Magazine article The CPA Journal

Taking a Close Look at the SEC

Magazine article The CPA Journal

Taking a Close Look at the SEC

Article excerpt

Challenges of Today and Solutions for the Future

This past month has seen the impact of sequestration - mandated federal spending cuts that took effect on March 1 - on the nation. Like all federal regulatory agencies, the SEC is feeling its effects. Although the commission may not have to reduce its workforce, spending cuts will likely slow the process for new regulations and limit staff hiring, travel, and training, according to SEC Inspector General Carl W. Hoecker. The agency suffered a 5.2% reduction in its 2013 budget - from $1.32 billion down to $1.25 billion as a result of sequestration.

Charged with the primary responsibility of protecting investors, the SEC has been criticized in the not-too-distant past for failing to detect major frauds, such as Bernie Madoff s Ponzi scheme, and for squandering the scarce resources it receives from American taxpayers. It's not surprising that the SECs budget was in the crosshairs as Congress sought targets for spending cuts.

Conflict Minerals Provision

Legislators on the House Financial Services Committee also took the opportunity to voice their objections to a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that requires companies to disclose whether their products contain "conflict minerals" from the Democratic Republic of the Congo or adjacent regions. (For more information, see Greg Gaynor, Katherine Campbell, Dee Ann Ellingson, and Matthew Notbohm, "The Dodd-Frank Act's Conflict Minerals Provision: What CPAs Should Know about the SECs Final Rule," on p. 14 of this issue of The CPA Journal) In the past, SEC regulations mainly focused on the financial protection of investors, rather than getting involved in matters pertaining to corporate social responsibility. Consequently, many are now questioning whether this is an appropriate use of the agency's resources.

Furthermore, the Dodd-Frank Act created significant extra work for the SEC - for example, oversight of the over-thecounter derivatives market and hedge fund advisors, development of a whistleblower program, promulgation of new rules, and generation of studies and reports - as well as continuing its prior duties. The commission is currently responsible for overseeing approximately 35,000 entities, 12 national securities exchanges, and 10 nationally recognized statistical ratings organizations (NRSRO), in addition to the PCAOB and the Financial Industry Regulatory Authority (FINRA), to name a few. …

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