As we enter the New Year, the Republican agenda of “defunding” Dodd-Frank that was aired during 2010 looks to be coming to fruition. Case in point: the Securities and Exchange Commission (SEC) not being awarded extra funds under the continuing resolution (CR) spending bill, H.R. 3082–the Full-Year Continuing Appropriations Act, 2011—which passed the Senate on Dec. 21. Another worry for advisors in 2011: that a debilitated SEC will need oversight assistance from a self regulatory organization (SRO)—namely the Financial Industry Regulatory Authority (FINRA).
As it stands now, the SEC will continue to function under its FY 2010 budget until March 4, which under the CR keeps the SEC’s budget from Oct. 1, 2010, through Sept. 30, 2011 at $1.118 billion. The SEC had requested $1.258 billion in FY 2011. Under the original spending bill, the SEC would have gotten an increase of $205 million, or 18%, over the agency’s FY 2010 budget—putting the agency’s total budget at $1.3 billion. The boost would have helped the agency implement the scores of new rules under Dodd-Frank, and also help the agency with its oversight and enforcement duties as well as give needed funds for technology updates.
David Tittsworth (left), executive director of the Investment Adviser Association (IAA) in Washington, says that the CR “kicks the can down the road” by freezing funding for the SEC and most other federal agencies at 2010 levels. “The stage is now set for a battle between the new Republican majority in the House and the Obama Administration,” he continues, as both sides need to resolve funding issues before the resolution expires on March 4, 2011, or they will face the prospect of shutting down the federal government.
The SEC has listed on its website its “planned” activities regarding Dodd-Frank implementation throughout the New Year, but how this agenda actually plays out remains questionable. SEC Chairman Mary Schapiro (left) has already commented about the SEC’s inability to implement provisions under Dodd-Frank due to lack of funding. As Don Trone, CEO of Strategic Ethos, bluntly states: “If the SEC does not get significant, additional funding it’s not going to be able to support all 243 rulemaking activities [under Dodd-Frank], and 67 studies contemplated in the Act.”
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The SEC’s oversight capabilities will be considerably constrained under its current budget, with an SEC spokesman saying the Commission has already cut back on travel for