Spending deal gives SEC, CFTC modest increases

WASHINGTON Tue Apr 12, 2011 11:53am EDT

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WASHINGTON (Reuters) - U.S. securities and futures regulators would receive modest funding increases for fiscal year 2011 under the spending deal that averted a government shutdown, according to details released on Tuesday.

Both the Securities and Exchange Commission and the Commodity Futures Trading Commission have said they need big budget increases to implement the Dodd-Frank financial regulation law that Congress enacted in 2010.

The Dodd-Frank law greatly expands the SEC's power to regulate hedge funds, municipal advisers and over-the-counter derivatives trading.

The proposed spending bill hammered out by congressional negotiators raises funding for the SEC by $74 million from 2010 levels to $1.19 billion.

Funding for the CFTC, which is responsible for the lion's share of the oversight for the nearly $600 trillion global swaps market, would rise by $34 million to $202.7 million.

The funding boosts are for fiscal 2011, which ends on September 30.

"I was pleased we'll be able to plan for the rest of the year, and I look forward to continuing the dialogue with Congress with regard to funding for 2012," CFTC Chairman Gary Gensler said on Tuesday.

An SEC spokesman had no immediate comment on the budget.

The stalemate in Congress over the 2011 budget has already had an impact on the two agencies, forcing them to scale back on travel and hiring.

Gensler said Tuesday he needed more time to review the numbers before he could determine whether the modest budget increase would be enough to allow the CFTC to lift its hiring freeze.

Both the SEC and the CFTC have said they do not have the manpower or the technology to help implement the dozens of new rules that the Dodd-Frank law requires.

In a speech earlier this year, SEC Chairman Mary Schapiro warned against any move to slash the budget, saying her agency could not keep up with fraudsters who have better technology.

"We need to ask ourselves if we want our chief securities regulator to have to pull the plug on data management systems and on a digital forensics lab needed to recreate the data that sophisticated fraudsters leave on hard drives and iPhones," she said in early February.

The CFTC has also complained of similar technology woes.

On Tuesday, CFTC Commissioner Scott O'Malia said he was glad the budget bill directed the CFTC to spend the additional funds on much-needed technology upgrades.

"It is essential that sustained investment in technology will enable the commission to leverage our federal resources to improve our surveillance capabilities," he said.

Now that Democrats and Republicans have come to an agreement on a fiscal 2011 budget, their attention will turn to fiscal 2012.

In February, the Obama administration proposed big increases for the next fiscal year. They would bring the SEC's budget to $1.41 billion and the CFTC's to $308 million.

(Reporting by David Morgan, Sarah N. Lynch and Christopher Doering; editing by Gerald E. McCormick and Lisa Von Ahn)

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