Since the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in July, many federal agencies, including the Securities and Exchange Commission, the Federal Reserve Board, and the Office of the Treasury, have been tasked with creating new rules that will govern the future of America’s financial institutions. The Act contains some 300 provisions and may necessitate promulgating upwards of 243 regulations. However, many agencies are now facing an important question: where is the money to properly enforce these new regulations going to come from? Heated debate has raged about appropriate funding for agencies like the SEC and CFTC, whose 2010 funding levels are set to expire March 4.
SEC Chairman Mary Shapiro recently raised the issue before the Senate. Ms. Shapiro has stated that “[t]he real crunch comes after the rules are in place and [the SEC] has to operationalize them. We lack the resources to do that.” Congress’ failure to pass a budget that would have given the SEC an 18% funding increase puts that agency and other regulatory agencies in a bind. If unsuccessful, Shaprio has stated that the SEC will have to cut some 600 employees and would be unable to implement the rules and studies required by the Act.
To help mollify the situation, on January 26, 2011, the Federal Bar Association Securities Law Committee Executive Counsel wrote a letter to members of Congress imploring them to vote for more funding for the SEC. The letter asks Congress for “a substantially increased appropriation for the SEC” through registration fees at no cost to the American taxpayer, and “the adoption for the SEC of the same funding model that Congress has used successfully for decades for the nation’s banking regulators.” In response to the fiscal stalemate, Senator Barney Frank, one of the authors of Dodd-Frank Act, introduced an amendment last week to increase the SEC’s funding by $131 million.