The Council of Institutional Investors, the Consumer Federation of America, and ShareOwners.org, which represents retail investors, are urging lawmakers to spare the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) from proposed budget cuts. The groups also are asking investors to contact their members of Congress.
Like most federal agencies, the SEC and CFTC are operating based on a continuing budget resolution based on 2010 funding levels that expires on March 4. On Feb. 19, House lawmakers approved a budget resolution for rest of the 2011 fiscal year that calls for a $25 million cut from the SEC’s $1.1 billion budget and a $56.8 million reduction from the CFTC’s $168.8 million budget. The groups also warn that House Republicans have proposed to pare the 2012 funding for federal agencies back to 2008 levels, which would mean a budget cut of about $200 million for the SEC.
If such a budget is approved, SEC Chairman Mary Schapiro has said that the commission would have to slash 600 staff positions and wouldn't be able to implement the 93 rules and carry out the 20 studies mandated by the Dodd-Frank Act. The reductions would "have a very real effect on the SEC's ability not just in respect to Dodd-Frank, but also our core mission," Schapiro said.
The SEC had planned to hire 800 new employees next year to carry out all its Dodd-Frank responsibilities, including overseeing hedge fund advisers, credit raters, and derivatives dealers. Given the budget uncertainty, the SEC already has put on hold its plan to create a new Office of the Investor Advocate, and has significantly limited employee travel, which has slowed down some investigations.
The investor groups have expressed hope that the Senate, which still is controlled by Democrats, would resist significant budget cuts for those agencies.
As Jeff Mahoney, general counsel of the Council of Institutional Investors, observed in a press release: "While regulatory failures were a contributing cause of the financial crisis, the solution is not to cut the funding of the SEC and the CFTC. Rather, the solution should include providing the SEC and CFTC with the resources necessary to improve their effectiveness and better fulfill their important missions--missions which have now been significantly and appropriately expanded by Dodd-Frank. The bottom line is that underfunding the SEC and CFTC will likely guarantee weak enforcement of our securities laws and lax oversight of our financial markets, a result that should concern investors and all Americans."