By Bill Flook
The SEC is proposing to use its reserve fund in the coming fiscal year to make several information technology (IT) improvements, while the White House is seeking to eliminate the fund. The disagreement reflects a long-standing rift between the commission and Republicans over use of the fund, which was created under the Dodd-Frank Act. Sec. 954 of PL111-203
The SEC on February 10, 2020, released a nearly 150-page document outlining its spending plans for fiscal 2021, which begins in October.
The market regulator wants to carry out its IT priorities “supported by full use of the reserve fund,” including improvements to cybersecurity, data analytics, and upgrades to its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) filing system, which was breached by hackers in 2016.
Among other staffing increases, the SEC wants to add two additional positions to its newly-created chief data officer function to “ improve our review process over data collection to provide greater assurance that we limit data collected to only the data we need and can effectively manage and secure.” The commission in January named Austin Gerig, head of the Office of Data Science within the Division of Economic and Risk Analysis (DERA), as its first chief data officer.
Also under the request, the SEC is seeking to “replace or consolidate legacy systems, which often cost more to maintain and contain security vulnerabilities; and bolster the systems that enable our enforcement and examination programs to uncover fraud and other wrongdoing.”
“This request assumes the SEC will have continued access to its Reserve Fund, which allows the SEC to commit to important, long-term technology initiatives,” the SEC wrote in its budget justification.
The White House has other plans. In a cost-cutting blueprint released by the Office of Management and Budget (OMB), the Donald Trump Administration is seeking to eliminate the fund “ in order to restore accountability to the American taxpayer.”
“While the fund is outside of the congressional appropriations process, it has come to represent an extension of the SEC’s regular appropriation rather than the emergency reserve it was intended to be,” OMB stated. “This proposal would restore the SEC’s accountability by diverting reserve fund resources to the U.S. Treasury for deficit reduction and requiring the SEC to request any additional appropriations from the Congress beginning in 2022.”
OMB estimated the plan would save up to $50 million a year.
Cutting the Dodd-Frank reserve fund has for years been on the wish-list Republican lawmakers seeking to impose greater control over the SEC’s spending.
This article originally appeared in the February 14, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.
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