The SEC’s Fiscal 2009 Budget: More Money Please

SEC Chairman Cox testified before the House Subcommittee on Financial Services and General Government Committee on Appropriations on Wednesday, April 16th regarding the President’s budget for fiscal year 2009. Supporting the President’s proposal, the Chairman began by noting that the agency’s budget has not been increased for three years. Under the proposed fiscal 2009 budget, the SEC would receive about a four percent increase over two years. After taking into account inflation and the impact of the pay raises for the staff, the proposed budget would permit the SEC to maintain the staff at about its current 2007 level in fiscal 2009.

Nevertheless, the Chairman assured the Committee that “[t]he SEC is continuing to pursue wrongdoers in all corners of the securities markets, while also applying enforcement recourses to areas that pose the greatest risks to investors.” Those areas include the work being done by Enforcement’s subprime working group, which is aggressively investing possible fraud and market manipulation as well as:

• insider trading by large institutional traders;

• wrongdoing in the municipal bond market;

• microcap fraud; and

• scams against seniors.

At the same time, the Division will also continue to return funds to harmed investors through Fair Funds. Efficiency through “The Hub” – a recently-initiated agency wide database – will aid the staff in these endeavors, Chairman Cox noted.

The Chairman did not explain how the agency will continue to aggressively police the markets with the same number of people through the end of fiscal 2009 or September 30, 2010. While “The Hub” may aid efficiency, it seems doubtful that it is the answer to continually doing much more with less.

There is little doubt that the Division faces a daunting task going forward. Policing all corners of the markets, as Chairman Cox assured the Committee the Division would, is increasingly a global task, as even a casual review of last year’s enforcement cases demonstrates. At the same time, the challenges facing the Division are increasingly complex and belied by the overly simple description of Enforcement’s policing efforts given to the Committee.

In addition, as the Enforcement prepares to meet the challenges of tomorrow it must also deal with repeated calls for reform of its procedures, additional transparency and more speed and efficiency. Facing an increasingly complex, ever-changing and more difficult environment year after year with the same resources in not just daunting, at some point it becomes impossible. Yet, maintaining the integrity of America’s capital markets is an essential, critical mission. Perhaps the Committee will realize this and add a few dollars to the budget.