Memo to Congress: Increase funding for the SEC

May 22, 2013

The newly confirmed chairman of the Securities and Exchange Commission, Mary Jo White, testified to the House Financial Services Committee on May 16 and requested an increase in funding for her agency. SEC funding does not come from federal government revenues, but from fees assessed on securities transactions. White’s request to increase the agency’s funding does nothing to increase the federal deficit or take funding from other programs. She is merely asking to spend the money the agency collects.

This is the SEC’s Budget Authority (what Congress says the SEC can spend, in the center column) and the Actual Obligations (what was spent, in the right column) for the last several years, in thousands:

There have been increases since the financial crisis in 2008, but the Budget Authority from Congress was frozen between fiscal year 2012 and 2013. Chairman White explains why this will not do:

The securities markets we oversee are continuously evolving, and the technology of today is most certainly not the technology of tomorrow. Fast-paced and constantly changing markets – fueled by financial firms whose annual technology budgets exceed what the SEC spends on its entire operations – require constant monitoring and analysis. When issues are identified, the investing public deserves appropriate and timely regulatory and enforcement responses. The securities industry also has been growing rapidly in size. In the last decade, trading volume in the equity markets has more than doubled, as have assets under management by investment advisers. It is expected that these trends will continue in the foreseeable future. At the same time, the SEC’s jurisdiction has grown to cover significant new aspects of the securities markets.

And how much of the fees that the SEC collects would Chairman White like to spend?:

The SEC is requesting $1.674 billion for FY 2014. If enacted, this request would permit us to add approximately 676 new staff positions, which are needed today both to improve core operations and implement the agency’s new responsibilities. The budget request would provide additional funding for the following key areas:

• expand oversight of investment advisers and improve their regulation and


• bolster enforcement;

• economic and risk analysis to support rulemaking and oversight;

• build oversight of derivatives and clearing agencies;

• enhance reviews of corporate disclosures, including supporting implementation of the


• leverage technology, including enhancing the tips, complaints, and referrals system,

build data analysis tools, improve our e-Discovery systems, and bolster IT

security; and

• enhance training and development of SEC staff.

White is requesting a 21 percent bump in spending to support, implement and enforce the 90 Dodd-Frank Act provisions that require SEC rulemaking.

Message to Congress: financial markets work best when investors are confident that they will be dealt with fairly. This requires “cops on the beat,” and the markets are enormous:

Separate data about the US from SIFMA, puts the US bond market at just under $37 Trillion (including municipal bonds) as of the end of 2011 (a year later than the McKinsey data), and Bloomberg puts US stocks now (April 2012) at about $21.4 Trillion.

A budget increase to $1.6 billion to police markets worth over $50 trillion sounds like a good deal for Congress. Time to give Chairman White the budget authority she requests.

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