_________________________________________

                    REMARKS BY ARTHUR LEVITT
         CHAIRMAN, U.S. SECURITIES & EXCHANGE COMMISSION
      "THE SEC AND THE STATES: TOWARD A MORE PERFECT UNION"
 NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION CONFERENCE
              VANCOUVER, B.C. -- OCTOBER 23RD, 1995
            _________________________________________

     Let me begin by congratulating incoming President Dee Harris
and President-elect Mark Griffin.  I also want to thank Phil
Feigen for his outstanding leadership during a time of change and
transition.  

     I'd like to talk to you today about some of those changes,
particularly those set in motion by last November's election, and
how we might best address them.  I want to open up a dialogue
that is candid, serious, and constructive.  It may cause us both
some discomfort, but I believe we've built up enough trust and
good will between us to endure a little discomfort.

     I recognize that these are sensitive subjects.  But I come
before you as a partner and a friend, in the belief that it's
better to face tough issues together, than to face them apart.

     All of us sense that this is a crucial moment for the
securities industry and its regulators.  If we didn't realize it
last November, and if by chance we missed it during the debate
over securities litigation reform, there's been no mistaking it
since the introduction of the Capital Markets Bill by Congressman
Fields.  

     The SEC and the states had been working in earnest for two
years to address some of the problems in our dual system of
regulation.  The proposal for federal pre-emption came
unannounced, but we've got to look beyond our immediate reaction
and ensure that the important questions get addressed.

     This Congress has been characterized by a call for
fundamental change.  Many of its members see a wide gulf between
what is, and what should be.  

     Both we and Congress have a choice about how to conduct this
debate:  We can engage it forthrightly, and even
enthusiastically, in the best American tradition.  Or we can man
the barricades, and fight each other tooth and nail.

     Like you, I believe in the value of vigorous debate.  Thomas
Jefferson said we need a little rebellion from time to time; I
now understand more clearly what he meant.  

     I've always felt that it's healthy to question your most
basic assumptions, and the Republican ascendancy has forced all
of us to do just that.  For the same reason, I give credit to
Jack Fields: some of the issues he has raised need to be aired -
- including, in an age of deeply diminished resources, the
duplication of effort between state and federal regulators.

     The debate over the respective roles of Washington and the
States in securities regulation has been proceeding for three-
quarters of a century.  In 1920, Congressman Edward Dennison
proposed a bill under which the federal government would have
enforced state securities laws.  Seventy-five years later, the
Fields Bill proposes that the states enforce the federal
securities laws.  The pendulum has swung from one extreme to the
other.

     At the same time, the current debate has become too pointed,
too passionate, and too polarized.  Harsh words are used to cover
up soft arguments.  Code words like "pre-emption" and "states'
rights" are lobbed like grenades, setting off alarms that drown
out responsible dialogue.

     If we do nothing else today, I hope we can help to change
the tone of the debate from polarized extremes, to one in which
reasonable people can disagree, but still reason together.  We
owe it to the citizens we are sworn to serve.

     The truth is that the current system of securities
regulation is not the system you and I and the Congress would
create if we were starting from scratch.  Although great strides
have been made, it won't surprise you that many think our
combined regulatory structure still looks more like the product
of Rube Goldberg, than of Thomas Jefferson.  

     This is not a criticism of the states, which do an excellent
job of protecting investors.  And it's not a criticism of the
SEC, which does its work well, too.  It is a criticism of the way
we come together, or fail to come together.

     When both the SEC and the states have coordinated and
cooperated, the system has worked.  I like to think that's been
true of my tenure as Chairman.  I don't believe that any
Commission has been more supportive of the states -- and
certainly no Commission has ever been better supported by the
states.  

     Our efforts to work better together began soon after I came
to the Commission.  We created coordinating committees and joint
meetings which, for the first time ever, gave NASAA a role in the
SEC's decisionmaking process.  Together, we've compiled an
enviable record of achievements:  Profile prospectuses.  Joint
sweeps of brokerage firms and investment advisers.  Wrap fee
disclosure.  Joint training of examiners.  Investor education
initiatives.  Enforcement matters like the Prudential case.  And
much, much more.

     But by the same token, when the urge to cooperate has been
lacking, the system has been, at best, dysfunctional -- consider,
for example, the experience of the Commission's 1992 Small
Business Initiatives.  A promising set of initiatives was made
less successful because of a lack of coordination between us.

