Securities and Exchange Commission Chairman Mary Schapiro said her agency is poised to take on the scores of directives mandated by the financial regulatory reform bill President Barack Obama will sign into law Wednesday.
Securities and Exchange Commission Chairman Mary Schapiro told a congressional panel Tuesday that her agency is poised to take on the scores of directives mandated by the financial regulatory reform bill President Barack Obama will sign into law Wednesday.
In her prepared testimony, Ms. Schapiro said the agency would have to add 800 new positions in order to carry out responsibilities emanating from the legislation. In response to questions from lawmakers, she said the regulator had prepared a spreadsheet laying out its assignments and their deadlines.
The White House has proposed boosting the SEC budget by 12% to a total of $1.258 billion in fiscal year 2011. With that level of funding, the agency could hire an additional 374 staff members, a 10% over fiscal year 2010. Congress, however, has not yet acted on Mr. Obama's budget.
The 2,300-page financial-reform measure, approved along mostly party-line votes in the House and Senate, touches on nearly every facet of the financial system. Rather than prescribing a detailed overhaul, the measure puts the reform responsibility on federal agencies, which will have to promulgate about 250 regulations, according to some estimates.
With the reform process now in the hands of the regulators, it's unclear how it will unfold. Republicans at the hearing criticized the package, saying it is creating “uncertainty” in the market that hamstrings businesses and investors and damages job creation.
The SEC will take up much of the reform burden, undertaking 124 activities, including 17 studies, to implement the bill, according to an analysis by the Securities Industry and Financial Markets Association.
Ms. Schapiro acknowledged the challenge and assured lawmakers the agency has the resources to get the job done.
“We're prepared for the rulemaking task, and we're adequately staffed,” Ms. Schapiro said before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. “But we'll continue to bring people onboard.”
Although the SEC has dozens of tasks to complete in a short amount of time, Ms. Schapiro said that it would balance meeting statutory deadlines with seeking guidance from the public on regulations it will propose.
“We will need lots of input from market participants, investors and others … to know what the contours of the regulations should look like,” Ms. Schapiro said. “We're committed to both speed and expeditiousness but also a deliberative process that allows us to get the right result.”
One of the portions of the bill most important to investment advisers — a provision calling on a study and possible rulemaking surrounding a universal fiduciary duty for investment advisers and broker-dealers when providing retail investment advice — will require the SEC to seek guidance. Ms. Schapiro said that the agency has put out a request for comment.
“We'll be very consultative on this issue,” Ms. Schapiro said.
No matter how much the SEC listens to its constituencies and carefully conducts rulemaking, the regulatory process is bound to take unforeseeable twists and turns, according to Republicans.
“We're creating more uncertainty in the marketplace, and investors will remain on the sidelines,” said Rep. Scott Garrett, R-N.J.
The subcommittee chairman, Rep. Paul Kanjorski, D-Pa., expressed confidence in Ms. Schapiro and the SEC, saying that under her leadership, the agency “has pursued an ambitious results-oriented agenda aimed at protecting investors and restoring market confidence.”
But Mr. Kanjorski said that he, too, would be keeping an eye on the regulatory process.
“I believe that Congress must focus like a laser beam on this issue by holding regulators accountable for their performance under the landmark statute,” he said, promising to hold many hearings related to the new law.
Republicans themselves are injecting some uncertainty into the process. Many analysts believe, and the White House has acknowledged that Republicans could take control of the House in the fall election.
If the GOP gains control, party leadership has vowed to revisit financial reform and either repeal the bill or upend new regulations.
“Both the power of the purse and the authority of the Congressional Review Act give Congress a broad range of options to reconsider the approach the president is poised to sign into law,” Rep. Mike Pence, R-Ind., the House's third-ranking Republican, said a media event Monday.
While he's still in office, Mr. Obama could veto any financial reform moves a Republican Congress makes. But Congress could deny funds for the regulatory process.
