tougher things --
 Wall Street will surmount this.  But what about the thousands
upon thousands of Americans who hold a stake in Orange County
debt -- what about the parents saving for their children's
education, what about the elderly planning their retirement?  The
nation is counting on Orange County to do the right thing; and if
it does not, no one will be hurt more than the County and its
residents, for the ensuing higher interest rates on its debt
would effectively constitute a huge tax increase on its
taxpayers.

     In the year ahead, we'll offer our support to municipalities
across the country in many ways, including seminars and speeches
to local officials about investment policies, risk assessment,
and financial instruments.  We will also work to help taxpayers
better understand how the municipal market works; after all,
these funds DO represent public money.  You've done a lot to get
out the same kind of message in the course of the past year, and
I'm grateful for that.  We'll need to be especially vigilant this
summer, when many vital issues will be played out.

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     International cooperation will be another key element of the
SEC's strategy for 1995.  Here's a statistic that's not as well
known as it should be:  While cross-border listings in other
major markets, such as London and Tokyo, have 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
440 foreign companies entered the U.S. public market for the
first time, bringing the total number of foreign listings to 670.

     We're working very hard to make our markets more accessible
to foreign companies, because the future of finance, as Bart
Rowen acknowledged, is international.  As I mentioned, I just
returned from a visit to Southeast Asia -- I won't force you to
look at my slides, but if I can share just one story, you'll get
a flavor of the kinds of things that personal contact can
achieve:  One of my objectives was to persuade the Finance
Minister in Indonesia to move toward opening markets for
financial services.  For some time, the stock exchange in Jakarta
didn't list the securities of world-class U.S. companies, for
fear of diverting capital from Indonesian markets.  After a frank
one-hour discussion last Wednesday with the Finance Minister, he
directed that this practice be changed immediately, so that U.S.
companies will soon be included among those traded in Jakarta.

     Good relations with our foreign counterparts can also help
protect American investors.  A wide variety of professionals
operate in U.S. markets from abroad; many advise U.S. mutual
funds that invest in foreign markets.  I am very pleased to
announce that, just this morning, the SEC and the United Kingdom
Investment Management Regulatory Organization signed an agreement
-- the first of its kind -- that will allow the SEC to obtain
information on a regular basis about U.K. advisers who offer
their services in the U.S.  We will work with our colleagues to
conduct more efficient joint, on-site inspections, without using
additional resources.  We began with the U.K. because it has the
largest number of SEC- registered advisers of any foreign
country, with approximately $270 billion under management.  But
you can expect to see us take this new approach in other
countries as well.

                                #

     Finally, the year ahead presents us with challenges of other
kinds:  We're closely examining our regulatory requirements to
find ways we can improve the process for the thousands of
corporations that go to market each year -- saving money for
companies and their shareholders, and helping to preserve the
international competitiveness of our businesses and pre-eminence
of our markets.

     The SEC is now in the process of examining the existing
"safe harbor" protection we grant companies for the disclosure of
forward-looking information.  The question is how to encourage
businesses to provide more useful information to the market
safely, without stripping individual investors of remedies
against fraud.  We're now studying the comments and testimony
we've received on the issue.  We hope to announce our proposals
soon.

     There's a broader issue at work here.  I'm deeply concerned
that the rules of capital formation in the 20th century may not
be adequate to meet the needs of the 21st.  To ensure that we are
prepared for the challenges ahead, we've created a capital
formation advisory committee, chaired by SEC Commissioner Steve
Wallman.  The committee is weighing the efficiency and costs of
regulation against its benefits in public offerings.  I'll
illustrate the scope of the committee's mandate by sharing one
simple, but fascinating question they'll be examining:  Should
the SEC consider registering COMPANIES, as opposed to SECURITIES? 
I'm sure the revolutionary nature of this question is not lost on
this audience -- this could change the way our markets work. 
Whatever the ultimate answer, this is precisely the kind of
question we should be asking ourselves as we stand at the
threshold of a new century.

     This question of the cost of raising money is so important
that, even as the committee undertakes its task, I am today
unveiling a series of proposals that could well improve the
efficiency of capital formation in the United States.

     One initiative would allow companies to simplify financial
statements by excluding many of the complex footnotes included in
annual reports and other documents sent to investors.  This
should make the information more readable for investors, and also
save companies money on printing and distribution.  The
information available to the marketplace would not be
compromised, since it would still be filed publicly with the
Commission, and sent to investors by companies on request.

     Another proposal would eliminate an apparent inconsistency
in our regulations:  A company planning an acquisition can only
raise capital in our public markets if it can provide the
financial statements of the business it's acquiring.  But it can
be difficult, if not impossible, to obtain financial statements
when the acquisition is a private company, or a division of a
public company that doesn't have stand-alone statements, or a
foreign firm whose statements aren't prepared according to U.S.
accounting principles.  Moreover, although our rules prevent the
acquiring company's shares from trading in the primary market,
they can still trade freely in the SECONDARY market.  That
doesn't make sense.  In the past, some companies facing this
hurdle have opted to sell securities offshore or in private
placements; our proposal would remove this reason for not tapping
the U.S. public markets.  

     We plan to make things easier for enterprises that are
thinking of going public, but are worried about spending a lot of
money to comply with our rules before they even know if investors
would be interested in buying their stock.  Our proposal would
allow these companies to distribute materials to potential
investors to "test the waters" for interest in a possible initial
public offering.  They could then make a more informed decision
before proceeding with the preparation of documents we require
for a registered offering.    

     We're also proposing a new kind of federal-state
partnership.  Recently, California sought to ease the burden on
small businesses by exempting certain offerings to California
residents from its state securities registration requirements. 
But the state exemption did not work well with existing Federal
exemptions.  We are now developing a proposal that would provide
a corresponding Federal exemption for offerings of up to $5
million that qualify for the new California exemption.  This can
be viewed as an experiment; I'm advised that no other state has a
comparable exemption.  We hope that the Commission's action will
encourage other states also to consider creative ways to foster
small business capital formation.

     I've raised many issues with you today, perhaps too many. 
But our markets are changing constantly, and our success, like
yours, depends on recognizing and responding to those changes.  

     I ask for your partnership on these issues; I ask for your
thoughts and opinions -- come to think of it, I KNOW I'll get
those; I also ask for your continued help in getting information
to -- and FROM -- investors.  

     That is my interest in coming before you today -- but it's
an interest we hold in common.  For we're both in the business of
informing investors -- and we both believe in the benefits of
information to our society.  If we do our jobs well, not only
will people make better investments in the market -- they'll make
a better market for investors.  And that's a result EVERYONE will
applaud.  

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