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White House Wants to Lift Budget Above $3 Billion in Five Years

The SEC wants to use a budget boost to hire 250 additional staffers, more than half of whom will go toward improving its thin examination coverage of registered investment advisers. The spending increase is laid out in White House’s budget wishlist for the coming fiscal year.

If the White House can convince a reluctant Congress, the SEC will use a proposed budget boost to hire 250 new staffers, more than half of whom would be assigned toward improving the commission’s thin examination coverage of registered investment advisers.

The agency on February 9, 2016, laid out its hiring goal in a budget justification document coinciding with the release of the White House’s $4 trillion budget request for fiscal 2017. Under the Obama administration’s request, the market regulator will see its budget grow to $1.78 billion for the fiscal year beginning in October, up from $1.6 billion this year. The White House refers to the requested total as a “down payment” toward its new plan to double the SEC’s budget by 2021.

The SEC hopes to add 127 additional examiners in its Office of Compliance Inspections and Examinations (OCIE), chiefly to improve adviser examination rates, a long-standing priority. Today, the commission only examines about 10 percent of investment advisers annually.

“Without adequate staffing, the SEC is not able to examine investment advisors as frequently as it should, introducing significant risk to investors and the economy,” the White House said in its budget overview.

The SEC also wants to add 52 new positions to its enforcement staff, 30 of them devoted to investigations and another dozen to litigation. Only four of the 250 new positions will go to the Division of Corporation Finance, despite the SEC’s frequent complaints of being overwhelmed with rulemaking mandates under the Dodd-Frank Act and JOBS Act. and

Dodd-Frank called for the agency’s funding levels to reach $2.25 billion by 2015. Even with hard-fought increases in recent years, the SEC has yet to come close to that number. Obama’s five-year goal is more ambitious still, seeking to give the SEC a more than $3 billion budget.

Republican lawmakers dismissed the president’s budget blueprint as dead on arrival. Senate Appropriations Committee Chairman Thad Cochran, a Republican from Mississippi, said he expected “little appetite” on Capitol Hill for the proposed spending increases.

Prior to the formal release of the budget, GOP leaders scoffed at any further budget increases for the SEC, in particular. The House Financial Services Committee has formally called for the commission to receive no increase in fiscal 2017, arguing it has mishandled both its funds and its priorities. Republican lawmakers say the agency does not deserve additional increases. In a document approved earlier this month, the panel chastised the SEC for prioritizing its Dodd-Frank Act executive compensation disclosure rules, while missing deadlines on its crowdfunding rules under the JOBS Act.

The $1.78 billion budget request is somewhat less than expected, however. Late last year, the SEC told the House Financial Services Committee it would seek $1.88 billion for the commission in fiscal 2017.

Obama’s request is for the most part a political statement, and lawmakers are under no obligation to adhere to it. The release kicks off a months-long process, during which agency heads, including SEC Chair Mary Jo White, will make their supporting case before Congress, after which lawmakers will craft budget resolutions and, later, appropriations bills.

The SEC’s funding comes from fees collected from the industries it regulates, although its budget must still be approved by Congress. To offset the increase, the Obama administration said it will propose higher transaction fees that will “particularly fall on high-frequency trading.” The White House will also seek to impose a fee on large financial firms based on their liabilities.

“We learned the hard way in 2008 just how damaging risk and leverage in the financial system can be, and we’ve done a lot to curb excessive risk on Wall Street since,” Jeffrey Zientz, director of the White House National Economic Council, wrote in a February 8 post on “This fee is another way to further those reforms, ensuring that taxpayers aren’t on the hook for risky Wall Street gambles.”