April 19, 2013

The SEC & the President’s Proposed 2014 Budget

Last week, President Obama offered a budget that many declared dead on arrival (but some said offered starting point for a debate). Here’s news from Scott Kimpel of Hunton & Williams: Last week, the White House released its proposed 2014 budget, with the SEC discussion beginning on page 1313. Whether this – or any federal budget – will be passed for fiscal year 2014 remains to be seen. Still, the President’s proposal provides some interesting insights into agency priorities as the SEC chairman contributes to the budgetary request with the input of the agency’s office and division heads.

Under the budget, the SEC is allotted approximately $1.67 billion, a 25% increase over the $1.33 reserved under the 2013 Continuing Resolution, broken out as follows:

– Enforcement would receive $494 million under the proposed budget, a 19% increase over the 2013 Continuing Resolution. Notably, Enforcement plans to focus on “bringing additional legal, accounting, and industry expertise to investigations and cases; supporting current initiatives in market intelligence; and enhancing case management.” Enforcement also plans to bolster staffing for the Office of Market Intelligence (OMI), which is responsible for triaging and processing the thousands of enforcement tips, complaints and referrals the SEC receives each year.

– Corp Fin has requested $164 million, a 24% increase. These amounts would be devoted to expanding Corp Fin’s disclosure review program and toward rule-writing efforts, among others.

– Trading & Markets is budgeted at $98 million, a 24% increase. Trading & Markets has significantly expanded rule-writing and supervisory responsibilities under Dodd-Frank and the JOBS Act, and the increased sums would be dedicated to satisfying those responsibilities.

– Investment Management is seeking $63 million, a 29% increase. The budget notes that the Division plans to focus in particular on exchange-traded funds (ETFs) and money market funds in 2014.

– OCIE is budgeted $347 million, a 31% increase. As part of its proposed increase, OCIE intends to hire additional examiners to focus on investment advisers and investment companies as part of the office’s ongoing efforts to increase supervision of the investment management industry.

– RiskFin would receive $51 million, a whopping 59% increase over the 2013 Continuing Resolution and an astounding 155% over the 2012 actual amount. The economists in RiskFin are under ever-increasing pressure to support the Commission’s cost-benefit analyses and the increased amounts would support these efforts. The Division also intends to enhance its expertise in equity markets and trading, fixed income markets and products, “financial innovation”, and asset valuation.

The budget narrative repeats the talking point that “[b]ecause the SEC’s budget is offset by fees, the agency’s funding level has no impact on the Federal deficit.” While this statement is technically true, it may be of little comfort to the registrants (and their shareholders) who actually pay those fees.

Warren Buffett’s View of Governance & Securities Law

In this podcast, Prof. Larry Cunningham discusses the Third Edition of “The Essays of Warren Buffett: Lessons for Corporate America” (the first version dates back to 1997 and actually began as a law review conference) as it applies to corporate governance and securities regulation, including:

– What are some of the venerable principles of corporate governance that reappear in this edition?
– What’s new for Warren concerning corporate governance?
– Who does Warren think was responsible for the financial crisis and how has responsibility been apportioned?
– What about compliance and assuring integrity through the ranks?
– For Warren, what’s the toughest battle to fight in terms of compliance?
– What’s the appropriate response when improprieties are found?

Here is Kevin LaCroix’s review of Larry’s book…

More on our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season Blog” for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Declassification, Political Spending Again Ubiquitous
– Campaign Mounts for Independent Chairs
– No-Action Letter Challenge to New Version of Retail Proxy Access Proposal
– Western Union Seeks to Exclude Norges Bank Proxy Access Shareholder Proposal
– Survey: Mutual Fund Support for Corporate Political Disclosure

– Broc Romanek