SEC and CFTC to get extra resources for investigations and enforcement
US financial regulators responsible for writing a bulk of the rules required by the Dodd-Frank Act, managed to lock in more funding for next year, even as lawmakers attempt to freeze spending for most government agencies, as proposed by the House Appropriations Committee.
The House of Representatives passed a proposal to boost the SEC budget more than 10 percent to $1.25 billion for the fiscal year ending on September 30, 2011. The Commodity Futures Trading Commission (CFTC) will see its budget escalate to roughly 35 percent to $261 million if the bill passes the Senate.
‘This is just the first step in the legislative process, it is not a done deal just yet and we don’t know what’s going to happen,’ says Jim Allen, head of capital markets at CFA Institute.
According to Allen, the SEC needs the extra money to help in rebuilding a new image after failing to catch the Bernard Madoff Ponzi scheme and the risky Wall Street practices that contributed to the financial crisis.
‘The SEC needs resources like people who can understand and analyze information ahead of time,’ says Allen. ‘Having adequate and necessary resources are always helpful.’
Prior to this, US financial regulators and institutional investors had been urging Congress to increase the SEC and CFTC funding.
A letter to Senator Harry Reid and Senator Mitch McConnell, written by Kurt Schacht, managing director of CFA, and Joe Dear, chair of the Council of Institutional Investors, highlighted that added funding would only help the economy in regaining its traction.
‘The ability of the SEC and the CFTC to effectively pursue their missions and responsibilities, remains, in our view, critical to the stability of our financial markets and the overall US economy,’ the letter states. ‘We write to express our strong support for providing increased funding for the SEC and CFTC.
The letter served as a follow up to last year’s report by the Investors Working Group (IWG), an independent organization co-sponsored by the CFA Institute and the Council of Institutional Investors, that proposed ideas to help bridge the gaps in the current system such as, adopting new regulations and imposing careful constraints on proprietary trading at depository institutions and their holding companies.
Moreover, the IWG explicitly recommended that ‘Congress . . . ensure that funding keeps pace with rapid market changes and financial innovation.’
‘Now that they [Congress] are heading to the continuing resolution the letter is staying true to the proposals that IWG released,’ says Allen.
