Schumer, Shelby Push Senate Amendment Adding $20M to SEC Budget to Help Catch Financial Scammers

Press Release

SCHUMER, SHELBY PUSH SENATE AMENDMENT ADDING $20M TO SEC BUDGET TO HELP CATCH FINANCIAL SCAMMERS

SEC Chair Schapiro Endorses Proposal, Which Would Provide Increase For FY10 and FY11

Amendment Would Add 60 New Officers To Agency's Enforcement Division And Fund Needed Technology Upgrades

Senators Will Seek To Add Provision To Leahy-Grassley Anti-Fraud Bill On Senate Floor This Week—Existing Bill Funds Only FBI, Not SEC

WASHINGTON, DC—With mounting financial fraud cases stretching the capacities of federal regulators thin,U.S. Senators Charles E. Schumer (D-NY) and Richard Shelby (R-AL) announced Tuesday they will push to amend legislation being considered by the Senate this week in order to increase the Securities and Exchange Commission budget by $20 million. The two-year funding boost would enable the agency to hire 60 new enforcement officers, as well as perform critically needed upgrades of its information technology systems.

Schumer and Shelby's proposal would amend S. 386, the Fraud Enforcement and Recovery Act. That bill, co-sponsored by Senators Patrick Leahy and Chuck Grassley, provides badly needed resources for the Federal Bureau of Investigation to bolster its white-collar crime division. Schumer and Shelby said that it only made sense to likewise increase the SEC's budget to prevent future Ponzi schemes and other financial frauds.

The lawmakers were joined at a news conference Tuesday morning by SEC Chair Mary Schapiro, who has strongly endorsed the Schumer-Shelby amendment.

"We cannot afford to nickel-and-dime an agency that serves as our first line of defense in this ongoing financial crisis," Schumer said. "The bill moving through the Senate this week is strong and needed, but it will be made even better by incorporating these vital resources for the SEC. With fewer enforcement agents on hand to deal with more and more cases, the likelihood is all too high that scammers will go uncaught. One fraud that gets missed is one too many."

"Financial frauds greatly undermine investors' confidence in the integrity of our markets. Such crimes are particularly damaging in light of our current economic conditions. Regrettably, the SEC's resources have not kept pace with the growth of the markets, limiting its ability to prevent and prosecute frauds. The Fraud Enforcement and Recovery Act makes many important improvements, but falls short with respect to the needs of the SEC. This amendment will ensure those needs are filled so the SEC will be able to better police our financial markets and safeguard investors," Shelby said.

The resources allotted by the Schumer-Shelby amendment would address understaffing at the SEC, which saw a 10-percent decline in its employee ranks from 2005-2007. Since that time, the modest upticks in the agency's annual budgets have mostly covered cost-of-living adjustments for the reduced workforce. Even the four percent budget increase in this year's omnibus package made only a small dent in getting the SEC back up to 2005 staffing levels, and the SEC's technology budget is still more than 50 percent lower than 2005 levels.

At the same time, the burdens on the agency have never been greater. So far, in this month alone, the SEC has put a stop to $155 million in fraudulent Ponzi schemes. And, as a critical component of its current enforcement efforts, the SEC is currently investigating over three dozen cases involving subprime mortgage-backed financial instruments.

The amendment offered by Schumer and Shelby on Tuesday represents their latest joint effort to secure increased resources for federal agencies charged with responding to the financial crisis. In January, Schumer and Shelby announced the Supplemental Anti-Fraud Enforcement ("SAFE") Markets Act, which sought to authorize $110 million annually for new hires at the Justice Department and the SEC. The Leahy-Grassley legislation, which was introduced soon after and went on to win approval from the Senate Judiciary Committee, adopted Schumer and Shelby's call for $75 million for the FBI, but did not include any resources for the SEC. In light of the enormity of the current crisis, an additional $20 million for SEC enforcement for fiscal years 2010 and 2011 would be an invaluable complement to the critical resources already contained in this bill. It would ensure a comprehensive response to the financial crisis akin to that taken by Congress two decades ago, when it passed the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), which authorized spending more than $75 million a year for enforcement officials to bring cases stemming from the S&L crisis.

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