As compliance officers mull the impact of the Dodd-Frank Act on their organizations, the Securities and Exchange Commission is ramping up to do its part in implementing the various rulemakings and studies required under the law, which is slated to be signed by the President today.

While the dollar cost of full implementation will depend on the effective date of new rules, the timing of hiring, and other factors, the SEC estimates that it will need to add roughly 800 new positions to carry out its new and expanded responsibilities under the law, its chairman told members of a House sub-committee this week.

To accomplish the hiring of hundreds of new staff during fiscal 2011, the SEC is enhancing its human resources staff and streamlining its hiring process, simplifying the application process, and maintaining a searchable database of applicants so it can interview for a vacancy as soon as it appears, Chairman Mary Schapiro said in July 20 written testimony before the House Sub-committee on Capital Markets, Insurance, and Government-Sponsored Enterprises.

Among other things, the Dodd-Frank Act gives the SEC nationwide service of process in civil actions, clarification on the scienter standard for Exchange Act-aiding and -abetting actions, authority to order penalties in cease-and-desist proceedings, and adds or expands its oversight of over-the-counter derivatives, credit rating agencies, and private funds.

Noting that the Act requires the SEC to promulgate a "large number of new rules, create five new offices, and conduct multiple studies, many within one year," Schapiro said, "The importance and complexity of the rules coupled both with their timing and high volume and the rule-writing agenda currently pending will make the upcoming rule-writing process both logistically challenging and extremely labor intensive."

If enacted, she noted that the President's FY 2011 budget request of $1.258 billion would allow it to hire an additional 374 professionals, bringing the agency's total staff to about 4,200. The President's proposed FY 2011 budget included a request for $24 million to begin implementation of the financial reform legislation.

That budget request also proposes to spend an additional $12 million on information technology investments, including the third phase of the SEC's new system for analyzing tips, complaints, and referrals; improvement of the surveillance, risk analysis, and case and exam management tools available to the enforcement and examination programs; and a new system to handle the increased volume of evidentiary material obtained in investigations.

The Dodd-Frank Act makes changes to the SEC's funding structure, linking its appropriation with the fees it collects, creating a Reserve Fund, and requiring the agency to submit its annual budget requests concurrently to the Administration and Congress.

Schapiro said the new structure will be "tremendously helpful for the SEC to cover emergency needs that arise in the middle of a fiscal year; to help pay for multi-year initiatives, particularly new systems; and to make sure our fees are properly aligned with our budget."

She noted that the staff has already begun meeting internally to discuss a provision of the law that grants the agency broader authority to pay whistleblowers who come forward with information about securities violations a bounty of as much as 30 percent of any settlement that exceeds $1 million.

Initial work is also underway to move forward with procurement of a required study by an independent consultant of the Commission's internal operations, structure, and funding. Schapiro said the agency has submitted a formal reprogramming request to the House and Senate Appropriations Committees to free up funds to pay for the study.

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