President Obama's 2017 Federal Budget Would Increase Allocations to SEC and CFTC | Practical Law

President Obama's 2017 Federal Budget Would Increase Allocations to SEC and CFTC | Practical Law

President Obama released his proposed US budget for fiscal year 2017, which includes a major increase in funding for the SEC and CFTC.

President Obama's 2017 Federal Budget Would Increase Allocations to SEC and CFTC

Practical Law Legal Update w-001-4360 (Approx. 3 pages)

President Obama's 2017 Federal Budget Would Increase Allocations to SEC and CFTC

by Practical Law Finance
Published on 10 Feb 2016 • USA (National/Federal)
President Obama released his proposed US budget for fiscal year 2017, which includes a major increase in funding for the SEC and CFTC.
On February 10, 2016, President Obama released his proposed US Budget for Fiscal Year 2017, which includes a major increase in fund allocation to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as well as other measures directed at reinforcing regulation of the financial markets.
The budget includes:
  • An allocation of $1.8 billion to the SEC and $330 million to the CFTC. These allocations represent an 11% increase in funds for the SEC, and a 32% increase for the CFTC as compared to 2016 allocations.
  • Support for legislation that enables funding of the CFTC through user fees, which shifts the cost of regulatory oversight provided by the CFTC from the "general taxpayer to the primary beneficiaries of the CFTC's oversight."
  • Imposing a fee on the largest financial firms on the basis of their liabilities to help reduce risk in the financial sector.
The SEC and the CFTC have long asserted that they have the legal authority to regulate the securities and derivatives markets but lack the funding. The increase would allow the agencies to continue to step up enforcement activities, a stated area of focus for the CFTC in the derivatives markets now that much of the Dodd-Frank Act has been implemented.
In his testimony regarding the proposed 2017 budget, CFTC chairman Timothy Massad expounded on the need for more CFTC funding. According to Massad, the additional $80 million in funding would enable the CFTC to continue to properly oversee the rapidly changing and evolving derivatives markets. Massad said the CFTC would use the additional funds to ensure that the US derivatives markets "continue to be stable, transparent, competitive and free of fraud and manipulation" in the following areas:
  • Data and technology. The CFTC plans to increase its ability to receive, store, and analyze message data resulting from the growth in electronic and automated trading.
  • Surveillance. The CFTC plans to improve surveillance capabilities and keep up with technological sophistication of current markets by investing in both technology and personnel as well as developing the CFTC's automated surveillance and data visualization tools.
  • Enforcement. The CFTC plans to bolster its enforcement efforts, which requires specific resources to investigate and punish abusive practices. For example, analyzing automated trading patterns requires sophisticated information technology capabilities, and unique expertise.
  • Examinations. The CFTC will work to increase and improve examinations of the critical infrastructure in the markets, such as clearinghouses, and better equip the agency to deal with the very real risk of cyberattacks.
The 2017 budget proposal highlights President Obama's resolve to provide the CFTC with the tools it needs to properly address these areas, and to provide regulators with the resources needed to adequately supervise and regulate the financial markets. The federal fiscal year 2017 begins on October 1, 2016.