SEC Plans Growth in Scope, Staff

The new chairman of the Securities and Exchange Commission is asking Congress to approve a large budget increase to pump up the agency's enforcement, examination and risk assessment efforts.

The SEC's budget was repeatedly slashed year after year during President Bush's second term, crippling its effectiveness and forcing the agency to cut more than 400 jobs at a time when the securities market was experiencing dramatic growth, SEC Chairman Mary Schapiro said during testimony before the House subcommittee on financial services and general government on March 11.

"The agency has suffered a significant decline in staffing levels due to several years of flat or declining budgets," Schapiro said. "Between 2005 and 2007, the agency lost 10% of its employees, a decline that inevitably affected all of the SEC's major programs."

Schapiro said the current fiscal year 2009 budget is totally inadequate and if left unchanged, would require the elimination of nearly 100 additional staff positions. In fact, the SEC will require a 5% budget increase just to maintain current staffing levels, she said.

"In the context of such rapidly expanding markets, I believe the recent reductions in the SEC's staff seriously undermined the agency's ability to effectively oversee the markets and effectively pursue violations of the securities laws," she said.

In order to "restore the SEC as a vigorous and effective regulator," Shapiro said the funding to her agency must go even further. She said President Obama is requesting $1.026 billion for the SEC in fiscal year 2010, a 9% increase over this year's budget.

"This proposal demonstrates the Administration's firm resolve to strengthen oversight over our financial markets," she said. "It will fund an additional 50 staff for the SEC, enhance our ability to uncover and prosecute fraud, and begin to build desperately needed technology."

The SEC plans to pump up its enforcement, examination and risk assessment programs by adding staff positions, she said, as well as reinvesting in the agency's underfunded information technology system.

A high priority will be to create a central repository system to handle tips, complaints and referrals, she said. "This is what the citizens who take the trouble to send in tips – as well as the investing public – demand and deserve," she said.

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