June 01, 2012

ABA urges self-funding for SEC and CFTC

The ABA urged Congress last month to address the need for increased reliable sources of revenue for the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to enable the agencies to carry out their expanded regulatory responsibilities under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Jumpstart Our Business Startups (JOBS) Act and several other new laws.

“The increasingly rapid pace of change in financial markets in recent years, accompanied by frequently shifting public attitudes, growing marketplace complexity and expanding cross-border capital flows, has posed a serious challenge to the regulators’ ability to perform their functions consistent with the objective of maintaining a stable and dynamic financial system,” Giovanni P. Prezioso and William F. Kroener III, the co-chairs of the ABA Task Force on Financial Markets Regulatory Reform, wrote May 17 to the chairs and ranking members of the House Committee on Financial Services and the Senate Banking, Housing and Urban Affairs Committee.

In their letter, Prezioso and Kroener noted that despite repeated calls for increased and independent sources of funding for the agencies, Congress has not authorized the agencies to become self-funded through the use of industry-paid fees. They added that it is increasingly clear that the agencies’ current funding levels are inadequate to meet the growing challenge of overseeing modern financial markets, including the need to complete their many new congressionally assigned tasks under the Dodd-Frank Act and other legislation.

Self-funding of the SEC and the CFTC, rather than the current congressional appropriations process, is the most effective means of ensuring the agencies’ ability to achieve the critical regulatory missions assigned to them by Congress, according to the ABA letter.    

Prezioso and Kroener said that when the Dodd- Frank Act was under consideration, SEC Chairman Mary Schapiro and many others encouraged Congress to authorize self-funding to help eliminate the chronic underfunding of the SEC and to enable the agency to make multi-year commitments to build technology and infrastructure. In addition, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and other financial regulators have been self-financed for years, and, as with those agencies, the money for SEC self-funding could come from transaction and registration fees already provided for by Congress. Comparable reasons apply for supporting self-funding for the CFTC as well, they said.

“The ongoing development of thoughtful and effective new regulatory approaches generally cannot occur if regulators have insufficient ability to plan for longer term developments and must devote all of their limited and unpredictable resources to short-term fluctuations in market sentiment and public attitudes,” they maintained.

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