From Wall Street Giveaway to Pro-Consumer: Reducing Securities Transaction Fees
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From Wall Street Giveaway to Pro-Consumer: Reducing Securities Transaction Fees

For nearly four years, The Security Traders Association (STA) worked “The Hill” in an attempt to get legislation passed that would reduce fees charged for selling securities.

Paul Holmes

For nearly four years, The Security Traders Association (STA) worked “The Hill” in an attempt to get legislation passed that would reduce fees charged for selling securities.  The fees, originally designed to fund the oversight and regulatory activities of the Securities and Exchange Commission (SEC), now generated about five times the agency’s budget. 
 
The Torrenzano Group was retained by STA to conduct a program to achieve passage of the bill.  An aggressive campaign was developed to reposition the issue from what was perceived as a Wall Street giveaway to one that benefited American consumers by allowing them to keep more of the money their investments earned.  The program included a research component, repositioning of the issue, development of new messaging and aggressive media and government relations campaigns, which resulted in passage of the bill by Congress and approval by the president.  During the course of the campaign, however, two major developments occurred – a shift in power in the Senate and the September 11 terrorist attacks – that necessitated quick reaction and further repositioning in order to achieve success.
 
THE CHALLENGE
 
Securities transaction fees (Section 31 fees), levied at the time securities are sold, are used to fund the SEC’s market oversight and regulatory activities.  Fees collected in 2000 amounted to nearly $2 billion, resulting in an overage of $1.5 billion that ended up in the federal government’s general fund.  STA repeatedly failed in its efforts to get legislation approved to reduce fees and return that money to investors.
 
RESEARCH AND PLANNING
 
Through extensive database research, journalist interviews, STA member discussions and feedback from key Congressional representatives, The Torrenzano Group determined that fees charged on the sale of securities was not an issue widely covered by the media.  What little coverage did exist, often described efforts to reduce fees as a “Wall Street giveaway.”  Additionally, messages brought to Congressional representatives emphasized the benefit to Wall Street firms of reducing fees.  Further research indicated that more than half of American workers owned stock, either directly or through mutual funds and 401k and pension plans, and that fees paid by firms that conducted transactions on investors’ behalf were passed on to individuals in the form of higher brokerage service fees.
 
The research made it clear that reduction of securities transaction fees was not a Congressional priority because the issue, perceived as benefiting only a select few, was not popular among voters.  A plan was developed to reposition the issue as one that would have a positive affect on the average American, thereby generating bipartisan support for fee reduction.
 
STRATEGIC APPROACH AND EXECUTION
 
The Torrenzano Group employed a two-track approach to reposition the fee reduction bill.  First, the firm developed new messaging for STA officials to take to House and Senate leaders.  The new messages depicted securities transaction fees as a “hidden tax” on average Americans who, through transactions in mutual funds, 401(k) holdings and pension plans, were the ones actually paying the fee, taking away money that was rightfully theirs to save for retirement, their children’s education, the purchase of a home or to meet other personal and family expenses. 
 
As STA officials began to bring the new message to “The Hill,” The Torrenzano Group arranged meetings with numerous reporters to educate them on the effort to “save American investors $14 billion over the next ten years.”  Over the course of the campaign, the old “Wall Street giveaway” perception gave way to the pro-consumer theme created by The Torrenzano Group – both in statements by public officials and in the increasing media coverage on fee reduction.  The House of Representatives passed the Investors and Capital Markets Fee Relief Act in June of 2001.  Attention then turned to the Senate, where complications soon occurred.
 
ADAPTING TO UNFORESEEN EVENTS
 
After repositioning the issue as a individual investor concern and generating the necessary support among Congressional leaders, two unforeseen events were encountered: Jim Jeffords defection from the Republican Party and the terrorist attacks of September 11.
The Jeffords defection shifted the balance of power in the Senate to the Democrats, who now had a 50 to 49 majority.  Instead of Republican Sen. Phil Gramm, an outspoken STA ally, having significant influence on which legislation made it to the floor for a vote, Democrat Tom Daschle now called the shots.  The Torrenzano Group continued to reinforce the pro-consumer message through the media as STA officials met with Daschle and his staff to convince them of the bill’s importance and reinforce the message that the fees were a hidden tax on average Americans.  The strategy worked and Daschle proclaimed his support for fee reduction.
 
Once again, it looked as though the long sought after legislation would breeze through the Senate.  In fact, Sen. Daschle agreed to take up the bill already passed by the House, rather than pass its own bill that would have required a conference committee to work out differences.  But before the bill could be brought to the Senate floor, STA and The Torrenzano Group faced an additional challenge: 9-11. 
 
In the aftermath of the terrorist attacks, Congressional attention shifted to funding the war on terrorism, financial assistance for New York City and an economic stimulus package.  The Torrenzano Group had to build the initiative’s visibility once again, this time in a new climate where the economy – and the financial industry itself – where seen as key issues. 
In response to the new climate, The Torrenzano Group repositioned the initiative slightly to show how passage of the fee reduction bill would place more disposable cash in the wallets of average Americans, which could be used to buy consumer goods – supporting the economy – or to take new equity positions – supporting the sagging financial markets. 
 
RESULTS
 
The Torrenzano Group’s efforts on behalf of the STA were highly successful.  Media coverage generated by the firm, in tandem with the Congressional support generated through the repositioning of the bill, placed the securities transaction fee reduction initiative in an easily supportable position. 
 
On December 20, 2001, the last day before Congress adjourned for the holidays, the Senate passed into law House bill H.R. 1088, the Investors and Capital Markets Fee Relief Act, previously passed by the House of Representatives. 
 
President George W. Bush signed the bill into law on January 16, 2002.  In what was the most compelling example showing just how successful the repositioning campaign had become, in his approval message, President Bush used words nearly identical to the messaging developed by The Torrenzano Group to depict the issue as a pro-consumer issue – “This legislation will relieve the fifty percent of American households that now own stock, either directly or in pension or mutual funds, from the burden of these fees.”  Endorsements rarely, if ever, get any better than that.
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