The CFTC and SEC find themselves short on resources, which is causing delays in rule-making. Will the GOP cut off the cash?
Despite the seemingly “symbolism only” vote to repeal healthcare in the Republican-controlled House this week, it can stop rules in other ways. Take Dodd-Frank, for instance, which members have described as “job killing.” With the recent demise of a budget deal in Congress, regulation is getting a delay in funding.
Both the Securities & Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) have acknowledged that a growing workload and lack of resources are having a serious impact on their ability to write the rules. Both agencies need to hire hundreds of people to not only research and write the new rules (see related story here), but also manage new amendments to rules already on the books.
For example, on Tuesday the SEC released a final rule regarding Section 916 of Dodd-Frank, which governs the handling of rule changes submitted by self-regulatory organizations (SROs) – notable SROs include the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board. To comply with Dodd-Frank, the SEC is adopting new “Rules of Practice,” which will add transparency to the process it uses “when conducting proceedings to determine whether an SRO’s proposed rule change should be disapproved under Section 19(b)(2) of the Exchange Act.”
The problem, however, is that adding this transparency will increase the workload at a time of “consequent constraints on Commission resources,” the SEC said. Before Dodd-Frank this process was a more nuanced approach, where the SEC would hint to the SRO that its submitted rule might be disapproved; the SRO would then go back to the drawing board to make the rule more palatable to the SEC. Not anymore – the nuance will be replaced by hard numbers, facts and a see-through process.
The budget “is already forcing the agency to delay or cut back enforcement and market oversight efforts,” SEC spokesman John Nester said in a statement to CNN last week. “The longer we operate under significant budgetary restrictions, the greater the impact.”
Similarly at the CFTC, Chairman Gary Gensler is looking to increase the commission’s funding from $169mn to $261mn to help handle the broad rule-writing responsibilities given the agency by Dodd-Frank. But this isn’t happening as funds continue to be tied up. The agency is writing more rules in a week than it previously had written in a typical year.
As it stands now, both agencies are operating on extensions of last year’s budgets, which will keep them running until March 4, but also force them to postpone action on many Dodd-Frank rules.