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Financial regulators defend budget requests before Senate subcommittee

Thechairs of two of the biggest federal financial regulators took to Capitol Hillon April 12 to defend their agencies' budget requests for fiscal year 2017,highlighting increased resources as a key component to allow the Securities andExchange Commission and the Commodity Futures Trading Commission to keep pacewith rapidly changing financial markets.

CFTCChairman Timothy Massad told the Senate Appropriations Subcommittee on FinancialServices and General Government that "sensible regulation requiresresources" but that "the agency does not have the resources necessaryto adequately oversee these markets in the way that the public deserves."

"Ourbudget is simply not proportionate to the responsibilities we face. The president'sbudget request would change that," Massad said. "This budget willgive us the resources to keep pace with an industry that is changing andinnovating at the speed of light, and that is much larger and more complex thaneven just a few years ago."

TheCFTC is requesting $330 million and 897 full-time equivalents for fiscal year2017, a year-over-year increase of $80 million, or 32%, and 183 FTE over the fiscalyear 2016 enacted level.

TheSEC is requesting $1.78 billion, which is $176 million, or 11%, higher than fiscalyear 2016.

SECChair Mary Jo White highlighted that the SEC's funding is"deficit-neutral, which means that any amount appropriated to the agencywill be offset by modest transaction fees (approximately $.02 per $1,000) andtherefore will not impact the deficit or the funding available for otheragencies."

Whitesaid that "additional funding is imperative if we are to continue theagency's progress in fulfilling its responsibilities over our increasinglyfast, complex, and growing markets."

However,Chairman of the Subcommittee Sen. John Boozman (R-Ark.) pointed to a steadyincrease in both agencies' budgets in the past 15 years. Since fiscal year2000, the SEC budget has grown from $377 million to $1.6 billion and the CFTCbudget has grown to $250 million, up from $62.7 million in fiscal year 2000.

"Whilethe SEC is a fee-funded agency, congressional oversight over the commission'sbudget is critical," Boozman said. "Although those fees come from publiccompanies and exchanges, they are borne by investors, and Congress has aresponsibility to ensure those funds are being spent in a manner that protectsinvestors, helps markets operate efficiently and spurs economic growth for allAmericans."

Massadsaid the increased funding would allow the CFTC to address technologicaltransformations that are creating new risks to financial stability, such asautomated trading and cyberattacks.

Ofthe requested $80 million increase, approximately 36% would be dedicated to ITinvestments that will enhance all of the CFTC's activities, such as market,financial and risk surveillance, data collection and analysis, and enforcement.The remaining 64% supports an increase in staffing and related support, with aparticular focus on critical areas such as surveillance, enforcement andexaminations, Massad said.

Atthe SEC, funding at the requested level would permit the agency to hire anadditional 250 staff and continue to improve IT. Specifically, the SEC intendsto increase examination coverage of investment advisers and other key entitieswho interact with retail and institutional investors, as well as further leveragecutting-edge technology to permit the SEC to better keep pace with theentities, markets and products it regulates. Funding is also aimed at enhancingthe SEC's enforcement program's investigative capabilities, strengthening itsability to litigate against wrongdoers and further bolstering the agency'seconomic and risk analysis functions, White said.

"Tobe frank, the forecast for providing the requested resources for fiscal year2017 does not currently look promising. We again face complicated and challengingfunding decisions," ranking member of the subcommittee Christopher Coons(D-Del.) said during the hearing.

"Giventhe enormous responsibility given to both the SEC and CFTC, it is critical thatCongress, and in particular this committee, provide [these agencies] theresources needed to protect investors and to promote and preserve confidence inthe markets, all while responsibly managing taxpayer dollars."