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                 "COMMON SENSE AND SACRED COWS: 
                   SEC SELF-ASSESSMENT TODAY"
                REMARKS BY CHAIRMAN ARTHUR LEVITT
             U.S. SECURITIES AND EXCHANGE COMMISSION
           THE 34TH ANNUAL CORPORATE COUNSEL INSTITUTE
              CHICAGO, ILLINOIS -- OCTOBER 19, 1995
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     I came to the SEC after a long career in the private sector. 
My sentiments, history, and passions are those of a businessman. 
In the course of my life, I worked for a community newspaper,
helped establish a cattle company, grew two weekly newspapers, and
founded a small brokerage firm that became a large one.  

     Along the way, I've had the usual range of business
experiences -- I've been sued by overzealous lawyers, and plagued
by irrational government regulations. 

     A lifetime of experience is not something you shed, like an
old skin, when you arrive inside the Beltway, to be transformed
into a regulator.  Quite the opposite -- my background informs
everything I do at the SEC.  

     I know the benefits of SEC regulation as well as anyone else. 
But I also know the burdens.  Among the things I would like this
Commission to be remembered for, is its lack of requests to
Congress for more regulations.  

     We've been open to the concerns of American business.  At the
same time, we've worked hard to reinforce investors' faith in the
integrity of our markets, during a period when millions of
investors left the safety of bank CDs for the risks and rewards of
our capital markets.  We feel that that is among the very best
contributions we can make to the process of capital formation in
America.

     In my work to improve the system for companies and investors
alike, I've become a student of the regulatory process.  I've
explored ways to make things work better for those we regulate,
without sacrificing the agency's mission.  

     Along the way, I ran across Philip Howard's book,  "The Death
of Common Sense".  The book has some interesting insights about
government regulations, and numerous examples of how they can go
wrong.  

     One story Howard tells seems particularly instructive: 
Several years ago, the government required Amoco Oil Company to
install benzene filters in its refinery waste pipes.  Amoco
dutifully complied, at a cost of about 31 million dollars.  Some
time later, after a chance discussion between a government
regulator and an Amoco official, the regulators visited the Amoco
plant to discuss the benzene problem.  After spending some time
together on the refinery's dock, the regulators discovered that
the source of the problem was not the waste pipes at all, but the
pumping of fuel into barges.  The solution to that problem was
relatively easy and inexpensive, but meanwhile 31 million dollars
had been wasted.    

     The SEC, of course, does not regulate benzene, and I don't
know how often things like this happen.  I certainly hope it's not
too often.  But I do believe that a similar lack of communication
between regulator and regulated probably goes on every day on a
smaller scale, at all levels of government.

     And because of that lack of communication, some rules are
misguided, or their cost to society outweighs the benefit.  Some
rules are overbroad: they have unintended consequences for some of
the companies subject to them.  And some rules may be well-
designed when written, but become bad rules as the world changes
around them. 

     Now, where does the SEC come out in all of this?  I think we
come out pretty well.  There is our no-action letter process, which
offers companies guidance in their efforts to comply with our
rules.  Regulations and forms are periodically updated.  The
introduction of the integrated disclosure system several years ago
further eased the burden on many companies.  

     As regulatory burdens go, the SEC is on the low end of federal
agencies -- most of our rules were designed with capital formation
in mind, and there is no mass outcry against us.  But I know that
there is definitely room for improvement.  I want to take this
opportunity to tell you about some of the ways that we are trying
to make things work better for all of us. 

     Most of the people in this room are already aware of our
Advisory Committee on Capital Formation and Regulatory Processes,
which has been at work for the better part of a year.  Chaired by
SEC Commissioner Steven Wallman, this Committee is considering
approaches to the registration process that can fairly be described
as revolutionary -- company registration, for example, which, if
viable, would certainly go a long way toward easing the burden on
registrants.  I daresay that a lot of people are looking forward
to the Committee's report, which is expected late this year.

     Another new and promising initiative at the Commission today
is our Task Force on Disclosure Simplification, which is reviewing
all of the SEC's rules and forms for public companies, in order to
identify, weed out or modify rules that no longer make sense. 
Although it's an internal group, I've asked Philip Howard to act
as its advisor, and he has agreed.   

     There's only one way to do this, and it's without sacred cows. 
Everything is on the table -- including the rules relating to
private and registered offerings; the rules governing periodic
reporting; the rules under the Williams Act, which apply to tender
offers; and even the staff's process for clearing new products,
which we hope will be better integrated across the divisions, as
well as speeded up.  

     At the same time, this is no wholesale chopping-up of the
securities laws, nor a lessening of the investor protections that
have made American capital markets the greatest, deepest, and most
liquid in the world.  It is rather an exercise in good government -
- an attempt to communicate with those we regulate, so that we may
trim or simplify our rules as needed.

     The Task Force will spend some time focusing on the disclosure
process itself.  If the paperwork burden on public companies is
excessive, and disproportionate to the benefit to the public
market, no one is well served -- not investors, and not our public
companies.  

     A critical part of this project is the participation of people
like you who live with the Commission's regulations every day. 
You're in a good position to tell us what works and what doesn't
work.  Let's learn from the Amoco Oil example I cited earlier --
 let's spend more time on the refinery dock sharing ideas about how
to make things better.    

