To Securities and Exchange Commission Chairman John S. R. Shad, the American investor enjoys the biggest, most efficient and fairest securities markets in the world; and armed with new enforcement technology, the SEC will help those markets become even better.
To Royce Griffin, securities administrator of Colorado, American investors are threatened by "an epidemic of securities fraud," and the SEC, despite its best efforts, is "woefully lacking" in staff and resources to confront the threat.
Shad, Griffin and other experts will square off today before a House subcommittee that is probing the ability of the SEC and other regulatory bodies to deal with the burgeoning growth in securities trading.
That growth is easily documented. Since 1980, the volume of shares traded on the New York Stock Exchange has increased by more than 300 percent, and the number of initial public stock offerings registered with SEC has grown by a comparable amount.
The number of registered broker-dealers has increased 80 percent, the number of investment companies is up by more than 60 percent and the number of investment advisers has almost doubled.
There has also been a "corresponding growth" in the indicators of "potential securities fraud," according to Rep. Timothy E. Wirth (D-Colo.), chairman of the subcommittee on telecommunications, consumer protection and finance of the House Energy and Commerce Committee, which has scheduled the SEC oversight hearing for today.
Wirth has cited increases of nearly 100 percent in the number of complaints and inquiries received by the SEC in this period, and of 317 percent in complaints lodged with the National Association of Securities Dealers, an industry self-regulatory organization.
Despite the increases, the size of the SEC staff is slightly less in the current fiscal year than it was in fiscal 1979, Wirth said. The pressures to reduce federal spending don't offer a bright prospect for staff increases.
"Clearly, the commission staff has not been able to keep up with the expansion of the marketplace," said Griffin, in testimony prepared for today's hearing. Griffin is also president of the North American Securities Administrators Association.
Shad said in his prepared testimony that, even with a somewhat smaller staff, the SEC has produced record results: SEC inspections of investment companies and investments advisers rose 115 percent between 1981 and 1985, and the number of enforcement actions is 41 percent higher.
The commission's efforts are supported by an increasingly sophisticated electronic monitoring of stock transactions on the American and New York stock exchanges, he said. The Chicago Board Options Exchange and the NASD, which supervises over-the-counter trading, are moving toward such systems, the SEC chairman added.