President Obama Calls for SEC, CFTC Budgets to Double

One of the key aspects of President Obama’s proposed Fiscal Year 2017 budget has been an early push for the budgets of Wall Street regulators to double over the next five years. If accepted without changes, the budget for the Securities and Exchange Commission would increase 11% to $1.8 billion and the Commodity Futures Trading Commission budget would get a 32% increase to $330 million in fiscal 2017.

Over the past few years, both government agencies have repeatedly called for expanded budgets as they implement the mandates of the Dodd-Frank Act and regulate the securities and commodity markets. These requests have not been met by Congress, which has resisted full funding calls in the past.  This is the most ambitious proposal yet, though.

There have not yet been any early news reports about the IRS budget, which has received drastic cuts of more than $1 billion over the past five years. We have seen multiple reports about the negative impact that these budget cuts have had on taxpayer services and collection efforts.

The proposed budget increases for the SEC and CFTC will not be without controversy. The Republican party has taken multiple steps to repeal portions of the Dodd-Frank Act and it is unlikely to provide full funding for these agencies as long as they are unhappy with their mission. When Congress agreed to increases in the funding for SEC and CFTC in the FY 2015 budget, it did so as part of an agreement to repeal the controversial swaps push out rule that was adopted in Dodd-Frank.

Additionally, specific criticism of the CFTC will likely be unleashed by legislators given the disclosure by the CFTC auditor KPMG of potential problems in the accounting of leasing liabilities. After the disclosure, a GAO report concluded that the agency violated a government accounting law but stopped short of a conclusion that it also violated another federal law on government spending.

Nevertheless, the budget increases would be an important step in giving the SEC and CFTC the money in order to pursue enforcement actions based on information they receive through the whistleblower programs.  Dodd-Frank authorized the securities and commodities regulators to pay rewards to individuals who bring them information concerning Dodd-Frank.  However, informants are unable to pursue wrongdoers on behalf of the United States as they do when filing a qui tam lawsuit under the False Claims Act.  Thus, it is important for them to have the resources to pursue enforcement actions based on the information they receive.