It all sounded so good when Congress rejected self-funding for the SEC at the 11th hour of the Dodd-Frank negotiations, but promised to take care of the SEC's budget situation in other ways, including large increases over the next five years and a new “reserve fund” of up to $100 million the SEC could tap into for emergencies. However, as foreshadowed here back in October, an agency without self-funding really does not have much of anything other than old promises and whatever the current version of Congress chooses to give it.

In October, an 18% budget increase that the SEC was supposed to receive under Dodd-Frank was not included in a stopgap spending bill to fund government operations through early December. Now, the WSJ reports, the SEC has been forced to shelve its plan to open a new whistleblower office as mandated by Dodd-Frank. The agency says that it cannot open that office, and four other new offices created under Dodd-Frank, without an increased budget. For now, at least, its funding is frozen at FY2010 levels along with the rest of the federal government due to an impasse in Congress. With the Congress soon to be controlled by Republicans, most of whom opposed Dodd-Frank, the fate of the SEC's budget is again quite uncertain.

It is unclear how the SEC will manage the crush of tips it is expected to receive under the new whistleblower bounty law established by Dodd-Frank if the whistleblower office is delayed for a significant period of time. This office, for which the SEC has been actively recruiting a “Whistleblower Coordination Officer,” is to have primary responsibility for carrying out the program. For now, the SEC says, the functions of that office will be “temporarily assigned to existing staff within the Division of Enforcement.”

Sen. Charles Schumer, a proponent of SEC self-funding, stated that “[t]his is a glaring example of why self-funding was so necessary. We'll continue to fight for it.”