SEC Needs Additional Funds to Implement Dodd-Frank: Chairman

By | February 14, 2013

The top U.S. securities regulator will urge lawmakers on Thursday to boost its funding, saying a failure to increase the budget could hamper its ability to enforce new rules of the road for Wall Street.

The Securities and Exchange Commission “does not yet have all the resources necessary to fully implement” the 2010 Dodd-Frank Wall Street reform law, SEC Chair Elisse Walter will tell the Senate Banking Committee, according to prepared remarks viewed by Reuters.

“If the SEC does not receive additional resources, I believe that many of the issues to which the Dodd-Frank Act is directed will not be adequately addressed,” she added.

The SEC and other financial regulators in recent years have been denied big budget boosts despite broad expansion of their responsibilities after the 2007-2009 financial crisis.

Republican lawmakers in particular have stood in the way of funding hikes, using Congress’ appropriation authority to hinder stricter supervision of financial markets.

The SEC’s latest plea for more money comes as federal agencies, including the SEC, face a budget cut due to “sequestration” — automatic across-the-board spending cuts put in place as part of a larger congressional budget fight. They are due to kick in March 1 unless lawmakers agree to an alternative.

Walter does not explicitly mention concerns about sequestration in her prepared testimony, but the SEC and several other regulators that are slated to testify on Thursday could face questions about it during the hearing.

In preliminary estimates last year of how sequestration would affect each government agency, the White House’s Office of Management and Budget said the SEC’s $1.321-billion budget could face a cut of $108 million.

The Commodity Futures Trading Commission is also slated for a $17 million cut, while the Consumer Financial Protection Bureau faces a $34 million cut, according to the OMB document.

Both the SEC and CFTC have their budgets appropriated by Congress, though the SEC’s is deficit neutral because the monies are matched through industry transaction fees.

The CFPB is a government regulator that is funded by the Federal Reserve and does not receive congressional appropriations.

Nevertheless, it is still on the sequestration chopping block along with some other non-government, industry-funded organizations like the Public Company Accounting Oversight Board and the Securities Investor Protection Corp.

The head of the PCAOB told reporters on Wednesday that the federal government is wrong to target his non-profit corporation for sequestration and said the PCAOB may consider asking for a legal review of the matter from the Justice Department.

An OMB official said Wednesday that the sequestration law reduces budget resources in all accounts unless they are exempted. The CFPB, PCAOB and SIPC’s accounts were not granted an exemption, and the PCAOB and SIPC have funds available through federal laws. That means their accounts can be sequestered, the official said.


Walter said in her prepared testimony that President Barack Obama’s fiscal 2013 budget request of $1.566 billion for the SEC could help hire 676 new staff to help carry out exams and investigate wrongdoing. The agency also needs the money, she added, for technology upgrades.

The SEC, CFTC and CFPB have all remained silent on how they are preparing in the event sequestration occurs, though Walter did say on Wednesday the agency is ready to work with the PCAOB if it is affected.

The SEC denied a Freedom of Information Act request by Reuters in November 2012 for its for sequestration contingency plans, saying it was withholding a document because it was “predecisional” in nature and exempt from public disclosure under the FOIA law.

A similar request made to the CFTC also came up empty, with the agency telling Reuters it had no responsive documents.

The CFPB on Wednesday declined to comment, saying it would be premature because of ongoing discussions by Congress to avert the cuts.

Spokesmen for the CFTC and SEC also declined to discuss how they might deal with sequestration if it comes to fruition.

Topics Legislation

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