A protracted congressional battle over the federal budget could torpedo the SEC's efforts to carry out the duties required by the financial-reform legislation.
As part of the massive Dodd-Frank reform law, the Securities and Exchange Commission is charged with addressing 95 rules and proposals, and conducting 17 studies. Much of that work must be completed over the next 12 months or so.
For the SEC, meeting that daunting schedule on its current budget could prove to be a Herculean task.
“On sheer manpower, are there enough hours in the day and days in the week?” asked Robert M. Kurucza, a partner at Goodwin Procter LLP and a former associate director of the SEC's Division of Investment Management. “If you look at the current resources of the SEC, it's not enough.”
The chances of the commission getting significant new resources are slim — at least any time soon. The Senate Appropriations Committee approved a $1.3 billion budget for fiscal 2011, an 18% hike from the regulator's previous fiscal-year budget. The House Appropriations Committee is likely to follow suit. The Obama administration's proposed budget would have boosted the commission's funding for fiscal year 2011 to $1.25 billion.
The SEC could get caught up in the larger appropriations battle, although there appears to be bipartisan support in Congress for boosting the agency's budget. Even so, the rancorous debate over the yawning federal deficit almost guarantees that Congress will fail to approve the overall budget by Sept. 30, the end of the federal fiscal year. At that point, agencies will have to operate on their current budget under what is called a continuing resolution.
“I imagine the budget fights will be pretty intense,” said Stan Collender, a partner at Qorvis, a communications firm in Washington. “A continuing resolution is very likely. It's about as sure as anything can be politics.”
The continuing resolution could be relatively short-lived — if Congress passes the budget during a lame-duck session in November or December — or it could last well into next year. In the meantime, the SEC will have deadlines to meet.
Mr. Collender, a Capitol Hill veteran who worked for both the House and Senate budget committees, said some agencies would be able to get more funds than others in an extended-fiscal-year budget. But he said it's likely that the SEC will have to tighten its belt until the fiscal 2011 appropriation comes through — whenever that is.
“It would almost certainly mean that the SEC would have to move money from one function to another,” Mr. Collender said. “If you go into next year, it will put a crimp in all the SEC activities where money was shifted away.”
In July, SEC Chairman Mary Schapiro told the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises: “We're prepared for the rule-making task and we're adequately staffed.”
But at the same time, Ms. Schapiro estimated that the regulator would have to add 800 staff members to meet the Dodd-Frank requirements. Under the administration's proposed budget, the agency could have added 374 staff members.
It's unclear how many more hires the plumped-up congressional appropriation will fund.
The Dodd-Frank bill does establish a separate reserve fund of up to $50 million a year, which cannot exceed $100 million at any given time.
But given the deadlines for many of the mandates in the measure, bringing 800 new employees on board at the SEC in a relatively short period could be a tall task.
AMBITIOUS HIRING PLAN
“That's a huge hiring effort,” said John Palguta, vice president for policy at the Partnership for Public Service, a non-profit organization dedicated to improving the federal work force. “You don't stand up that many people quickly.”
Of course, if the SEC can't hire under a continuing resolution, it can still make some progress toward adding to its current staff of 3,632 permanent employees. For one thing, the agency can launch recruiting and conduct interviews. “There's a lot they can do, up to the point of bringing someone on board,” Mr. Palguta said.
When it scouts for talent, however, the SEC faces the same challenge that daunts other government agencies. Many candidates would have to take a sizable cut in pay to join the federal payroll.
Laura Anne Corsell, a partner at Montgomery McCracken Walker & Rhoads and a former attorney in the SEC investment management division, acknowledges that working for the agency is not lucrative. But it does offer other kinds of fulfillment.
“These are all people who could be making a lot more money doing something else,” Ms. Corsell said. Working at the SEC “is an opportunity to make policy and participate in the way in which the financial system works and, at this point in time, is rebuilt. That's a pretty powerful draw to a lot of people.”
Many potential candidates aren't consciously looking for such a mission. The agency must find so-called “passive” candidates, Mr. Palguta said.
“Any agency that does the post-and-pray is not doing a good job,” he said, referring to a simple job posting on a federal website. “They're going to have to find people who aren't looking for a job.”
Conducting such an intensive search puts even more pressure on SEC managers, who must implement Dodd-Frank while they hire. And even when the perfect candidate is identified and landed, the hiring process is not over.
“It doesn't end when you get them in the door,” Mr. Palguta said. “You have to figure out their training, their development, their assignments.”
Meanwhile, the clock on the Dodd-Frank deadlines keeps ticking.
E-mail Mark Schoeff Jr. at [email protected].
