TheCorporateCounsel.net

Recently, SEC Chair Schapiro testified that 374 professionals would be hired over the next year to help the agency carry out it’s new duties (bringing the total number of Staffers to 4200), with a total of perhaps 800 over a longer period of time. Given the poor existing job market for lawyers, there are a lot of folks whose ears perked up over this news. Here’s the SEC’s “Job Center” for those that fall into this category. You may want to review my tips for getting hired by the SEC, as noted in this blog.

Dodd-Frank: How Did Self-Funding for the SEC Fare?

Not well. The budget requests from President Obama to Congress to support the SEC are noted in Chair Schapiro’s testimony. Section 991 of Dodd-Frank didn’t survive in the form originally desired by the Senate (ie. self-funding for the SEC) – rather the final Act reaches a middle ground in Section 991(e), under which the SEC can establish a $100 million reserve fund with the Section 6(b) registration fees it collects, which it can dip into without going through the normal Congressional appropriations process (as noted in this Reuters article).

This “Securities & Exchange Commission Reserve Fund” is held by the Treasury – and the SEC has 10 days after dipping into the fund to notify Congress of the date, purpose and amount drawn. Under the terms of the Act, it looks like the SEC has wide latitude as it is limited to “necessary to carry out the functions of the Commission” – but of course, Congress may decide to interpret that phrase strictly. Any funds drawn by the SEC can be replenished by more fee collections, but no more than $50 million can be deposited in any one year.

Otherwise, it’s business as usual where the independent SEC is required to go to Congress annually to get funded. Not the best framework in my opinion…

What if the Act had authorized the SEC to put penalties from enforcement proceedings into the fund? It likely would raise constitutional questions. See Tumey v. Ohio, 273 U.S. 510 (1927); see also Caperton v. A.T. Massey Coal Co., No. 08-22 (U.S. June 8, 2009).

The SEC’s New Ethical Requirements

Recently, the SEC adopted supplemental standards of ethical conduct for its employees, mainly to respond to the SEC’s Inspector General report that contained allegations of insider trading by some of the attorneys in the Enforcement Division made back in May.

The “supplemental” standards give guidance on permitted, prohibited and restricted financial interests and transactions, as well as engaging in outside employment (yes, some Staffers have been known to moonlight on occasion in unrelated fields). Once these standards take effect in mid-August, SEC Staffers won’t be able to trade securities if they have possession of material nonpublic information nor trade in one “directly regulated” by the SEC. I don’t think that includes public companies making filings through Edgar. There is a requirement now for Staffers to clear trades through a computer system and hold any purchases for six months (unless they are sold at a 10% loss or more).

– Broc Romanek