Blogs

SEC Advocates for 8% Budget Augmentation

In May 2022, SEC Chairman Gary Gensler testified before the Subcommittee on Financial Services and General Government U.S. House Appropriations Committee, arguing for an 8% increase in the SEC's budget. He outlined his primary objectives, among which was to "guarantee the SEC has adequate resources to effectively function as the market watchdog." This move appears to reflect a transition back to the "broken windows" policy approach spearheaded by former Chair Mary Jo White in 2013 and later concluded in 2017 by ex-Chair Jay Clayton.

Gensler emphasized the extent of the capital markets under SEC supervision, which includes 24 national securities exchanges, 99 alternative trading systems, and nine credit rating agencies, among other entities. Despite its vast responsibilities, such as monitoring the disclosures of over 8,200 reporting companies, the SEC's workforce has reduced by 4% since 2016.

The SEC's request for additional funding also stems from the need to manage the rapidly growing cryptocurrency market, despite the recent market downturn and volatile nature of the crypto sphere. Gensler asserted that this volatility underscores the necessity for enhanced regulatory enforcement.

In his request, Gensler highlighted contemporary technological advancements like predictive data analytics and the mounting cybersecurity risks these advancements bring. The SEC is seeking a total budget of $2.149 billion, an 8% rise from the previous year. This increase would permit the SEC to expand its full-time staff by 6%, including significant additions to the departments of corporate finance and enforcement.

Notably, enforcement remains the SEC's largest employment sector, comprising 1,365 employees in direct enforcement and 1,100 in examinations, compared to 438 in corporate finance. The SEC is reportedly handling approximately 1,700 open matters at any given time, and Gensler pointed out that more cases are going to trial than ever before. This trend, however, has stirred discontent among some of the SEC's top enforcement attorneys, many of whom are said to be leaving the agency due to frustration over the new trial-oriented policy.

Besides the requested federal budget, the SEC generates revenue from registration statement fees and enforcement fines and penalties. The proposed budget augmentation will also support the SEC's relocation to a new headquarters in Washington, D.C.