Just as Securities and Exchange Commission Chairman Mary Schapiro is again airing complaints that the SEC’s dire funding situation is wreaking havoc on the agency’s ability to police the securities markets, a group of 41 prominent securities lawyers is lobbying Congress to give the SEC the boost it needs.

The group of lawyers–which includes the former head of the SEC’s Office of Investment Management Andrew “Buddy” Donohue, and former SEC Commissioner Annette Nazareth—tell lawmakers in their Jan. 26 letter that the SEC’s funding situation is “critical,” and that “the regulator of our capital markets is running almost on empty.”

Stephen Crimmins, a partner with the law firm K&L Gates in Washington, who’s a former Deputy Chief Litigation Counsel in the SEC’s Enforcement Division, spearheaded the lawyers’ letter to Congress. Crimmins told me on Feb. 8 that lawmakers are basically “pulling the rug out” from Schapiro in not following through with the mandate set out in Dodd-Frank to double the SEC’s budget. Crimmins says some of the lawyers are planning to follow-up with lawmakers in a matter days to get feedback on the letter.  

Schaprio told a group of lawyers during an early February speech that the continuing resolution that the SEC is operating under “is a strain that is already having an impact on our core mission—separate and apart from the new responsibilities that Congress gave us to regulate derivatives, hedge fund advisers and credit rating agencies.”

As Crimmins points out in a recent report that he penned, Congress formally amended Section 35 of the Securities Exchange Act of 1934 to authorize SEC budgets of $1.3 billion for fiscal 2011 (beginning on October 1, 2010, just 10 weeks after Dodd-Frank’s enactment); $1.5 billion for fiscal 2012, $1.75 billion for fiscal 2013, $2 billion for fiscal 2014, and $2.25 billion for fiscal 2015.

Congress, Crimmins wrote in his report, missed the deadline on its first installment, and today, “four months into the new fiscal year, Congress has still not appropriated any SEC budget.” The agency, he continued, “hobbles along at pre-Dodd-Frank funding levels, despite substantial new obligations and deadlines imposed by Congress. Worse yet, Congress is now talking about freezing or even cutting the SEC’s pre-Dodd-Frank budget.”

Here’s what the group of lawyers told members of Congress—including Senate Banking Committee Chairman Tim Johnson, D-S.D., and Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee—that they’d like to see. The lawyers said they support a substantially increased appropriation for the SEC paid for entirely through the SEC’s longstanding registration fee mechanism, at no expense to the American taxpayers and with absolutely no deficit impact, or preferably the adoption for the SEC of the same funding model that Congress has used successfully for decades for the nation s banking regulators.”

The lawyers went on to tell lawmakers that “protecting America’s investors (large and small) from investment fraud, restoring integrity to the markets, and encouraging capital formation for America's businesses by drawing investors back into the markets are priorities too important to sacrifice. For America's capital markets to maintain their dominance on the world financial stage, they need a strong, smart and effective regulator, and this requires adequate funding.”