     No one has worked harder in the cause of uniformity than
NASAA -- I recognize that, and applaud it.  Uniformity is one of
your stated goals, and I believe it offers us a starting point
for a new chapter in the debate -- a middle ground on which we
can build a broader consensus.

     Is there waste and duplication?  Of course there is -- and
by definition, that means that at least part of the problem lies
with the SEC and SROs.

     In an era when all of our budgets are being cut, we need to
cooperate more efficiently, divide responsibilities more clearly,
and use our limited resources more strategically.

     Is the SEC willing to take a hard look at itself as we re-
evaluate our respective roles?  You bet we are -- and we will.

     Are the states crucial for investor protection? 
Unequivocally.  State regulators are the front line of defense,
and you're often the first to identify potential problems, before
too many investors are harmed.

     We recognize and support your vital role.  A few weeks ago,
for example, the SEC introduced its own site on the part of the
Internet known as the World Wide Web.  One piece of information
we made very sure to have up there was the title, address, and
phone number of every single state regulator.

     You do important work.  There are areas in which your role
should be expanded -- examining investment advisers, for example.

     Your programs need to be well-funded.  Whether it is filing
fees from mutual funds, corporate securities, or registration
fees from broker-dealers, I believe that you should continue to
receive the funds you currently receive.  The local cop must be
there walking the beat.

     But at the same time, with a limited number of cops, it's
important that we don't all walk the same beat.  

     I will defend your right to protect investors.  But there is
no defense for duplication; there is no defense for waste; there
is no defense for needless burdens on legitimate businesses.

     If we work at it together, we can come out of this with a
better deal for American investors, businesses, and taxpayers.

     Besides the limited resources we have for investor
protection, there's another compelling reason to seek a better
alignment of state and federal responsibilities:  The world has
remade itself several times over since 1933, and the nature of
the securities business has changed.  Communications technology
is far more advanced because of computers; international travel
and mobility are much easier; and investment instruments are more
complex.  Most importantly, today we are a global market -- we
are not 52 separate markets.

     One state regulator recently wrote that "The states need to
recognize that the industry does face a problem of 52 separate
jurisdictions, and . . . there is a business cost to these
regulations."  I agree.  To force American firms to cope with a
regulatory jigsaw puzzle with each new offering or product, is to
saddle them with a competitive disadvantage in the global
marketplace.

     That regulatory puzzle can also deter foreign firms from
listing here, which in turn reduces the opportunities available
to American investors.  This is a competitive disadvantage for
the nation.

     The sovereign states of the European Union have agreed that,
as of next January, an offering of securities approved by one of
them, is approved by all of them.  Surely we should be watching
that experiment to see if it holds any lessons for us.

     It's easy to show that the current system is far from
perfect.  The hard part is figuring out how to make it better. 
That's why I applaud NASAA's announcement, which you will hear
more about shortly, of a blue-ribbon panel to study the relative
roles of state and federal securities regulation.  The panel
includes some of the most distinguished people in the field.  In
light of the fact that a legislative solution is already being
discussed, I am especially pleased that the panel is committed to
a six-month time frame.

     In the meantime, let me take this opportunity to raise some
ideas about a possible middle ground in six key areas of activity
-- investment advisers; investment companies; registration of
brokers; broker-dealer examination; registration of corporate
securities; and enforcement authority.  I ask you to keep in mind
that these ideas constitute the beginning of a dialogue, not the
end.  

INVESTMENT ADVISERS
     Let me start by addressing an area I believe strongly
requires state regulation: investment advisers.  Their number
exceeds 21,000 today -- an increase of more than 500 percent in
the last 10 years.  Most of them are smaller advisers, who are
examined, on average, once every 44 years.  

     We clearly could use your help.  There's no doubt in my mind
that coverage would be better if the states assumed primary
responsibility for examining the smaller advisers.

     I call this "reverse pre-emption," because the federal
government should step aside and defer to the states when it's
clear that they can do a more effective job.  After all, you're
right on the scene, and able to see problems that may be lost
when viewed from the distance of Washington.

     Earlier this year, Senator Gramm proposed a similar division
of responsibilities.  I think that the states and the SEC ought
to persuade Congressman Fields to endorse Senator Gramm's
proposal, with minor modifications, and add it to his own bill.

