Securities and Exchange Commission Chairman Mary Schapiro told a congressional panel last Tuesday that the SEC is poised to take on the scores of directives mandated by the financial-reform bill that President Barack Obama signed into law on Wednesday.
In her prepared testimony, she said that the SEC would have to add 800 new positions in order to carry out responsibilities emanating from the legislation. In response to questions from lawmakers, she said that the SEC had prepared a spreadsheet laying out its assignments and their deadlines.
The White House has proposed boosting the SEC budget by 12% to a total of $1.258 billion in fiscal year 2011. With that level of funding, the SEC could hire an additional 374 staff members, a 10% increase over fiscal year 2010.
Congress, however, hasn't yet acted on Mr. Obama's budget proposal.
The 2,300-page financial-reform measure, approved along mostly party line votes in the House and Senate, touches on nearly every facet of the financial system. Rather than prescribing a detailed overhaul, the measure puts the reform responsibility on federal agencies, which will have to promulgate about 250 regulations, according to some estimates.
With the reform process now in the hands of the regulators, it is unclear how it will unfold. Republicans at the hearing criticized the package, saying it is creating “uncertainty” in the market which hamstrings businesses and investors and damages job creation.
The SEC will take up much of the reform burden, undertaking 124 activities, including 17 studies, to implement the bill, according to an analysis by the Securities Industry and Financial Markets Association.
Ms. Schapiro acknowledged the challenge and assured lawmakers that the SEC has the resources to get the job done.
“We're prepared for the rulemaking task, and we're adequately staffed,” she said before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. “But we'll continue to bring people onboard.”
Although the SEC has dozens of tasks to complete in a short amount of time, Ms. Schapiro said, it will balance meeting statutory deadlines with seeking guidance from the public on regulations that it will propose.
“We will need lots of input from market participants, investors and others ... to know what the contours of the regulations should look like,” she said. “We're committed to both speed and expeditiousness but also a deliberative process that allows us to get the right result.”
One of the portions of the bill that is most important to investment advisers — a provision calling for a study and possible rulemaking surrounding a universal fiduciary duty for investment advisers and broker-dealers when providing retail investment advice — will require the SEC to seek guidance. Ms. Schapiro said that the SEC has put out a request for comment.
“We'll be very consultative on this issue,” she said.
No matter how much the SEC listens to its constituencies and carefully conducts rulemaking, the regulatory process is bound to take unforeseeable twists and turns, according to Republicans.
“We're creating more uncertainty in the marketplace, and investors will remain on the sidelines,” said Rep. Scott Garrett, R-N.J.
The subcommittee chairman, Rep. Paul Kanjorski, D-Pa., ex-pressed confidence in Ms. Schapiro and the SEC, saying that under her leadership, the commission “has pursued an ambitious, results-oriented agenda aimed at protecting in-vestors and restoring market confidence.”
But he said that he, too, will keep an eye on the regulatory process.
“I believe that Congress must focus like a laser beam on this issue by holding regulators accountable for their performance under the landmark statute,” Mr. Kanjorski said, promising to hold many hearings related to the new law.
Republicans themselves are injecting some uncertainty into the process.
Many think that the Republicans stand a good chance of taking control of the House in the fall midterm elections. If they do, GOP leadership has vowed, they will revisit reform and either repeal the bill or upend new regulations.
While he is still in office, Mr. Obama could veto any financial- reform moves that a Republican Congress makes. But Congress could also deny funds for the regulatory process.
E-mail Mark Schoeff Jr. at [email protected].
