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SEC Faces Cuts In Bush Budget Proposal. Author/s: Colleen Marie O'Connor
Issue: April 16, 2001While Congress publicly debates how much of a tax break average Americans will receive next year, under President Bush's recently-unveiled budget proposal, the SEC is facing a staff reduction in fraud investigations and enforcement jobs.
Despite the proposed rollback, however, the SEC is toeing the White House line.
"We support the President's budget," said an SEC spokesman. "We believe we can maintain our program at these levels. Our management priority is to obtain authority for pay parity for 2002."
He added that staff reductions are being made by not filling 57 vacant positions, saving $5.2 million. This would be compensation, in part, for the 3.7% general pay raise and $19.1 million special pay increase the SEC argues is necessary to keep its senior attorneys, examiners and accountants from leaving for positions in the private sector.
The SEC budget proposal stands at $437.9 million, just a 3.5% increase from its current $422.8 million budget.
The question though is whether the cut will hurt the commission's ability to monitor fraud. Despite the overall impact, the cuts are not likely to have much impact on monitoring, said Richard A. Edlin, a New York-based corporate and securities attorney with Greenberg Traurig LLP.
"Monitoring is a daily, habitual activity, whereas enforcement actions are selective surgery," said Edlin, who also noted that cuts are usually expected when a Republican administration comes into office.
The SEC certainly has his hand full in this area. According to the SEC, last year it received and responded to 81,507 complaints and questions, an increase of nearly 10% compared to 1999. Since 1995, the complaints and questions received and responded to by the SEC have risen 88%. In all, the commission expects to handle 136,500 investor complaints and inquiries during the fiscal year that begins Oct. 1.
"Anytime you have a collapse in the market, you're going to have increased complaints," Edlin noted.
"It's not surprising at all to see an increase in investor complaints and it doesn't mean there's anymore fraud being committeed."
Included in the proposal are staff reductions in inspections of mutual funds. Current figures show mutual funds are now owned by 49% of all U.S. households, with $7.4 trillion in assets under management.
According to documents filed last Monday by the SEC, "the pace of review of enforcement cases may not keep up with the incoming matters," in regards to cuts in mutual fund inspectors.
COPYRIGHT 2001 Securities Data Publishing, Inc.
COPYRIGHT 2001 Gale Group
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Terms related to this article: United States Securities and Exchange Commission Finance
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