SEC faces cuts in Bush budget for fiscal 2006

Sarbanes calls reduction in agency funds `unwise'

February 08, 2005|By BLOOMBERG NEWS

The Securities and Exchange Commission, the nation's top financial market regulator, stands to get 2.7 percent less to spend next fiscal year under President Bush's proposed 2006 budget.

The agency, led by Chairman William H. Donaldson, would receive $888 million, down from $913 million for the current fiscal year. The 2006 request also calls for an $8 million reduction in the SEC's enforcement budget.

The proposal puts an end to SEC funding increases that have more than doubled the agency's budget from $438 million in 2002, when the collapses of Enron Corp. and WorldCom Inc. focused attention on corporate crime. It's also forcing the SEC, which is spending more on enforcement staff, to cut operating costs.

Maryland Sen. Paul S. Sarbanes, senior Democrat on the Senate Committee on Banking, Housing and Urban Affairs, and co-author of the 2002 corporate-governance law that set higher penalties for corporate fraud and called for additional SEC funding, said the president shouldn't be reducing the agency's budget.

"It was unwise for the Bush administration to cut, through the budget, the funds available to the Securities and Exchange Commission at this critical juncture in their efforts to restore investor confidence in our financial markets," Sarbanes said in a statement. "While much progress has been made in recent years, the SEC is still straining to fulfill an increased mission."

"We'll be able to maintain all of our mission," James McConnell, the SEC executive director who oversees the budget, said in a conference call with reporters in Washington yesterday. "We don't view it as a cut, we view it as a flat budget."

The SEC's enforcement budget for 2006 is being cut by $8 million to $287 million. McConnell said the reductions won't hurt the SEC's policing efforts; spending on enforcement personnel would rise to $209.2 million from $201.3 in 2005.

McConnell and Peter Derby, a senior aide to Donaldson, said the agency will try to save on expenses such as travel and "manage hiring" by keeping the number of unfilled positions at around 200, or 5 percent of its work force.

The budget is "lean," McConnell said. "It will represent a management challenge that the chairman is willing to take on."

The 2006 budget doesn't contain money for new hiring. This fiscal year, the SEC got funding to hire 106 additional staff, mainly for overseeing the $8.1 trillion mutual fund industry. The agency has hired almost 1,000 attorneys, accountants and compliance examiners since the wave of financial scandals in 2002.

The SEC's 2005 budget includes $25 million it won't spend this year.

Alabama Sen. Richard C. Shelby, a Republican who is chairman of the Senate banking committee, will monitor the agency to make sure it has enough funding, said his spokesman Andrew Gray.

"We'll have Chairman Donaldson up here relatively early in the year, and that'll be the top of the questions, to make sure that the SEC does have those resources," Gray said.

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