If Securities and Exchange Commission Chairman Mary Jo White harbored any delusion that asking Congress for a bigger budget would be easy, those hopes were quickly dashed during a hearing before the House of Representatives’ Committee on Financial Services on Tuesday.
Within minutes of convening the hearing—an examination of the SEC’s agenda, operations, and Fiscal Year 2016 budget request—Rep. Jeb Hensarling (R-Texas), chairman of the committee, was pointing to the constantly updating national debt tally that hangs in the chamber and positioning the request against the backdrop of hard-working Texans struggling to make ends meet. He added some statistics to bolster his political viewpoint: the SEC’s budget has increased 400 percent over the past 20 years, growing at three times the rate of the nation’s defense budget.
The SEC’s current budget is $1.5 billion and White is requesting $1.722 billion for Fiscal Year 2016. The added funding she said, would allow the agency to add 431 new staff positions, “needed both to improve core operations and implement the agency’s new responsibilities.” Added funding, combined with the Commission’s existing reserve fund, would also support ongoing technology and data analytics improvements, and the modernization of the EDGAR filing system.
Throughout the hearing, White was also grilled on matters unrelated to the budget.
Rep. Scott Garrett (R-N.J.) expressed concern about the political polarization of the Commission and also how it has prioritized efforts under White’s watch. “I was hopeful that under your direction the Commission would finally be able to agree on a regulatory agenda that, first and foremost, advances only its statutory mission,” he said. Unfortunately, some are asserting that the SEC is becoming more political and distracted from its core mission. During your first two years as chairman, the Commission has had 10 partisan, 3-2 votes on major agency rulemakings. Over the last two years, you have prioritized thousands of hours and millions of dollars completing some special interest rules, like the CEO pay ratio and conflict minerals rules.” White, perhaps diplomatically, didn’t counter that those two “special interest rules” were in fact Congressional mandates from the Dodd-Frank Act, even amid demands that the SEC act more quickly on remaining requirements of the JOBS Act.
Rep. Maxine Waters (D-Calif.) expressed her concerns about how the Commission grants waivers, allowing companies that violate federal securities laws or that entered into a settlement of SEC charges to avoid an automatic disqualification from certain registration exemptions when raising capital. “Currently every publicly available waiver application has been granted with large financial firms receiving the vast majority of them,” she said.
Prior to the hearing, Waters filed legislation that would require the SEC to “conduct a more rigorous and public process for granting waivers.” It would no longer allow the SEC to consider waivers at the staff level and require that it provide the public a notice and comment period before one is issued.
Responding to White’s comments that she does not intend to attempt a second try at a proxy access rule, or move forward with a rulemaking petition that calls upon the SEC to require companies to disclose political contributions, Rep. Michael Capuano (D-Mass.) accused commissioners of not living up to their rhetoric on supporting and protecting shareholders. “It makes me wonder whose side you are really on,” he said. “If I own three percent of a company for three years, why shouldn't I be able to nominate somebody to the board?”
White countered that, even without formal rulemaking, shareholders have successfully pressured companies into both allowing board nominations and revealing their political spending. “The shareholder proposal process is working effectively,” she said.