NACD Insight & Analysis: The Undeterred SEC
Recent business news is seemingly filled with stories covering the SEC’s push to fulfill the requirements set by Dodd-Frank.
In the last week, NACD Directors Daily has featured reports of the SEC pursuing an insider trading case, proposing rules restricting bonuses at large brokers and investment advisers, and examining practices at banks that have restructured troubled loans. In addition, it was reported this week that the SEC has seen an uptick in whistleblower claims, receiving “one or two high value” tips every day. The agency is not expected to receive a raise in funding in the current debate over the federal budget, leading many to question how the SEC will be able to function at the elevated level required by Dodd-Frank.
In speeches this week, SEC commissioners have discussed the difficulties the agency faces in the future. At the Practising Law Institute’s annual symposium, Chairman Schapiro noted how the current budget freeze on the SEC restricts the organization from functioning as necessary, but, despite her call last year for 800 new employees to carry out the Dodd-Frank mandates, the agency’s budget has been frozen at $1.1 billion since the end of the last fiscal year. The current proposed federal budget is under debate, causing uncertainty over whether portions concerning financial services oversight will be restricted.
SEC Commissioner Elisse Walter echoed the Chairman’s views at the U.S. Chamber of Commerce this week. Her comments focused on the difficulty the SEC has in depending on the budget, particularly as it pertains to making long-term investments in technology.
Directors should be aware that, regardless of the apparent difficulties the SEC says it will have in the upcoming year, the agency is ultimately responsible for carrying out the mandates established by Dodd-Frank. For example, the SEC is expected to issue final rules on the whistleblower bounty program, despite their perceived lack of necessary resources. Boards would be prudent to prepare their companies for the challenges posed by compliance issues. With respect to the new whistleblower program, boards should examine their current internal reporting structure, as well as review their corporate culture.