SEC Financial Regulatory Powers Might Be Handed Over To Wall Street-Funded Finra
Congress may outsource the job of regulating thousands of investment advisors to an organization funded by the professionals it regulates, Bloomberg News reports.
Two and a half years after the worst financial crisis since the Depression, Washington lawmakers are focused on cutting funding from the government's oversight of the financial industry, even before last summer's Dodd-Frank law is fully implemented. House Republicans support a measure to flat-fund the Securities and Exchange Commission, to deny it resources that Democrats and SEC officials say are crucial to the protection of investors and the policing of financial crimes.
And there's another regulator eager to step in. The Financial Industry Regulatory Authority, an organization that oversees brokers and draws its budget from industry it regulates, is lobbying to replace the SEC in its oversight of nearly 12,000 investment advisors, who collectively manage about $40 trillion, Bloomberg reports.
Industry experts say Finra is a weaker cop than the SEC. It levied $43 million in fines last year, compared to the SEC's $1 billion.
Finra spent $300,000 on lobbying in the first quarter of this year, the Associated Press reported this week. That's 43 percent more than it spent during the same period last year.
"They’re supposed to oversee the activity of the industry, but they are industry," Denise Voigt Crawford, former commissioner of the Texas State Securities Board, told Bloomberg.
The SEC, which draws funding from Congressional appropriations, has for months anticipated a reduction in its budget. The agency began slowing the pace of some investigations late last year, fearing it would have to contend with budget cuts.
"It is not helpful for the wheels of investigations to grind to a halt," former SEC lawyer Jacob Frenkel told the Wall Street Journal in December.
The SEC's expanding workload demands an expanded budget, SEC chair Mary Schapiro said in a speech to Congress last year, several months before the financial reform was passed. The agency, she said, should become self-funded, drawing its budget from penalties it levies.
"The SEC languishes as one of the few financial regulators still subject to the annual appropriations process," Schapiro said. "I believe that fees assessed on investors' transactions should be dedicated to protecting investors."
Read the entire Bloomberg story here.