     I know that members of the Task Force have already solicited
suggestions from registrants and their in-house counsel, as well
as investors, analysts, accounting firms, law firms, and others. 
I want to take this opportunity to ask you also to send us your
suggestions and best ideas.  The Commission plans to issue the
recommendations by the end of this year.

     Some revisions have not waited for the Task Force's report. 
Earlier this month, for example, we addressed the rules under
Section 16 -- a Section that I know is very near, if not dear to
the hearts of everyone in this room.

     Whenever I meet with business leaders, in fact, at the top of
their list of concerns -- right up there with litigation reform -
- is Section 16.  The exemptions from Section 16b for compensatory
stock awards have been called overly complex and burdensome on
innocent transactions -- and that is among the nicer things that's
been said about them. 

     As you may know, the Commission made some improvements to
these rules in 1991, and we offered more last year.  This time, we
proposed a major simplification of Rule 16b-3 to provide companies
greater flexibility in devising their employee benefit plans.  We
also proposed greater flexibility for your companies' DRIP plans. 
Indeed, we are also soliciting comments as to the continued
efficacy of Section 16b, and whether legislation should be proposed
to rescind it.

     The Commission is constantly reassessing its rules and
regulations.  Simplification was a major goal well before we formed
the Task Force.  Our efforts have resulted in a number of specific
proposals that are already on the table; let me mention just a few
of them.

     We've floated a number of proposals that could affect proxy
statements and annual reports to shareholders and make them more
readable and useful.  These ideas range from moving some elements
of the executive compensation tables from the proxy statement to
Form 10-K, to eliminating a number of footnotes from the annual
report -- though they would still be required as filings with the
10-K, and would still be available to investors on request.  We're
searching for ways to allow registrants to communicate with
shareholders more effectively, and at lower cost. 

     We're working to facilitate the use of electronic media to
enhance communication and save costs.  We've just approved the
electronic delivery of prospectuses and reports to shareholders
who have the means and desire to communicate in that fashion. 
While the technology may not yet be sufficiently widespread or
developed to replace paper altogether, the Commission is taking
steps toward that end.

     While I'm on the subject, I should put in a plug for the SEC's
new World Wide Web site.  One of the main reasons the Commission
was created was to "let in the light" of disclosure on offerings
of securities; how could we not take advantage of the tremendous
opportunity afforded by the Internet, which has the potential to
bring public company filings right into the investor's living room?

     Commissioner Wallman and I are both computer enthusiasts, and
we're very excited about the SEC Home Page, which offers SEC News
Digests, rule proposals, litigation releases, speeches, testimony,
press releases, and much, much more -- not to mention access to our
huge EDGAR database of corporate information.  It's turning out to
be a very popular site on the Internet, and I encourage you to
check out our offering.

     Let me now turn to some proposals that would streamline the
offering process, both public and private.

     One initiative would eliminate an apparent inconsistency in
our regulations:  A company planning an acquisition through an
exchange of securities in a registered offering can only proceed
in the U.S. if it can provide the financial statements of the
business it's acquiring.  At the same time, these statements are
not required for secondary market trading for 60 days.  That
doesn't make sense.  

     Moreover, it can be difficult, if not impossible, to obtain
audited financial statements before the acquisition if the target
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. 


     This regulatory contradiction has driven some companies to
effect acquisitions offshore or through private offerings.  This
benefits no one, and so we proposed rules in June that would allow
companies to provide audited statements for significant
acquisitions up to 60 days after the deal is consummated.

     We also are exploring ways 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. 
We've asked for comments about allowing these companies to
distribute materials to potential investors to "test the waters"
for interest in a possible initial public offering.  

     On the private offering side, we've proposed to reduce the
holding periods under Rule 144 to permit resales of "restricted"
securities after a one-year, rather than the current two-year,
holding period.  Securities held by non-affiliated shareholders
could be sold without restriction after a holding period of two,
rather than three years.  We all know that the length of the
holding period for "restricted" securities can have a significant
impact on the cost of capital in private placements.  This proposal
is designed to lower the costs of these placements by providing
additional liquidity, on a faster basis, in those markets. 

     In addition, we've asked for comment on allowing general
solicitations in private placements.  This would allow companies
to locate accredited investors on a more cost-efficient basis.

     Finally, we've proposed 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.  Our proposal 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 the same exemption.  We expect
that the Commission's action will help encourage other states also
to consider creative ways to foster small business capital
formation.

     I hope I've given you an idea of some of the ways we're
modernizing SEC regulations to make them less intrusive and more
helpful -- without compromising investor protection.  

     This is not a new process.  Change has always been the
hallmark of our markets, and the SEC has succeeded for 61 years by
recognizing that fact and responding to it.  The Commission is well
aware that if a regulatory structure won't bend, it might break.

     As corporate counsels, you will play a critical role in these
initiatives, for as disclosure rules become more flexible, the
demand for compliance must be even stronger.  

     We see the corporations you serve as among our nation's
greatest resources.  Through meetings, comment letters, and even
gatherings such as this Institute, let's continue the dialogue
we've established -- for the good of your companies, and for the
good of America.  Thank you.

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