House Financial Services Committee Chairman Spencer Bachus is planning to push ahead with legislation that would restructure the Securities and Exchange Commission (SEC), which has taken a lot of heat since the nation’s financial meltdown in 2008.
The Alabama Republican said earlier this week that a draft of legislation, to be called the SEC Modernization Act, is underway and is expected to contain many of the reforms recommended by the SEC inspector general, and reports from the Government Accountability Office and an independent consultant.
The reforms contained in the draft call for the consolidation of duplicative offices, a strengthening of managerial and ethics responsibilities, and a strict interpretation of how a $100 million reserve fund maintained by the agency can be used. The fund is now utilized “as the commission determines necessary.” Under the chairman’s plan it would be used to make “badly needed agency technology improvements.”
Under ethics reforms, the proposal would also develop a system to identify potential conflicts of interest by present and former SEC employees to head off potential “revolving door” problems between Wall Street firms and the staff members.
“The SEC is structurally flawed and suffers from operational inefficiencies and organizational incoherence,” Bachus said a statement. “This legislation will be a comprehensive restructuring of the SEC. It will make the SEC more efficient, consolidate duplicative offices, enable the agency to use better technology, and strengthen ethical safeguards to avoid conflicts of interest.”
Although the proposals would be a major change in how the agency carries out its watchdog responsibilities by consolidating, and in some cases creating new offices, Bachus insisted the moves would not require a funding increase. Currently the SEC budget is $1.1 billion, which is 6 percent above the 2010 funding level.
“Simply providing more funding to the SEC without first correcting its flaws will do nothing but prolong these inefficiencies and structural failures,” he said. “Without fundamental reform, there will never be any real improvement to the SEC’s operations.”
Bachus was careful not to criticize the current head of the SEC, Mary Schapiro, or her predecessors for problems. Instead, he blamed Congress.
“It is the structure of the agency itself that is the main problem and over the years Congress has only increased its dysfunctional structure through fragmentary and piecemeal amendments rather than the comprehensive reform that is needed.”
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