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SEC Chair Says Budget Shortfall Affecting Core Mission as Dodd-Frank Rulemaking Intensifies

By Jim Hamilton

The continuing resolution that has essentially frozen the SEC budget at 2010 levels has impacted the Commission?s core mission, said Chairman Mary Schapiro, separate and apart from the Dodd-Frank duties to regulate derivatives, hedge fund advisers and credit rating agencies. In remarks at the PLI SEC Speaks seminar, she noted that the budget shortfall has hampered the SEC?s ability to do what investors and capital markets deserve.

Moreover, the budget shortfall has occurred against the backdrop of the more than doubling of the trading volume and a 50 percent increase in the number of investment advisers. While acknowledging the need to find inefficiencies and leverage resources, which the SEC will continue to do, the Chair observed that last year the SEC sent the U.S. treasury nearly $300 million more in collected transaction fees than the agency spent. Further, in the past year, the SEC returned more than $2 billion to harmed investors.

In 2011, the SEC will continue working with the CFTC to shape the regulatory regime for OTC derivatives. The Commissions will define terms, develop requirements for new trading and clearing platforms, craft reporting regulations, carve out end-user exemptions and undertake dozens of other tasks. Along with the banking regulators, the SEC will develop risk retention, or ?skin in the game,? requirements for asset backed securities transactions. And, for the first time, issuers of asset-backed securities will perform reviews, required by Dodd-Frank, of the bundled assets as well as disclose the nature, findings and conclusions of these reviews.

The SEC will also consider rules stemming from its recent study recommending that financial professionals who provide personalized investment advice about securities adhere to a fiduciary standard of conduct no less stringent than that imposed on investment advisers. The Commission will finalize rules to leverage the resources of whistleblowers. After all, reasoned Chairman Schapiro, these individuals are closest to fraud and can be an invaluable source of information for enforcement and inspection efforts.

Full post as published by Jim Hamilton's World of Securities Regulation on February 04, 2011 (boomark / email).