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From Securities Regulation Daily, February 14, 2019

Conference bill emerges to fund SEC and CFTC through FY 2019

By Mark S. Nelson, J.D.

The conference report boosts the SEC’s funding while reducing the CFTC’s funding versus prior legislation House Democrats tried to enact in January, but funding levels are mostly consistent with prior Senate bills and higher than FY 2018.

A conference report agreed to by top House and Senate leaders would ensure that the federal government remains open for the remainder of FY 2019 while also providing funding for the SEC and the CFTC. The SEC would get a modest increase and the CFTC would get a decrease as compared to earlier January appropriations bills that sought to resolve border security issues while also reopening the federal government. With the exception of CFTC funding, the conference report (H.J. Res. 31) is consistent with related Senate bills in the last Congress whose text became the base text for the prior appropriations measures in the 116th Congress. The House and Senate will soon vote on the conference report although, if passed by both chambers, it remains unclear if President Trump will sign it because it lacks full funding for his proposed border wall. However, a White House tweet indicated Trump will sign the conference report. Temporary government funding expires February 15.

SEC and CFTC funding. The SEC would receive funding of nearly $1.675 billion for FY 2019 under the compromise package. More than $15 million would be allocated to the SEC’s Office of Inspector General, while over $75 million would be allocated to the SEC’s Division of Economic and Risk Analysis. Moreover, $37 million plus would be earmarked for relocation costs associated with the SEC’s New York regional office.

Meanwhile, the CFTC would receive funding of $268 million for FY 2019. Of these funds, $50 million would be set aside for information technology improvements (these funds would be available until September 30, 2020) and $3 million would be allocated to the CFTC’s Office of Inspector General. The CFTC had requested $281.5 million for FY 2019 and CFTC Chairman J. Christopher Giancarlo had praised the Senate Appropriations Committee bill (S. 3107) in the last Congress, which would have met the agency’s request.

The conference report is the fourth attempt by lawmakers since January to keep the federal government open for the duration of the current fiscal year. The first two attempts would have funded the SEC at $1.658 billion and the CFTC at more than $281 million (See H.R. 21 and H.R. 264). A third attempt at funding would have allocated the same funding levels as does the conference report to the SEC and the CFTC (See H.R. 648). As compared to the earlier funding attempts, the SEC gained $16.6 million and the CFTC lost $13.5 million. A comparison of FY 2019 to FY 2018 funding shows that the SEC and the CFTC each would gain roughly $20 million under the conference report (See H.R. 1625).

No SEC funds for political spending rules. Section 629 of the conference report would retain language from prior appropriations legislation barring the SEC from using funds allocated to the agency to finalize rules on corporate political spending disclosures. This text has been a hallmark of appropriations bills during the last several years.

The Supreme Court’s Citizens United opinion has resulted in persistent efforts by some lawmakers to require corporate disclosures of political spending although, so far, those efforts have not produced enacted legislation. However, Sen. Elizabeth Warren’s (D-Mass) Accountable Capitalism Act (S. 3348) from the 115th Congress would have required super majority approval of political donations by boards and shareholders. The signature government ethics bill (H.R. 1) introduced by the Democratic majority in the House in the 116th Congress would lift the ban on SEC disclosure rules for public company political donations although, as drafted, the removal of the ban would apply only for FY 2019.

More recently, questions about companies’ political spending and institutional investors have arisen. These concerns, for example, have been taken up by Rep. Jamie Raskin (D-Md), who recently introduced the Shareholders United Act of 2019 (H.R. 936), and by Delaware Chief Justice Leo Strine, who recently expressed his views in a paper. Representative Salud Carbajal (D-Cal) authored another recent bill to bring transparency to how companies spend company funds on political activities with his reintroduction of the Corporate Political Disclosure Act of 2019 (H.R. 1053) (see the version from the last Congress, H.R. 5670). The latest bill, the Transparency in Corporate Political Spending Act (H.R. 1176), announced this week via tweet by Rep. Andy Levin (D-Mich), and explained by him in a Facebook post, would complement a provision contained in H.R. 1 by clarifying the repeal of the ban on SEC rules about political spending disclosures.

Product of compromise. House Appropriations Committee Chairwoman Nita Lowey (D-NY) emphasized the bipartisan aspects of the conference report. "We cannot repeat the disastrous government shutdown, so it is incumbent on Congress to come together to responsibly fund our government. This legislation represents a bipartisan compromise and will keep our government open while funding key priorities."

Representative Kay Granger (R-Texas), ranking member of the House Appropriations Committee, also remarked that the conference report was the product of compromise. "With only three weeks to negotiate and prevent an unnecessary government shutdown, the conference committee has developed a strong, bipartisan package. I am proud of the work my colleagues and I have done to provide the necessary resources to address the crisis on our southern border. I am hopeful that both chambers quickly pass our legislation and that the President signs it into law."

Senate Appropriations Committee Chairman Richard Shelby (R-Ala) said the conference report provided for "a significant down payment on the border wall" while making it possible to finish work on FY 2019 appropriations. Meanwhile, Vice Chairman Patrick Leahy (D-Vt) acknowledged that the conference report was not a perfect deal, suggesting that "[e]veryone gave something" to make it happen.

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