Senate Democrats: GOP Cuts to SEC Could Mean Another Madoff

Washington, DC 20515

Dear Chairman Rogers:

We are writing to urge you to fully fund the Securities and Exchange Commission (SEC) at a level that will allow it to carry out its core mission and fully implement its expanded responsibilities under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). 

With our markets and economy still struggling to recover from the worst financial crisis in 80 years, this is hardly the time to handcuff the primary cop on the beat in our financial markets. Safe, orderly markets are a key ingredient in our economic recovery. Ever since the reforms instituted during the Great Depression, unparalleled transparency, investor protection and integrity have been hallmarks of the US capital markets. 

However, the House Appropriations Committee recently voted to cut $222 million from the amount requested for the SEC by the President. The Committee also voted to cut off the SEC’s access to the $50 million reserve fund established in the Dodd-Frank Act. This reserve fund was created to allow the SEC to respond to emergencies or fund technology upgrades in a timely manner that would not require it to sacrifice other priorities.

In the wake of the financial crisis, and in light of the proliferation of high speed electronic trading, the SEC’s core mission has grown far in excess of the funds appropriated to the SEC to carry out that mission. Now Dodd-Frank requires the SEC to increase its oversight of credit rating agencies, hedge funds and other private investment advisors. The SEC is also tasked under the Dodd-Frank Act with overseeing large portions of the over-the-counter derivatives markets, which have never been subject to regulation before and played a large role in the 2008 financial crisis. 

We urge you to provide the SEC with the resources it needs to bring its technology into the 21^st century, capable of monitoring and analyzing the activity of high-frequency traders, to police the security-based swaps market, and to take on the examination of investment advisers, hedge funds and credit rating agencies as required under the Dodd-Frank Act. 

We should also point out that the SEC is fully funded by fees it collects from the industry, so fully funding the SEC would not hinder the efforts underway to balance our budget.

Thank you for your consideration of this matter, which is vital to restoring investor confidence and integrity to the marketplace. 

Sincerely,

Senator Jack Reed

Senator Charles E. Schumer

Senator Richard  Durbin

Senator Robert Menendez