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SEC chief warns against budget cuts

New mandates by the financial overhaul will increase the strain, Mary Schapiro warns.

February 05, 2011|Jim Puzzanghera

WASHINGTON — Securities and Exchange Commission Chairwoman Mary L. Schapiro warned that her agency doesn't have enough money to police Wall Street adequately, let alone draft dozens of new regulations required under the financial reform law. And that's before congressional Republicans try to cut the SEC's budget further.

"It is a strain that is already having an impact on our core mission -- separate and apart from the new responsibilities that Congress gave us to regulate derivatives, hedge fund advisors and credit-rating agencies," Schapiro said at a conference Friday in Washington. "It is a strain that will intensify the longer the budget remains at existing levels."

The SEC has long complained that it doesn't have enough money to oversee the markets, even though public companies and other issuers of securities funnel hundreds of millions of dollars in fees to the federal government.

Those concerns were amplified by the financial crisis when the SEC was accused of failing to rein in the risky behavior of financial firms.

The SEC's budget for the 2010 fiscal year ended Sept. 30 was $1.2 billion, a boost from $960 million in 2009. President Obama's 2011 budget called for SEC funding to rise to $1.26 billion. But Congress never passed that budget.

GOP opposition scuttled attempts by Democrats late last year to provide a temporary funding boost to the SEC and another key regulator, the Commodity Futures Trading Commission.

Those agencies depend on congressional appropriations for their budgets, unlike the Federal Deposit Insurance Corp. and other financial regulators that are funded by industry fees.

Schapiro testified last summer that the SEC needed to hire 800 employees to implement new regulations in the Dodd-Frank financial overhaul law. She said Friday that the lack of additional money had "hampered our ability to do what investors and capital markets deserve."

Schapiro also said budget constraints could force the SEC to "pull the plug on data management systems and on a digital forensics lab needed to re-create the data that sophisticated fraudsters leave on hard drives and iPhones."

Key House Republicans, who opposed the financial overhaul law, also oppose a budget increase for the SEC and the CFTC because of the huge budget deficit.

"During our country's current debt crisis, all branches of government -- including Congress -- have to tighten their belts," Rep. Scott Garrett (R-N.J.), chairman of the House subcommittee that oversees capital markets, said last month.

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