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Budget fight would leave SEC with 'fewer cops'

By Hibah Yousuf, staff reporter


DALLAS (CNNMoney) -- Securities and Exchange Commission chairman Mary Schapiro warned Friday that the squabbling in Washington and the looming government shutdown could impede the agency's power to enforce securities laws.

"Tomorrow, unlike almost every other financial regulator, we may be shut down," leaving the agency with a thin staff and bringing many of the SEC's operations to a halt, she said, speaking at a business journalist conference in Dallas.

Currently the SEC's staff totals 3,969. The agency said Friday that more than 90% of that staff, or 3,637, would be furloughed in the case of a shutdown - 174 will remain to handle enforcement activity, while 158 will be retained to 'protect life or property.'

The bigger issue lies with funding, or rather, a lack thereof, Schapiro said.

Congress sets the SEC's budget, providing the government agency with the resources to regulate financial markets and protect investors, as well as the ability to implement pending financial reforms under the Dodd-Frank Act.

"Insufficient funding for the SEC means fewer cops on the beat, even though fraudsters show no sign of backing off," she said.

And a government shutdown will only exacerbate the problem.

"Insufficient funding for the SEC means an investor protection effort hobbled at a time when the events of the last decade have proved that effective enforcement of the securities laws is more important than ever," Schapiro said.

There was one semi-bright spot. Schapiro said that the SEC will be able to cover its budget starting next year with collected fees instead of tax dollars, making it deficit neutral.

But inadequate government funding will threaten the agency's necessary hiring plans and IT initiatives needed to analyze market data more efficiently.

The chairman added that it would also force the SEC to bring cases to trial without expert witnesses or information that the SEC's digital forensics lab could have discovered on laptops or iPhones.

"We cannot do our jobs as well as American investors need and deserve if we cannot hire the people, build the systems and make the changes necessary to protect our markets and support job creation," Schapiro said.

Schapiro also said the agency is in the early stages of looking into private stock rules that will affect some big tech companies, such as Facebook, Twitter and Groupon.

She said while she can't predict what changes, if any, will come out of the review, the rules in places are "decades old," so the agency is looking to see how they can be "modernized" with changing market dynamics and technology. To top of page

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