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Retirement Planning > Social Security > Social Security Funding

As State Securities Regulators Worry About SEC Funding, Government Shutdown Looms

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As state securities regulators gathered at their annual public policy conference in Washington on Monday, the threat of a government shutdown looked imminent.

While state securities regulators’ topic of focus was largely the Dodd-Frank Act, state securities regulators also voiced their concern about the Securities and Exchange Commission’s (SEC) funding shortfall, which is tied up in the federal budget discussion.

david masseyDavid Massey (right), president of the North American Securities Administrators Association (NASAA), said at the conference that work concerning Dodd-Frank was “far from over.” NASAA’s goal was to “make sure investor protection issues will not be weakened due to funding constraints.”

Norman Ornstein, a resident scholar at the American Enterprise Institute (AEI) in Washington, and a long-time observer of Congress and politics who also writes a weekly column for Roll Call and is an election analyst for CBS News, said during his luncheon address at the NASAA event that Congress was again grappling with yet another Continuing Resolution (CR) to fund the government.  He said we were “teetering at the edge of a government shutdown.” In fact, he predicted, there would be “at least one shutdown, and possibly more than one.”

The current CR that Congress agreed to would fund the government until April 8.

Sen. Tom Harkin (left), D-Iowa, chairman of the Health, Education Labor and Pensions (HELP) Committee and a member of the Senate Appropriations Committee, predicted in March that because Congress is so “tied in knots” over the budget, that a government shutdown was likely in the offing. Harkin told AdvisorOne that he’d like to see a CR “at last year’s level” to fund the government until year-end, so lawmakers can focus on crafting “a budget for next year.”

mary schapiroSEC Chairman Mary Schapiro (right) has told Congress that CR’s hamper the agency’s ability to operate and hire and attract knowledgeable and experienced personnel. NASAA reiterated its position that the SEC's budget should be the $1.3 billion that was authorized by Dodd-Frank.

Indeed, Ornstein with AEI said that the “cuts to the SEC’s budget” as put forth by House Republicans “have nothing to do with fiscal discipline,” If members of Congress were “serious about fiscal discipline” they’d increase the budget, he said.

During a separate press briefing at the NASAA event, both Massey and Jack Herstein, assistant director of Nebraska’s Department of Banking & Finance and Bureau of Securities, said that an under funded SEC would likely lead to an increase in fraud. Herstein will take over as NASAA's president come September.

Massey, Herstein and Marc Minor, Bureau Chief for New York’s Office of the Attorney General’s Investor Protection Bureau, also listed some of the products that are still under state securities regulators’ radar. One area of concern is structured products, Massey said, but “not the sale of these products to institutions, but esoteric products that are sold to mom and pop investors.”

Minor lumped “structured products” into any product that is “marketed in a way as to diminish the risk of that product.” Both Massey and Minor also agreed that auction rate securities is “still a live issue.” Foreign currency trading scams are also prevalent, Massey said, while Herstein noted that “old trends” are coming back, like oil and gas schemes.


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