The House Subcommittee on Economic Development, Public Buildings, and Emergency Management held a hearing in June on the Securities and Exchange Commission's recent lease of hundreds of thousands of square feet of office space and called on SEC General Counsel Mark Cahn to testify. Lest there be any confusion about where the lawmakers involved were headed with this hearing, they titled it “The Securities and Exchange Commission's $500 Million Fleecing of America.”

When the panel, chaired by Rep. Jeff Denham (R-Calif.), wasn't satisfied with Cahn's answers, members held a second hearing on the topic in July, and subpoenaed his boss, SEC Chairman Mary Schapiro. By all accounts, the tone of the meetings was often adversarial.

And so it goes in Washington, as Congress continues to pick fights with the government agency most relevant to corporate compliance officers. The bitter clash on display at the public hearings is just the latest skirmish in an increasingly nasty battle between the SEC and the legislative branch that funds and oversees its work. In recent months, Congress has fought with the SEC over the office space issue, SEC investigation practices, and Congress's attempts to repeal parts of the Dodd-Frank Act, but the main event has been the row over the agency's budget.

Conflicts between the SEC and Congress have always existed, often along party lines, but the mere disagreements of the past have given way to “Hatfield versus McCoy”-level wars today. The present level of conflict between the SEC and Congress appears to have begun in January 2009, after the SEC admitted to significant failings in its investigations of Bernard Madoff. The “first stone” was arguably thrown on Jan. 5, 2009, at the initial Madoff-related congressional hearing. At that House subcommittee hearing, Rep. Gary Ackerman (D-N.Y.) lashed out at a witness from the SEC, then still under the direction of Bush-appointee Christopher Cox, stating: “I want to know who is responsible for protecting the securities investor, because I want to tell that person—or those people—whose job it is that they suck at it!”

At a second hearing in February 2009, Ackerman erupted yet again after five senior officials from the SEC, now under the direction of Schapiro, repeatedly declined to answer questions on the Madoff case because of an ongoing inspector general investigation. In the hallowed chambers of the U.S. Capitol, Ackerman told the directors of four of the SEC's major divisions and its acting general counsel that the agency was “useless,” “worthless,” and “completely inept.” He added for good measure that “you couldn't find your backside with two hands with the lights on.” For many years prior to the Madoff revelations, the SEC's enforcement program had been widely regarded on Capitol Hill as the gold standard in securities enforcement, and an example of lean and effective government in action. The comments from Ackerman and some of his colleagues thus seemed a departure point in the relationship between Congress and the SEC.

Whatever the causes may be, the current relationship between the SEC and Congress seems to be as rocky as it has been in decades, with no peace in sight.

When the Republicans gained control of the House after the 2010 elections, the relationship predictably worsened; mutual distrust and antagonism have been the order of the day. For example, reports surfaced in late May that Sen. Charles Grassley (R-Iowa) was investigating possible insider trading at SAC Capital Advisors, a large, high-profile hedge fund. A few weeks later, however, word came that Grassley was not investigating SAC, but rather the SEC's handling of insider-trading investigations using SAC as a case study. Grassley was interested in how the SEC handled and responded to referrals from other regulators such as FINRA, and asked the SEC to provide a written explanation of its response to any SAC referrals.

A few days later the SEC responded, and abruptly told Grassley that his request was denied. In a letter dated June 9, SEC Enforcement Director Robert Khuzami stated that the agency would not disclose what it had done with the SAC referrals from FINRA. “To protect confidential and non-public investigative information, we generally do not comment on the status of investigations or related referrals and, in turn, are not providing information concerning the specific FINRA referrals you identified,” he wrote.

Grassley was predictably dissatisfied with the agency's rejection of his request. He said it was “not an acceptable response” and that he would continue to press for answers. On June 15, Grassley tried to turn up the heat on the SEC by informing it that he had new information showing that the SEC received 65 referrals concerning SAC, three times more than he originally believed. “The SEC needs to explain how it handled these referrals,” Grassley stated. “I'm looking for an accounting of what happened to try to determine whether the agency is doing its job.” To date, Grassley and the SEC remain in a stand-off over the issue.

Another Dustup

Meanwhile, the SEC was exhausting the patience of another senator, Louisiana's David Vitter (R-La.), in another matter. Khuzami testified before a House committee in May that the SEC was reviewing a decision by the Securities Investor Protection Corp. that found no basis for SIPC insurance to cover the losses of victims in the Stanford Financial scandal. Khuzami said that he anticipated that the SEC would make a determination on the issue in the “near future.” A month later, however, the SEC had still not issued its decision.

On June 14, a frustrated Vitter issued a statement that he intended to block the pending nominations of two commissioners for the SEC until the agency responded on the Stanford issue. “We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims,” he said. He vowed to hold the SEC “accountable—including holding these nominations—until these fraud victims get an up-or-down answer from the SEC on SIPC so they can move forward in the process, and if necessary, file a judicial appeal.” One day later, the SEC finally released its findings that certain individuals who invested money through the Stanford Group were, in fact, entitled to the protections of SIPC.

One day after that, on June 16, Congress took aim at the SEC in the office lease-related matter noted above. In the “$500 Million Fleecing of America” hearing on that date, Congress heard testimony from SEC Inspector General David Kotz. Kotz reported that an IG investigation showed that the SEC made “irresponsible” decisions in leasing $556 million worth of office space without a competitive bidding process and before it received an expected budget increase (which never came) from Congress. Kotz added that the SEC used a “deeply flawed” analysis that “grossly overestimated” the amount of space needed.

At the hearing, Rep. Eleanor Holmes Norton (D-Washington, D.C.) threatened to introduce legislation to revoke the SEC's leasing authority, and did so on June 27. Holmes noted that the General Services Administration handled leasing for most other federal civilian agencies, and that “it should not be surprising that the SEC's expertise in securities and financial matters did not extend to real estate management.” On July 5, the House sub-committee announced that because the SEC's COO and general counsel had been unable to “answer key questions related to the SEC lease and the circumstances surrounding the sole source procurement,” another hearing featuring Schapiro had been scheduled to address such issues— titled, of course, “The Securities and Exchange Commission's $500 Million Fleecing of America: Part Two.”

All of these recent battles have taken place with the debate over the SEC's budget raging in the background, and perhaps that debate has helped fuel some of the fire. Indeed, on June 9, during this same one-week period, SEC Commissioner Luis Aguilar delivered a speech reminding Congress that the SEC was at a key “inflection point,” facing greater responsibilities than ever despite being chronically underfunded by Congress.

Whatever the causes may be, the current relationship between the SEC and Congress seems to be as rocky as it has been in decades, with no peace in sight. And who are the business executives who have to work with that overstretched agency, on everything from investigations to financial reporting to no-action letters and new rulemaking?

Why, that would be you.