10 Aug 2009, David Benyon, Operational Risk & Regulation
WASHINGTON, DC - US Securities and Exchange Commission (SEC) chairman Mary Schapiro has commented she believes the regulator should evolve into an industry-funded body, departing from its government-funded roots.
Such a move, which Schapiro recommended in an interview to UK newspaper the Financial Times, would shift the federal regulator more along the lines of Schapiro's former charge before she took over at the SEC - independent investment industry body the Financial Industry Regulatory Authority.
Schapiro said moving to a direct model for industry support would allow the SEC to tackle more complex investigations, and invest more in technology and talent to provide better results.
The SEC already takes more than $1 billion a year directly from regulated organisations and investors through registration and transaction fees, but unlike the other federal regulatory bodies is constrained by requiring congressional approval for spending this money through its annual budget.
Schapiro's logic is that the constraints of that system make it tough for the SEC to invest in technological projects, long-term staff investment or multi-year investigations because its strategy is wedded to a short-sighted annual basis.
"Self-funding has been discussed over the years but I think it might now well be the moment," said Schapiro. "Some stability in funding would be an enormous benefit because it would help with long-term planning in such areas as technology and staffing."
A move to self-funding would appeal to many, as the US myriad of regulators compete for their budgets as well as responsibilities under the reform proposals of the Obama administration.
Many financial regulators already operate on such a model. The UK Financial Services Authority (FSA), for example, has been independently funded since its 2000 inception - although it has also been accused of regulatory failure and been compelled to intensify its supervision and enforcement in recent months.
"Self-funding will help us to avoid periods of drought," said Schapiro. "Think about what the markets were doing in terms of growth and innovation at the same time the SEC was in a hiring freeze."
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