May 1, 2008

The SEC’s 2009 Budget: Same Ol’, Same Ol’

On the one hand, SEC Chairman Chris Cox has been under fire, mostly due to his comments just before the Bear Stearns deal was announced (and more generally due to the crisis on Wall Street). On the other, he is being mentioned as a possible running mate for John McCain, as noted in this ABC poll. This is the world of “inside the Beltway” in a nutshell.

In the face of the market crisis, Chairman Cox recently gave testimony before the House Subcommittee on Financial Services/Appropriations regarding the President’s proposed SEC budget for fiscal year 2009. Noting that the agency’s budget has not been increased for three years, Cox is seeking a 4% increase over two years. Trust me, this ain’t much because after taking inflation into account and the impact of pay raises, the head count for the Staff would remain basically the same.

It’s hard to imagine how the SEC will be able to regulate new markets (eg. rating agencies), delve into the complicated derivatives and securitization morass and chase the seemingly ever-increasing number of wrong-doers with its current level of staffing (this op-ed from yesterday’s NY Times by three former SEC Chairs agrees). Not to mention the challenges of integrating a global regulatory framework. If that’s not enough, maybe this will get your attention – there is a total of one person in the SEC’s Office of Risk Assessment today.

Even some in the government are skeptical that the President’s budget for the SEC makes sense. According to this article in the, the GAO will examine the SEC’s Enforcement Division to ensure it has adequate recources; looking at the SEC’s budget justification (page 13), you can see that the percentage of enforcement cases filed within two years of an inquiry first being made has markedly declined over the past few years. And in this speech, Senator Reed discusses his views on the topic.

SEC Filing Fees: Going Way Up

In yesterday’s fee rate advisory, the SEC announced that filing fees will be going up after October 1st (or whenever Congress approves the SEC’s budget, which historically is significantly later than October 1st) to $55.80 per million from $39.30 per million of securities registered with the SEC.

This is a 42% hike, after a 28% hike last year. Before this period, there had not been a hike for quite some time. Note that there is no mention in the SEC’s press release of a reason for the hike. Actually, the press release doesn’t even mention that this is a hike from last year (but we still remember how Chairman Cox was quite proud of the steep drop in ’06, with a lot of fanfare in that press release). You may recall that the SEC’s fee rates aren’t related to the amount of funding available to the SEC; instead, the money goes to the US Treasury.

The Leap Year Curse

In typical leap year fashion, word on the street is that many companies missed the 120-day proxy filing deadline on Tuesday. Apparently, some service providers had the due date as Wednesday on their “filing calendar.” Yikes, a “failure to communicate“?

– Broc Romanek