Schapiro: SEC would use funding to bolster exams
Most of the hiring that the Securities and Exchange Commission would do if it got the budget increase…
Most of the hiring that the Securities and Exchange Commission would do if it got the budget increase that it is seeking would bolster its examination staff, SEC Chairman Mary Schapiro told members of Congress last Tuesday.
In testimony before the House Appropriations Subcommittee on Financial Services, she said that the SEC would add about 676 total positions if Congress approved the Obama administration's request for a $245 million boost to its $1.321 billion budget.
Of those hires, 222 would be examiners. It isn't clear how many would do investment adviser exams.
Strengthening oversight of the more than 35,000 firms it monitors is one of the SEC's top priorities, Ms. Schapiro told lawmakers.
“The funding level would allow the commission to enhance its investor protection activities by bolstering enforcement and examination programs, and continuously developing analytical models to identify regulated entities with high-risk profiles,” she said.
The SEC examines about 8% of the 11,700 registered investment advisers under its purview each year. That number is due to decline this year when midsize advisers switch to state oversight.
FURTHER STRAIN
“We are already examining, in my view, far too little of our regulated entities on an annual basis,” Ms. Schapiro said. “These numbers would be further strained if our budget is cut.”
In a Washington dominated by concerns about the burgeoning budget deficit, the SEC has fared pretty well.
For instance, the SEC received a $136 million increase for this fiscal year. That was $86 million less than the Obama administration had requested, but much better than a funding cut.
Most of the 400 new positions added this year were in the Division of Trading and Markets, according to Ms. Schapiro.
Asking for another increase didn't go over well with Republicans on the committee.
“Most agencies haven't received increases like y'all — nowhere close,” said Rep. Jo Ann Emerson, R-Mo., chairwoman of the appropriations subcommittee.
Like most of her Republican colleagues, she is looking for management improvements before Congress allocates more funding to the SEC. Among other things, Ms. Emerson criticized the SEC for failing to stop the multibillion-dollar Ponzi scheme perpetrated by Bernard Madoff and the fraud by Allen Stanford.
“This body is reticent to throw more money at the SEC until y'all have proven that you've addressed your structural problems from within in a comprehensive way,” she said.
Ms. Schapiro emphasized that the SEC's spending is financed by the fees that it charges for securities transactions rather than by taxpayer funds, though Congress does set its spending limits. She also stressed that the SEC needs a larger budget in order to fund the technology required to keep pace with increasingly complex financial markets and products.
Ms. Schapiro also touted what she called “significant improvements” in SEC operations.
She noted that the SEC filed a record 735 enforcement actions last year, though one lawmaker disputed that number, saying that some were cases carried over from previous years.
Later in the day, the SEC came under more congressional pressure about how it allocates its resources.
“The SEC needs to be a better steward of the substantial funding it receives,” according to a report that the House Financial Services Committee was expected to forward to the House Budget Committee.
“The SEC continues to spend time and resources on nonmandatory rule makings, such as the imposition of a fiduciarylike standard of care for broker-dealers,” according to the report, which reflects the views of the panel's Republican majority. “The committee continues to believe the SEC could better protect investors and prevent Madoff-like fraud by using its resources to conduct more examinations of registered investment advisers.”
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