11.18.2015

Q: How is the SEC financed? A: 100% by the equity markets.

By Jim Toes, Security Traders Association

Later today, SEC Chair White will testify before the House Financial Services Committee. One of the agenda items will be the SEC’s FY 2017 proposed budget of $1.883 billion. For comparison purposes, in 2014 the SEC’s budget was $1.35 billion. It is likely that Chair White will make a compelling case for the increase and that at some point we will hear, “…and this budget request is deficit-neutral” .

In March 2014 we published a Taking Stock column titled, “Section 31a fees and cake; Just cut me another sliver”. The article explained how the SEC is financed and questioned if its current funding mechanism is sound. Since enactment of the Dodd-Frank Act, the equity markets finance 100% of the SEC’s budget. This would not have been an issue back when the SEC’s 2001 budget was $423 million and it’s responsibilities were almost exclusively limited to the equity markets. But as time has gone on, and the SEC’s responsibilities have expanded, the funding mechanism has narrowed. Yes, narrowed. To be clear, it was not Chair White (or the SEC) who designed it, but I do hope the Chair’s participation at today’s hearing raises enough awareness among all effected parties that it needs to change. Please take a moment to read the March 2014 Taking Stock column as it is still applicable today.

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Read March 2014 Taking Stock, “Section 31a fees: Cut me another sliver” 

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