Durbin Holds Budget Hearing on Financial Market Oversight

Press Release

Durbin Holds Budget Hearing on Financial Market Oversight

United States Senator Dick Durbin (D-IL) today chaired a hearing which reviewed the funding requests of the nation's primary financial market regulators - the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC).

The CFTC is charged with protecting the public and markets users from manipulation, fraud, and abusive practices. It is also responsible for promoting open, competitive and financially sound markets for commodity futures. CFTC regulates the activities of nearly 70,000 individuals including salesmen, advisors and floor traders. The agency ensures that futures markets are equipped to be an instrument of price discovery and a means of offsetting price risks.

"The CFTC holds a pivotal position in our country's economic system," Durbin said. "CFTC's mission becomes even more important when you consider the how futures prices impact the prices of basic necessities - food, clothes, the gas in our cars and the heat for our homes."

CFTC is seeking a 17 percent budget increase to $130 million in fiscal year 2009. In the past decade, futures trading volumes have increased more than ten-fold. Over 3 billion trades were completed on the U.S. futures exchange in 2007 alone. CFTC oversees $4.2 trillion in daily trades. Despite the surge in activity, staffing levels have dropped 21 percent. This year's budget request would allow for new staff to be hired and for the modernization of technology and operating infrastructure.

Similarly, the SEC's mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. It oversees more than 12,000 publicly traded companies, over 10,000 investment advisers that manage more than $38 trillion in assets, nearly 1,000 fund complexes, and close to $44 trillion worth of yearly trading on America's stock and option exchanges.

"The strength of the American economy and our financial markets depends on investors' confidence in the financial disclosures and statements released by publicly traded companies," Durbin said. "Investors expect the SEC to be the vigilant ‘cop on the beat' and we want to be sure they have the resources to do just that.'"

Crucial to the SEC's effectiveness is its enforcement authority. Each year the SEC brings hundreds of civil enforcement actions for violations of the securities laws. Typical infractions include insider trading, accounting fraud, and providing false or misleading information.

Questions have been raised about whether the proposed enforcement budget is adequate to keep pace with the growing demands. The SEC's budget request for FY09 totals $913 million, a slight $7 million increase over last year. SEC's budget is offset by registration and transaction fees.

Durbin voiced concern about the small increase in the President's budget request. It is likely insufficient to sustain the agency's salary and will actually require cutting nearly 100 staff. This reduction of personnel comes at a time when developments and trends in the market call for more, not less, vigilance to protect investors. Resources devoted to enforcement are declining in terms of real dollars.

Testifying on separate panels were Walter Lukken, Acting Chairman of the CFTC and Christopher Cox, Chairman of the SEC.

In addition to their annual budget requests, today's hearing discussed the recent SEC-CFTC Memorandum of Understanding, Sudan divestment disclosure, SEC's role with subprime mortgage markets, expediting Fair Fund disbursements to investor-victims, plans for greater oversight of credit rating agencies, and how availability of interactive data is simplifying investor understanding and access to corporate filings and financial information.

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