* Obama seeks 18.5 percent FY13 budget boost for US SEC
* Obama also asks for 50 percent budget boost for CFTC
* DOJ would get $55 million more to fight financial crimes
* SEC, CFTC face daunting workload on Dodd-Frank, MF Global
By Christopher Doering and Sarah N. Lynch
WASHINGTON, Feb 13 (Reuters) - The White House on
Monday proposed big budget boosts for U.S. financial market
regulators, which are months behind in finalizing Dodd-Frank
reforms and are under pressure to more vigorously police markets
in the wake of the 2007-2009 financial crisis.
The Securities and Exchange Commission would get an 18.5
percent funding increase, while the Commodity Futures Trading
Commission would receive a 50 percent rise in spending under the
Obama administration's fiscal 2013 budget.
The SEC's budget would rise to $1.566 billion from 2012's
budget of $1.321 billion, while the CFTC would see a spending
jump to $308 million from $205 million. President Barack Obama
also called for legislation to fund the CFTC through user fees,
bringing it in line with most other financial regulators.
"Without sufficient funding ... the nation cannot be assured
that this agency can oversee the futures and swaps markets, that
customers are protected, and that the public gets the benefit of
transparent markets and lower risk," Gary Gensler, the chairman
of the CFTC, said in a letter to lawmakers discussing the
budget.
The Obama administration, under fire for a dearth of
significant prosecutions related to the 2007-2009 financial and
housing market meltdown, also called for adding $55 million to
the Justice Department's proposed budget to prosecute financial
crimes.
That would bring the proposed budget for such prosecutions
to over $700 million, which would fund more FBI agents,
prosecutors and forensic accountants. The overall discretionary
budget for the Justice Department would go down less than 0.5
percent to $27.1 billion.
The proposal comes shortly after the president announced the
creation of a new working group to further investigate
misconduct in the pooling and sale of home loans during the
financial crisis.
LONG WAY TO GO
The proposed budget hikes, however, are a long shot.
Republicans who control the House of Representatives have
questioned funding boosts for regulatory agencies as they look
to cut government spending and seek to throttle the
implementation of the 2010 Dodd-Frank law by starving regulators
of additional funds.
Last year, both the SEC and CFTC received far less than what
they had requested.
"There is still along way to go in the appropriations
process and this is just the opening round," said Jim Overdahl,
a vice president at NERA Economic Consulting, and a former chief
economist at both the SEC and CFTC.
The proposed funding increase comes as the SEC and CFTC face
a daunting to-do list.
In addition to facing major work on implementing new rules
to oversee the over-the-counter derivatives market, the CFTC is
also straining its limited resources to conduct an investigation
into the October collapse of brokerage firm MF Global
and the massive shortfall in customer money.
Both agencies are seeking to add staff and improve
technology to meet the new regulatory responsibilities.
CFTC and SEC officials have warned that a lack of funding
could hinder their ability to police the markets, implement new
reforms and harm staffing levels.
Not everyone at the CFTC agreed with the spending
plan's priorities.
In a dissenting statement from the 2013 budget request,
Republican CFTC Commissioner Scott O'Malia said the proposal
makes an "unsubstantiated case for a massive expansion in
staffing that is both unrealistic and unsustainable in this
deficit environment."
Like the CFTC, the SEC is also still working to complete
rules under the Dodd-Frank Act. Those new regulations expand its
authority to oversee over-the-counter derivatives markets as
well as credit-rating agencies and hedge fund and municipal
advisers.
The SEC also is working on other projects
unrelated to Dodd-Frank, including a series of reforms following
the May 6, 2010, "flash crash" and the development of proposals
to bolster capital formation for smaller businesses.
"Confidence in the markets is important to economic growth
and demands a strong investor protection agency. This additional
funding will allow us to continue strengthening our enforcement
and examination programs," SEC Chairman Mary Schapiro said in a
statement on Monday.
In addition to the president's proposed SEC budget, Obama on
Monday also called for obligating an additional $50 million into
a special reserve fund created in the 2010 Dodd-Frank law that
is financed with registration fees.
The money set aside in the reserve fund for 2013 would go
toward modernizing the SEC's website and online database for
corporate disclosure reports.
It would also be used to help the SEC develop a consolidated
audit trail, or a system that would allow the agency to track
all orders, messages and trades for the first time.
The consolidated audit trail has yet to be finalized by the
commission. The bulk of the cost would be funded by the
industry, although the SEC would still incur some costs in order
to be able to actually make use of the data.
Recently, SEC Chairman Mary Schapiro backed away from a push
to require real-time reporting of the trade data, in a move that
is likely to save money on the project .