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From Banking and Finance Law Daily, June 25, 2013

SEC and CFTC chairs present 2014 budget requests to Senate subcommittee

By Jacquelyn Lumb

SEC Chair Mary Jo White and CFTC Chair Gary Gensler testified today before the Senate Appropriations Subcommittee in support of their respective 2014 budget requests. Ranking member Mike Johanns (R-Neb) highlighted three areas of interest. He said the SEC should move with appropriate speed to implement the JOBS Act provisions, it should take a holistic and robust look at market structure, and it should be persistent in working with fellow regulators who attempt to go it alone. He mentioned the Department of Labor and the CFTC in particular.

With respect to the CFTC, he questioned whether it has moved too quickly with respect to derivatives market oversight and whether it chose guidance over rulemaking to avoid a cost/benefit analysis. Johanns said that transparency is critical, as is coordination, particularly with respect to cross-border swaps regulation. He said the CFTC has created confusion and concern abroad.

White discussed the SEC’s request for $1.674 billion, which she said is critical to support the additional staff, technology, and training the agency needs to fulfill its mission. She said the SEC’s top priority is to finalize rulemaking mandated by Congress.

Gensler noted that the CFTC’s current funding is $195 million after sequestration. The CFTC’s mission has expanded dramatically as it now oversees the nearly $300 trillion swaps market. The President’s fiscal year 2014 budget request seeks $315 million. Gensler noted that swaps were at the center of the 2008 financial crisis and said the funding is needed to hire additional staff and invest in technology. The CFTC has completed most of the Dodd-Frank rulemaking, and he said the extra $100 million budget request is a good investment for the American public.

MF Global. Senator Jerry Moran (R-Kan) sought information from Gensler about potential charges against Jon Corzine for his role in the MF Global collapse. He asked whether those who committed crimes will pay a price and whether Kansas farmers will be made whole. Gensler stepped aside from that investigation because of a former business relationship with Corzine, but said that as a general matter, civil and criminal charges will be pursued whenever wrongdoing occurs.

Cross-border derivatives regulation. Senator Christopher Coons (D-Del) said he strongly supports sufficient funding for both agencies but expressed concern that the agencies may be issuing conflicting rules on cross-border derivatives regulations. White said the differences have been publicized and there was no requirement to issue a joint rule. Gensler said he recognized the importance of harmonizing the rules and advised that the CFTC shares all of its draft documents with the SEC and other federal regulators, but they oversee different markets. He assured the committee that the CFTC continues to try to narrow the differences between the SEC’s and the CFTC’s rules.

Political contributions. Subcommittee Chair Tom Udall (D-NM) questioned White about the rulemaking petition that was submitted to the SEC seeking a requirement that issuers disclose their corporate political spending. Shareholders’ interest in this matter was heightened by the Supreme Court’s Citizens United decision, he said. White said the petition is under review by the Corporation Finance staff, but no rulemaking is being worked on at this time. The staff’s focus is on mandated rulemaking.

Udall said that corporate treasuries are in play and the funds are enormous. He acknowledged that many companies are reporting their expenditures but said it would help if the SEC would add consistency and transparency to the disclosure.

Johanns said there is a huge debate on the appropriate approach to campaign finance and cautioned White to tread carefully. He questioned why the SEC would want to get involved in such a controversial issue.

JOBS Act. Moran asked White about the SEC’s proposal to remove the ban on general solicitation under Title II of the JOBS Act, but questioned how parties can be assured that they are complying with the requirement to take steps to verify that sales are made to accredited investors. The Act’s intent will not be fulfilled if the SEC decides to make that determination on a case-by-case basis, he said. White said that commenters have asked for more certainty and the staff is focusing on that area as it moves toward a final rule recommendation.

Moran also pressed for a time frame for the crowdfunding rules under the JOBS Act, and White assured him that the rulemaking is among the SEC’s top priorities.

MainStory: TopStory CFTCNews Derivatives DoddFrankAct JOBSAct Swaps

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