Podcast Center
Video Center
Webcasts
Resource Center
Events
December 22, 2010 at 06:11 AM
As part of a flurry of legislative lame-duck activity at year’s-end, the Senate and House approved Tuesday a continuing resolution (CR) that forestalls a federal government shutdown but that leaves the SEC, among other federal agencies, without some of the extra funds it needs to efficiently run, and expand the operations of, their agencies.
The CR provides funds for the government to operate until March 4, 2011, leaving the 112th Congress to address a broader appropriations bill to fund the government in FY 2011 (an earmark-filled omnibus spending bill was killed in the Senate last week).
In the case of the SEC, the lack of funding has already led the agency to cut back on travel for examiners out of the Commission’s regional offices—only day trips are allowed—and to institute a hiring freeze for non-mission-critical positions. An SEC spokesman said it has also suspended the hiring of expert witnesses in certain trials, such as in complex securities cases, or the taking of depositions in other cases. Those ‘harmed’ investors who may get restitution out of an enforcement action brought by the Commission may also need to wait longer under the budget chill to receive funds due them.
In an interview with AdvisorOne, the SEC’s director of public affairs, John Nester, said the Commission believes that a “well-funded, effective SEC is essential for investors and the markets,” but that having to operate under the continuing resolution is “already forcing the agency to delay or cut back enforcement and market oversight efforts.” Nester further said that the longer the SEC “operates under significant budgetary restrictions, the greater the impact.”
The continuing resolution keeps the SEC’s budget for the current fiscal year—which runs Oct. 1 through Sept. 30, 2011—at the FY 2010 level of $1.118 billion. The SEC had requested $1.258 billion in FY 2011. The SEC is also one of those government agencies that takes in more than it spends, so it is never a net contributor to the federal budget deficit.
The Commission will continue to write rules, but its oversight ability is being compromised under the budget uncertainty, as is its ability to hire examiners with specialized knowledge and skills to oversee hedge fund managers, for example, or high-frequency trading.
Whether the budget uncertainty will affect the Commission’s ability to carry out a host of specific studies, rulemakings and
new offices mandated under the Dodd-Frank financial services reform bill remains to be seen.
Already the Commission has publicly listed a number of steps required under Dodd-Frank that it says it cannot implement due to “budget uncertainty,” including creation and ongoing staffing of offices of the Investor Advocate.
The president and CEO of the Financial Services Institute (FSI), Dale Brown (left), 
