On Monday, President Obama released his administration's proposed fiscal 2012 budget that would provide the SEC with $1.427 billion in funds--an increase of 28% over FY 2011. This week also brought the release of the SEC's FY 2012 Congressional Justification, in which it laid out in detail the support for its request for $1.407 billion in FY 2012. [Note--It is not clear to me if the Obama administration is proposing to provide the SEC with $20 million more than it asked for, or whether that $20 million is accounted for elsewhere--does anyone know?]

In its FY 2010 Congressional Justification, the SEC explains that a $1.407 billion budget is needed allow it to carry out its core mission, as well as the new responsibilities assigned to the agency under Dodd-Frank. By way of background for its current financial condition, the agency explains that it:

experienced three years of flat or reduced budgets from FY 2005 to 2007 that forced a reduction of 10 percent of the agency's staff;

saw its investments in new or enhanced IT systems decline by about 50 percent from FY 2005 to 2009; and

is just now returning to the staffing level it had in FY 2005.

The agency says that this shortfall in funds going back to 2005 combined with the new requirements under Dodd-Frank that it "promulgate more than 100 new rules, create five new offices, and conduct more than 20 studies and reports" require a surge in its budget.

Specifically, the SEC proposes to use the proposed increase of $264 million over its FY 2011 budget to add new positions, including 612 new full-time employees. This would put the agency at a total of 4,827 positions (with 4,460 full-time employees). 312 of the new positions (40 percent) would be allocated "to strengthen and support core SEC operations" such as the enforcement and examination programs. The other 468 new positions (60 percent) are necessary to implement the Dodd-Frank Act, the agency said, and include:

Derivatives -- 157 positions focused on the derivatives markets.

Hedge Funds -- 102 positions focused on compliance with the new rules for hedge fund advisors.

Oversight -- 50 positions to support implementation of various requirements.

Whistleblower -- 43 positions focused on the whistleblower program.

Municipal Securities -- 35 positions focused on municipal securities.

Clearing -- 33 positions focused on the Act's new responsibilities with respect to clearing.

Credit Rating Agencies -- 26 positions focused on NSRSOs, principally for the Office of Credit Ratings to perform the annual examinations required by the Act.

The SEC noted that it expected to need an additional 296 positions in FY 2013 for full implementation of the Dodd-Frank Act.

Specifically related to the Enforcement program in FY 2012, the SEC stated that its proposed budget will support a total of 1,432 positions in Enforcement (1,366 full-time), an increase of 156 positions (122 full-time). New positions in Enforcement will include:

28 positions focused on "intelligence analysis." e.g., the new Office of Market Intelligence;

92 new positions committed to expanding and focusing the investigations process; and

36 positions to reinforce the administrative proceedings function

Topics