ABA Presses for Self-Funding for SEC and CFTC

The American Bar Association is in strong favor of self-funding for both the Commodity Futures Trading Commission and the Securities and Exchange Commission. It is calling on Congress to quickly deal with this need to increase the agencies’ resources.

In a letter to lawmakers on the House Financial Services Committee and the Senate Banking Committee, ABA Task Force on Financial Markets Regulatory Reform co-chairs William Kroener III and Giovanni Prezioso talked about how not having sufficient funding sources for the SEC and the CFTC is going to substantially hurt the regulators’ ability to complete their assigned regulatory missions. The ABA believes that self-funding would effectively deal with this problem.

Both the CFTC and SEC have acknowledged that they are short on funds. The two regulators have partially attributed this to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which doesn’t authorize self-funding despite the fact that SEC Chairman Mary Schapiro, past SEC chairmen, certain senators, and securities lawyers had pressed for it.

Right now, the SEC and CFTC are funded via congressional appropriations. The ABA, however, doesn’t believe that the two agencies should get their funding this way. The letter noted that one of the regulators could be left short of the funds needed to do its job should “overall funding priorities change,” as they can with congressional appropriations. It pointed to the Jumpstart Our Business Startups Act, which brings with it new statutory mandates, as well as the other regulatory and legislative demands that need to be addressed in the wake of the recent economic crisis. Prezioso and Kroener also wrote about how changing financial markets, “shifting public attitudes,” the “cross-border” capital flow expansion, and “growing marketplace complexity” are making it harder for both the SEC and the CFTC to fulfill their duties and ensure that their goals are in alignment with keeping the financial system “stable and dynamic.”

The SEC is currently making more in fees than what it gets in total as a yearly budget. For example, from 2005 to 2009 the SEC collected about $7.4 billion in registration and transaction fees and gave them over to the US Treasury. Meantime, Congress appropriated $4.5 billion for the Commission’s budgets. The ABA, however, does not believe that fees from enforcement cases should be part of any self-funding mechanism. (The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board are all self-financed.)

Our institutional investment fraud lawyers represent clients throughout the United States. We also have clients that are located abroad but who have claims against a financial firm, broker, or investment adviser that is based in this country. Shepherd Smith Edwards and Kantas, LTD, LLP represents both institutional and individual clients. Your first consultation is free.

Read the ABA’s Letter (PDF)

Securities and Exchange Commission

Commodities Futures Trading Commission

American Bar Association


More Blog Posts:

AARP, Investment Adviser Association, Among Groups Asking the SEC to Make Brokers Abide by 1940 Investment Advisers Act’s Fiduciary Duty, Stockbroker Fraud Blog, April 14, 2012

FINRA Initiatives Addressing Market Volatility Approved by the SEC, Institutional Investor Securities Blog, June 5, 2012

CFTC and SEC May Need to Work Out Key Differences Related to Over-the-Counter Derivatives Rulemaking, Institutional Investor Securities Blog, January 31, 2012