Self-funding for the SEC was on the brink of becoming a reality last week, but the reports today are that an 11th hour compromise between Senate and House negotiators finalizing the massive financial reform bill has rejected self-funding.

An agreed-upon compromise measure pushed by Sen. Richard Shelby would still subject the SEC to the Congressional appropriation process, but also provide the SEC with some new flexibility in its budget process. Key points reportedly include:

Congress will establish a $100 million reserve fund that the SEC can tap in one fiscal year to pay for items such as technology or capital improvements. "The SEC would access the fund as needed, but would have to report its expenditures to Congress," Shelby said.

The SEC may now submit its budget directly to Congress, without needing prior approval by the White House.

Sen. Shelby explained that "severe managerial and operational failures" like the Madoff fraud left him unwilling to remove the SEC from Congressional oversight of its funding. He believes that the compromise reached in the reform bill "ensures the SEC has the funding it needs while still ensuring it be accountable to Congress."