Oral Statement of
                    Arthur Levitt, Chairman
            U.S. Securities and Exchange Commission

                           Concerning
               the Readiness of the United States
            Securities Industry and Public Companies
         To Meet the Information Processing Challenges
                        of the Year 2000

                   Before the Subcommittee on
               Financial Services and Technology
        Committee on Banking, Housing, and Urban Affairs

                      United States Senate

                         July 30, 1997



     Chairman Bennett and members of the Subcommittee:

     I appreciate this opportunity to testify on behalf of the
Securities and Exchange Commission on the readiness of the
capital markets to meet the information processing challenge of
the Year 2000.

     Wall Street faces a particularly serious test in preparing
itself for the Year 2000, given the securities industry's size,
complexity, interdependence, and heavy reliance upon computers.

     The Commission takes the Year 2000 problem seriously.  For
us, this is not a Year 2000 project -- it is a Year 1998 project,
because we need to have solutions in place by then in order to
test them in 1999.

     Securities firms are making a strong, widespread commitment
of time and money to convert their systems.  Although the
government, in the public interest, needs to oversee the
industry's progress, the most punishing blow for any firm that
fails to correct the problem will be dealt not by the government,
but by the market.  If a securities firm is not ready for the
Year 2000, it will have essentially made a choice to not be in
business.  There is obviously no guarantee, but we are confident
that market forces, with active government oversight, will foster
widespread compliance.

     The Commission began its Year 2000 efforts in early 1996.
We have not dictated a specific, centralized approach for the
securities industry to take in addressing the Year 2000 problem.
Rather, we have worked to ensure widespread industry awareness of
the problem and to encourage corrective action, through such
measures as on-site examinations by the SEC and the Self-
Regulatory Organizations, or SROs.

     Overall, we have found that the exchanges, the National
Association of Securities Dealers, and the clearing agencies are
well aware of the Year 2000 problem and have begun to address it.
Most have made significant progress.  We will not tolerate any
laggards.  We are confident that the SROs will be prepared on
time.

     For the investment company community, the challenges are
somewhat different.  Although many investment companies are
affiliated with SRO members, the Commission is their prime
federal regulator.  We are working with the Investment Company
Institute to ensure that its members are aware of Year 2000
issues and take all steps necessary to address them.

     The Commission has developed a close working relationship
with the Securities Industry Association on this issue.  The
SIA's Year 2000 Steering Committee and four working subcommittees
have established a program through which SIA members can share
information.  Of particular note is the SIA's plan to conduct
industry-wide testing during 1999 with exchanges, data
processors, registered clearing corporations, depositories, and
broker-dealers, to prepare for Year 2000 compliance.  The
Commission will actively encourage firms to participate in this
testing program.

     With respect to public companies, the Commission believes
that current laws and regulations are sufficient at this time to
cover reporting obligations concerning any material impact of
Year 2000 problems on operations and costs.  We also believe that
existing accounting and auditing standards will suffice to alert
management, investors, and other users of financial information
of any problem associated with the Year 2000.

     In terms of the Commission's internal information systems, I
am pleased to report to you that by far the most important SEC
system -- our EDGAR database of corporate information -- is Year
2000 compliant.  Other critical systems will join EDGAR by the
end of 1998.

     Contingency planning is an essential component of all Year
2000 preparations.  The SIA will address contingency planning at
a meeting scheduled for September 15, 1997.  The Commission will
actively participate in that meeting and will examine the
approaches being taken by the industry.

     Because this issue has international implications, we have
also raised it with our fellow securities regulators.  We are
working through the International Organization of Securities
Commissions to address this aspect of the Year 2000 problem.

     The change in millennium poses a formidable challenge for
automated information processing.  But the securities industry
has successfully surmounted every hurdle it has faced in years
past; it will surmount this one as well.  It would be unrealistic
to presume there will be no missteps as we move across this
threshold date.  But while we cannot promise perfection, we can
promise that we will have made every effort to be fully prepared.

     We look forward to continuing to work with you toward that
end.  Thank you.

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