Bush Proposes 10% Hike in SEC Funding

The Securities and Exchange Commission would get a 10% funding increase under President Bush’s proposed fiscal 2005 budget, partly to expand oversight of the mutual fund industry.

Bush proposed an $893-million budget for the agency that polices capital markets for the fiscal year that starts Oct. 1, up from the current $811.5 million, according to budget documents released in Washington on Monday. Bush also asked that $20 million in unspent money from this year’s SEC budget be tacked on to next year’s budget, for a total of $913 million.

The 10% budget hike exceeds the 3.5% growth in the overall federal budget and the 7.1% rise in Pentagon spending. Some lawmakers have criticized the SEC, which is headed by William H. Donaldson, for lagging behind New York Atty. Gen. Eliot Spitzer in uncovering trading abuses in the $7.4-trillion fund industry. The probe has led to the ouster of more than 60 executives, including the head of Putnam Investments.

“That President Bush is proposing an increase for the SEC when the budget is under such pressure shows that the administration recognizes the importance of policing the capital markets, but the agency will still be far away from having the resources necessary to do its job properly,” said Donald Langevoort, a securities law professor at Georgetown University.

Rep. Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee, said the $913 million total would give the SEC the money to do its job properly.

“It looks like they finally got it right,” Frank said of the Bush administration’s proposed SEC budget.

Bush’s SEC budget would increase spending on mutual fund oversight by $21 million, almost 14% over current levels. His budget would increase spending to crack down on corporate fraud by $35 million, a 13% increase. And it would boost spending to regulate markets, such as the New York Stock Exchange, by $19 million, or almost 16%.

The budget proposal includes $18.7 million for 106 new SEC employees to improve the agency’s oversight of mutual funds, to conduct a review of market structure and to help with hedge fund regulation if the SEC decides that hedge fund advisors must register, SEC Executive Director James McConnell said in a press briefing.