SEC Chairman Proposes Lower Commissions

SEC Chairman Arthur Levitt, approaching the end of his long tenure, is pushing mutual fund directors to reduce commissions that funds pay to brokerages, much of which are being passed on to investors.

Levitt also is threatening action if companies continue to give stock options to executives without shareholders’ approval.

Investors might be surprised to learn that commissions paid by mutual funds to traditional brokers to fill their orders have remained steady at 5 to 6 cents a share for nearly a decade, Levitt noted in remarks prepared for delivery Friday afternoon at Fordham University Law School in New York City.

The emergence of electronic markets, bringing far cheaper transactions, should have driven the commissions lower, he said.

Levitt also criticized other financial-industry practices that he maintains misuse investors’ money. Among them: the lack of dollars-and-cents pricing in the options-trading markets, which lag the equities markets in that regard.

The New York Stock Exchange and Nasdaq are expected to have full-scale decimal trading in 1-cent increments, replacing the 200-year-old fractions, by next April. But the stock-options markets, Levitt noted, will be trading only in five- and 10-cent increments.

“Investors are being denied the benefit of narrower spreads--and the industry is keeping the difference for itself” as profit, he said.

Levitt, appointed by President Clinton in 1993, has not specifically said he plans to leave the Securities and Exchange Commission after a new administration takes office in January. But he is widely expected to do so regardless of whether Vice President Al Gore or Texas Gov. George W. Bush captures the White House.