SEC Chair Mary Jo White (i) asked the House Financial Services Committee to approve a $2.27 billion budget request for FY 2018, (ii) provided updates on numerous SEC issues and regulatory initiatives, and (iii) outlined SEC priorities for the coming year. The new budget request reflects an increase of a $445 million over the FY 2017 request.

In a hearing summary, Delta Strategy Group highlighted Chair White's priorities for the remainder of her tenure:

  • Year-End Goals. Chair White stated that the SEC will continue current efforts on (i) capital, margin and segregation rules under Title VII of Dodd‐Frank, (ii) rules concerning the use of derivatives in the asset management space, and (iii) rules with regard to the electronic reporting of mutual fund reports.
  • Treasury Markets. Chair White said that SEC staff is working on guidance that draws a line between dealers and traders in order to determine whether high‐frequency traders and proprietary trading firms participating in treasury markets should be registered as dealers that are subject to SEC oversight.
  • Equity Market Structure. Chair White indicated that any changes to Reg. NMS likely will be left to the next administration.
  • Cybersecurity. Chair White reported that the SEC's FinTech working group will make targeted recommendations (i.e., concerning guidance, concept releases and rule proposals) to foster innovation while protecting investors. In addition, the Division of Corporation Finance currently is reviewing companies that issue digitized securities.

Chair White noted that markets and registrants under SEC oversight "have grown exponentially." She stated that the SEC's responsibilities have expanded to encompass hedge fund and other private fund advisers, security-based swaps, credit rating agencies, municipal advisors, clearing agencies and crowdfunding portals. Chair White cited the tripling of managed assets and trading volumes as additional reasons for the expansion:

From 2001 to 2015, assets under management of SEC-registered advisers more than tripled from approximately $21.5 trillion to approximately $66.8 trillion, and assets under management of mutual funds more than doubled from $7 trillion to over $15 trillion. Trading volume in the equity markets from 2001 through 2015 nearly tripled to over $70 trillion.

Chair White asserted that the budget request would not affect the deficit (or the amount of funding available for other agencies) because it is offset by matching collections of fees on securities transactions.

Commentary / Steven Lofchie

The Delta Strategy Group summary of the hearing provides useful guidance on the SEC's likely activities during the coming days before the President-Elect assumes office. For example, the summary indicates that Chair White would press ahead with security-based swap rules. It is unlikely, however, that Chair White would try to force through other politically controversial measures, like the rule proposal concerning disclosures of political contributions (see our previous story, " SEC Chair Mary Jo White to Step Down").

At the hearing, Representative Maxine Waters (D-CA) reportedly said that she was "appalled" to learn that the bank stocks had risen "on news of" a "massive, destabilizing lawless agenda" and despite general uncertainty regarding the President-Elect's agenda. When events play out in ways that are unexpected, and the market rises precisely when one had expected it to fall, it is reasonable to ask what assumptions formed the basis of those expectations, and whether those assumptions were correct. In other words, if the world reacts in ways that Representative Waters did not expect, then she might find it useful to question some of her own assumptions.

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