The consequences of the SEC's "close but no cigar" effort to become self-funded continue to mount. As I wrote here earlier this month,the SEC has already had to shelve its plan to open the new whistleblower office mandated by Dodd-Frank, an office that will be critical to its efforts to handle the expected crush of whistleblower tips. The whistleblower office was put on hold because the SEC's budget, which was slated to increase significantly under Dodd-Frank, remains frozen at FY2010 levels due to an impasse in Congress.
Now, the WSJ reports,the SEC has been forced to postpone testimony in some of its investigations and audits outside Washington, D.C. because the SEC won't pay the travel costs. Worse, it is unclear when this situation will be resolved as there is considerable fear that with Republicans taking over Congress, the 12% budget increase promised to the SEC by the Obama administration won't be approved and the SEC's budget could even be rolled back to 2008 levels.
I believe it is unfair for Congress to attack the SEC for its failings, as it has done regularly lately, while ignoring pleas from the SEC and reports by the SEC's Inspector General and others that the SEC is inadequately funded. As I wrote last summer,
Whether it comes from a dramatic increase in the SEC's budget or a move to self-funding, it is well past time for the SEC's Enforcement Division to receive the manpower, technology, and support needed to do its job. Only after Congress has carried out its own responsibility for properly supporting the SEC will it be fair to start pointing fingers on the question of protecting investors.
Looking at the increased budget slated for the SEC next year, Rep. Scott Garrett (R., N.J.) asked, "Why are we rewarding the agency that failed so miserably on so many fronts?" That seems to miss the point. Adequately funding an agency with the vital and daunting mission of protecting investors from fraud is not a "reward." It is the bare minimum we should expect from Congress, which chose to deny the SEC self-funding and to keep the SEC's budget under its control.