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Regulation and Compliance > Federal Regulation > SEC

Mary Schapiro Describes How SEC Would Deal With Govt. Shutdown: Exclusive Interview

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As Washington was consumed this week with a possible government shutdown after Friday, and as the partisan bickering on this year’s, and next’s, budget dominated the mass media and the interest groups, SEC Chairman Mary Schapiro gave an exclusive interview on Wednesday with AdvisorOne's Washington Bureau Chief Melanie Waddell.

(On Wednesday night, House Speaker John Boehner and Senate Majority Leader Harry Reid held a meeting, following which President Obama released a statement in which he said "I remain confident that if we're serious about getting something done we should be able to complete a deal and get it passed and avert a shutdown." In a Thursday morning television interview, Boehner said"I feel good about eventually getting to a deal." Read more on the possible government shutdown.)

Schaprio consented to address a broad review of the issues facing the SEC, and the impact that the resolution of those issues would pose for advisors. In this excerpt from that longer interview, which will appear in Investment Advisor magazine's May issue, Schapiro first spoke about the more pressing April 8 budget deadline that could lead to a shutdown of the federal government, and what that would mean for the Commission, those advisors who interact with the SEC and investors.

Melanie Waddell: The possibility of a government shutdown is looming and the SEC is still struggling under the current CR. What’s your worry about how the budget will play out?

Mary Schapiro: It’s hard to predict where this will land and I don’t want to speculate too much about it. Obviously we’ll know in a couple of days at least with respect to the fiscal year 2011 budget, and the process is ongoing to arrive at the 2012 budget.

I’ve testified at House Appropriations [Committee] and once at Senate Banking [Committee] on the budget, about what the impacts are going to be on the SEC of different scenarios that different members of Congress have put forward.

It’s hard to be too specific about how investors in the market will be most affected by cuts in our funding, because it really does depend on how deep the cuts are. We will have to make very difficult choices if the cuts are deep about what priorities we can continue to support and which of our activities, while still very important, are just ones we’re not able to support without additional resources.

Waddell: The SEC is still struggling under the current continuing resolution (CR).

Schapiro: Right. The SEC and the Commodities Futures Trading Commission (CFTC) are the only two agencies that are subject to annual appropriations. So unlike other regulators, we, like much of the federal government, are operating under last year’s budget level under the continuing resolution.

Waddell: What happens at the SEC in the event of a government shutdown?

Schapiro: We will shut down along with—not the banking regulators—other agencies. We will have a skeletal amount of staff on board to do what is


permitted under the law, which is to work in activities that are necessary to protect life and property. We will do some market surveillance and a number of other activities but the vast majority of the SEC functions will not continue during a government shutdown.

Waddell: Would you and the Commissioners even report to work?

Schapiro: I believe the commissioners and I are exempted from the shutdown provisions and we can designate a certain number of employees to carry on certain critical functions. We’ve gone through our contingency plans, as other agencies are doing now.

Two of the primary areas where cuts are going to have a big impact is our ability to hire the new skill sets that we’ve been successfully bringing in to the agency that allow us to do a better job of examining and policing Wall Street. The other that’s really concerning me is the ability to upgrade our technology to address issues like May 6 [the May 6, 2010 flash crash] and the general growth and complexity in the market that requires us to be more technologically enabled to be effective.


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