INVESTMENT COMPANIES
     It's difficult to make a similar case for investment
companies, which are comprehensively regulated at the federal
level.  In fact, a strong argument can be made that reducing
their oversight by states will not compromise investor
protection.  

     The fact that fund sales are national also makes a good case
for national regulation.  Some of the stories told about the
current system sound like Kafka:  What is a national investment
company supposed to do when several states impose investment
limitations that conflict with federal law -- and conflict with
one another?  As I see it, investment companies would be exempt
from state review, but would continue to file documents with the
states and pay the same fees.  The Commission would continue to
seek input from NASAA in our rulemaking process with respect to
investment companies.  And of course, the states would still
enforce sales practice violations.

     It seems to me that the investment company and investment
adviser proposals make a great deal of sense.  Together, they
constitute a good beginning on which to build a broader
agreement.  To acknowledge their merit is to show good faith and
to build credibility early in the legislative process.  I'd like
to see the SEC and NASAA work together to do that.

REGISTRATION OF BROKERS
     That brings me to broker registration.  State regulators
have a compelling interest in who is opening up shop in their
area.  The states should continue to license brokers doing
business within their borders.  

     At the same time, brokers and firms have a compelling
interest in a centralized and predictable registration system. 
NASAA has made significant efforts to coordinate state
registration processes through the Central Registration
Depository.  But the system remains cumbersome.  There's a need
for greater uniformity of the criteria state regulators use to
decide if a broker can do business in the states.  The current
system can too often seem arbitrary.

     When a broker changes firms, for example, if there's been a
complaint about him, his registration can sit on a state
regulator's desk for weeks or months.  That's not always
efficient, and in many cases, it's not fair.

     As things stand today, a broker can accumulate a number of
complaints and trigger no regulatory review as long as he stays
with one firm.  Because it is legally easier to deny a license
than to revoke one, the system focuses your attention on the
point in time when a broker changes firms.  Although I understand
the reasons for this, investors would be better protected if our
response were triggered by complaints, not by job changes. 
Technology can be part of the solution.  The new CRD will begin
to come on line next year, giving you a powerful new tool that
will help you focus on complaints when they occur.  There will be
no reason to wait for a broker to transfer firms before you take
action; and from the firms' and the brokers' perspective, the
system will be more fair and more predictable.  I applaud your
diligent work in cooperating with the NASD and the securities
industry to design a more rational and fair licensing system.

     In addition, I understand that some of you have discussed
the possibility of a "national license."  That also sounds like
an interesting idea, and I'd encourage you to pursue it.  

     One of the most difficult problems in our current system has
to do with making unadjudicated complaints available to the
public on the CRD.  It pits a broker's right to due process
against an investor's right to know her broker's background. 
Personally, I would be more inclined to make unadjudicated
complaints public if we found a mechanism to take meritless or
unpursued complaints off the system within a reasonable time,
let's say 2 years.  Investors need to know who they are dealing
with -- but at the same time, a complaint is not a conviction and
should not stain a broker's record permanently.  This strikes a
balance between interests.

     Again, I understand that this involves state record keeping
laws and that some progress is being made.  If we find ways to
take complaints that are meaningless off the system, it can only
make the overall system more meaningful.


EXAMINATION OF BROKER-DEALERS
     You have an interest in how business is being conducted in
your neighborhood.  For that reason, the states should continue
to examine broker-dealers who are operating within their borders. 
State regulators play an especially important role in examining
the bucket shops and fringe elements that may well escape the
SEC's notice. 

     I believe that states should continue to receive the same
fees they receive currently.  But I also believe that the states
shouldn't impose supplemental requirements that exceed federal
and SRO standards with respect to books and records and capital
requirements.  Maybe there's a flaw in our books and records law,
or our capital requirements, that makes them less useful as a
standard.  If that's the case, I commit to work with you
immediately to see if we can address your concerns in OUR rules.

     Imagine that you're a legitimate firm trying to do business
in the United States.  What's your biggest nightmare?  Fifty-two
separate books and records laws!  If that's not enough, add 52
separate capital requirements.  

     Lest anyone interpret this as an attack on the states, I
remind them that the SEC is one of the 52.  We need to work
together to give securities firms the uniformity and
predictability they need.

     Let's be honest: Uniform rules are rarely adopted uniformly. 
Each party to the process tinkers around the edges, creating a
regulatory maze for firms to find their way through.  That serves
no one well.  True uniformity, on the other hand, breeds
compliance.

