UPDATE 1-CFTC, SEC see funding surge under Obama plan

Mon Feb 14, 2011 11:40am EST

* SEC fiscal 2012 budget up 28 pct under Obama plan

* CFTC would see budget up 82 pct to $308 million

* CFTC's Chilton: Request "an admirable equilibrium"

* House Republicans have proposed cuts to both agencies (Adds details on CFTC, SEC spending)

By Sarah N. Lynch and Christopher Doering

WASHINGTON, Feb 14 (Reuters) - The White House proposed on Monday large funding increases for U.S. market regulators, a move likely to come under fire from Republicans who oppose key provisions in the Dodd-Frank financial reform law.

The Obama administration's fiscal 2012 budget proposes giving the Securities and Exchange Commission a 28 percent funding increase to $1.427 billion compared to fiscal year 2010 actual spending levels.

The Commodity Futures Trading Commission would see an 82 percent spending jump to $308 million, but $117 million of that total would be offset through a user fee on financial firms that is unlikely to draw support in Congress.

"President Obama's request presents an admirable equilibrium," CFTC Commissioner Bart Chilton told Reuters. "It proposes both fiscal restraint and needed resources for market oversight and enforcement," he said.

Dodd-Frank was enacted last year in response to the 2007-2009 financial crisis. U.S. regulators have said they will need more funding to write and enforce dozens of rules required by Dodd-Frank, including authority to oversee the $600 trillion over-the-counter derivatives market as well as hedge funds and private equity funds. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic showing CFTC budget: r.reuters.com/nek97r Full budget coverage: [ID:nN11152338] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Republicans who now control the House of Representatives have questioned funding boosts for regulatory agencies as they look to cut government spending and seek to throttle enforcement of Dodd-Frank by starving regulators of additional funds.

Congress did not finish its budget process for fiscal 2011 before the November elections, leaving government budgets frozen at 2010 levels. Congress has to agree by March 4 on continuing funding for the government for fiscal 2011, which ends Sept. 30.

Republicans proposed late on Friday cuts to spending for the remainder of the current fiscal year, with the CFTC hit particularly hard.

House appropriators said they wanted to slash $56.8 million from the CFTC's current funding of $168.8 million for 2011, while the SEC's would be lowered $25 million from the current level of $1.1 billion. [ID:nN11200912]

The Republican plans have drawn the ire of Democrats, including Barney Frank, the top Democrat on the House Financial Services Committee and co-author of Dodd-Frank. [ID:nN10274122]

Frank told Reuters last week he thinks withholding funding from the SEC and CFTC will fuel public anger, and possibly put pressure on Congress to come through with the money. "I think ultimately, both agencies will be funded," he said.

The budget freeze has begun to affect day-to-day operations at the agencies.

The SEC has already put several Dodd-Frank initiatives on hold, including the creation of new offices to oversee credit-raters and facilitate the handling of whistleblower tips and complaints. The CFTC has been forced to curb travel for employees and delay hiring staff.

The SEC, through filing fees its charges securities issuers, has consistently been a net contributor to the government's coffers, but Congress has set its annual budget.

A provision in Dodd-Frank requires the SEC to adjust the fees it charges the industry so they will offset the amount Congress appropriates starting in 2012. Anything collected beyond that amount would be classified as "discretionary offsetting collections."

The law also lets the SEC deposit $50 million from fee collections into an emergency fund. (Reporting by Sarah N. Lynch and Christopher Doering; Editing by Tim Dobbyn)

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