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9.23 SEC Match Funding

<< Title IX Overview

9.23 SEC Match Funding

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9.23.     SEC Match Funding.  The Act changes the manner in which the SEC obtains its annual funding.  Currently, the SEC is subject to the standard Congressional appropriations process for the Administration budget, and though the agency collects more in fees than Congress appropriates, the excess fees become general funds of the Treasury, to which the SEC has no claim.  Under the new system, the SEC would submit its budget directly to Congress and would be allowed to use some of the fees it collects to establish a $100 million reserve fund, on which it could draw without Congressional approval but subject to Congressional reporting.

Starting with the 2012 fiscal year budget process, the Act will make the following changes to the SEC's funding.  (i)  Direct submission to Congress of itemized budget: The SEC will submit an itemized budget to Congress and the President.  The budget will include itemized funds for carrying out the SEC's functions and amounts to be designated as contingency funding, and it will name activities for which multi-year budget authority would be suitable. [§991(d)]  (ii)  Establishment of reserve fund: Registration fees collected by the SEC will be deposited into a reserve fund, subject to a $50 million limit for any single fiscal year, and a $100 million aggregate limit on the balance at any time.  Amounts in excess of these limits are deposited as general funds in the Treasury and are not available to the SEC. [§991(e)]  (iii)  Use of reserve fund and reporting: The SEC may use up to $100 million from the reserve fund in any one fiscal year.  Within 10 days after the SEC obligates amounts in the fund, the SEC must notify Congress of the date, amount, and purpose of the obligation.  (iv)  Target registration fee amounts: The SEC will set its registration fees to achieve a target registration fee collection amount.  The Act sets target registration fee collection amounts for fiscal years 2012 through 2020, with amounts starting at $425 million in 2012 and increasing each year to $705 million in 2020 (the current statutory amount is $394 million for 2011). [§991(b)]  (v)  Matching budget to transaction fees: The SEC is authorized to set transaction fees (paid by the exchanges and national securities associations based on transaction volume) at an amount designed to cover Congress's annual appropriation to the SEC. [§991(a)]  (vi)  Authorization of additional appropriations: The Act sets out specific appropriation authorization amounts for the SEC through fiscal year 2015, which are in addition to any other funds appropriated.  These amounts start at $1.3 billion for 2011 and increase to $2.25 billion for 2015. [§991(c)]

9.23.1.              What Entities are Impacted and How?  The impact will primarily be on the SEC itself, which will have additional resources and more control over its budget.  The changes are also likely to impact SEC registrants, securities firms that are members of the exchanges and FINRA, and other entities subject to SEC jurisdiction.  SEC registrants and member firms may be affected by higher fees from increased target fee collection rates.  Other entities subject to SEC jurisdiction may be affected to the extent increased resources lead to increased SEC activity – such as filing review, rulemaking, inspections of regulated entities, and enforcement.