     We also need a more efficient use of federal, SRO and state
examiners.  There are too many horror stories out there like the
one I heard the other day -- a brokerage firm was subjected to 15
sets of securities examiners in the span of 24 months.  You can
almost envision it:  One examiner comes in just as another one is
leaving.  He demands all the same information.  Why does this
happen?  Simply because you and I are not coordinated.  There's
no excuse for that.

     We need to be more sensitive to the disruption we cause the
firms.  I envision a new partnership where we coordinate better
and share intelligence whenever we can.  At the SEC, we recently
created an Office of Compliance Inspections and Examinations to
better coordinate our own examinations.  And now we're working
with the SROs to correlate our schedules systematically.  I
intend to convene a "Planning Summit" where the SEC, the SROs,
and the states will come together to wrestle with these issues. 
We must find a way to examine firms effectively without tripping
over ourselves.  This Summit would not be a one-time meeting --
we need to meet regularly to discuss hot areas, scheduling,
firms, priorities, and other areas of critical interest.

REGISTRATION OF CORPORATE SECURITIES
     We could also divide responsibilities better in registering
corporate securities.  Before I go further, let me remind you
that our EDGAR database of corporate filings is now up on the
Internet -- it's a tool not only for investors, but for state
regulators as well. 

     States should continue to receive copies of SEC filings and
the current level of fees should be maintained.   Congress should
codify the existing exemptions from state regulation for those
comparable to listed and Nasdaq/NMS securities.

     Certain categories of offerings that have often been a
source of disclosure and sales practice abuses, and are sold
primarily to retail investors, should continue to be reviewed
locally as well as by the Commission -- offerings involving
limited partnerships, blank check, blind pool, bad boy, and penny
stocks. 

     We should consider expanding the exemption from federal
registration for intrastate offerings.  This is something that is
particularly within your special province.  We could make it
easier for corporations to sell intrastate offerings in the state
in which they're headquartered, subject to state registration.  

     For the remaining categories of offerings -- such as Nasdaq
small cap stocks -- perhaps a better system would be to have the
offering reviewed either by the federal regulator, or by a state
regulator, but not both.  The choice might be left up to the
company.  Whatever we finally decide to do, we need to find ways
to facilitate small business capital formation, without
sacrificing investor protection.  

     Along this line, I understand that eight Western states are
experimenting with regional reviews of certain types of small
corporate offerings.  All eight states are actively involved in
the discussion, with one of them taking the lead in the approval
process.  I think that's a promising idea, and I'd encourage you
to expand the scope of this interesting pilot program.

ENFORCEMENT AUTHORITY
     I'll close with a brief word about the area in which we've
worked best together, and that is enforcement.  We've succeeded
in establishing a model that could serve us well in the
registration and licensing area.  

     The Prudential global settlement exemplifies the power we
can bring to bear by working together to protect individual
investors.  We both acted swiftly, putting our sovereign
prerogatives aside in the name of reaching a better settlement
for investors.  I'm convinced that this global settlement will
not only stand the test of time -- it will inspire us as we
redefine our relationship in the months ahead.

     Enforcement is where the knowledge and skills of the local
cop on the beat are especially irreplaceable.

     Who knows the local prosecutors better than you?  Who works
with them day in and day out?  Who has better sources on the
ground?  Who has relationships with local players?

     This is not to say that we've always coordinated our
enforcement actions perfectly.  Could we do better?  Definitely. 
But that's a problem that's solved through leadership, not
legislation.  

CONCLUSION
     I've outlined some preliminary views today.  I've tried to
do so reasonably, but without pulling punches, either.  

     I don't expect you to agree with every point I've made.  But
I do hope you'll respond to them, and to the bill itself, as
legitimate proposals, worthy of debate.  I've also asked Jack
Fields personally to be open to your concerns and to meet with
you.

     The alternatives to a reasoned discussion are unthinkable
and unproductive -- on the one hand, remaining silent in the hope
that it will all go away; on the other hand, shooting sound bites
at Congress across the pages of the daily newspapers.  We need an
honest debate, and we need it soon.  There is no such thing as
being too early to discuss ways to improve our system.  But there
is such a thing as being too late.

     In 1933 and '34, Congress offered American investors
unprecedented protections with the securities laws.  Today, we
have a real opportunity to make this aspect of the New Deal a
better deal for all Americans.  We may very well fail to achieve
it; but we must not fail to try.

                          #     #     #