In testimony before the U.S. House Appropriations Subcommittee on Financial Services and General Government, SEC Chair Gary Gensler and Treasury Secretary Janet Yellen testified on the impact of market developments on agency budgets.

Mr. Gensler highlighted increased budgetary pressures as a result of the following:

  • Initial Public Offerings and Special Purpose Acquisition Companies ("SPACs"). Mr. Gensler stated that a "once-in-a-generation wave of initial public offerings" has placed demands on the SEC's resources. Mr. Gensler reported that the SEC is (i) addressing guidance on the accounting implications of certain terms that are prevalent in SPAC-issued warrants, (ii) assessing whether SPAC investors have adequate protections and (iii) determining how SPACs align with the SEC's mission to "maintain fair, orderly and efficient markets."
  • Private Funds. Mr. Gensler said that the substantial rise in the number of private funds, particularly equity and venture capital funds, and related new strategies and business practices creates new risks for investors and markets. Mr. Gensler noted that he asked SEC staff to recommend reporting and disclosure reforms.
  • Crypto Assets. Mr. Gensler remarked on the significant growth in the scale and valuations of highly volatile and speculative crypto tokens. He said that the development creates a number of investor protection gaps and challenges and reported that the SEC is (i) prioritizing token-related fraud enforcement actions and (ii) requesting comments on broker-dealer crypto custody arrangements.
  • Technology. Mr. Gensler said that the SEC is devoting resources to address market volatility arising from new technologies and business models (including from the dangers of gamification).
  • Data. Mr. Gensler stated that the SEC has to modify its data assessment, examination and enforcement functions in response to high-frequency trading, and the use of artificial intelligence, predictive tools and sentiment analysis.

In her testimony, Ms. Yellen asserted that the Treasury's annual budget is not commensurate to its growing portfolio. Ms. Yellen stated that the Treasury's budget is the same as it was in 2010, not accounting for inflation, and that several of its policy offices, including those of Domestic Finance, Economic Policy and Tax Policy, have seen budget reductions upwards of 20 percent since 2016.

Ms. Yellen noted that:

  • FinCEN has been tasked with developing an enormous database for collecting and storing beneficial ownership information, yet Congress has not allotted FinCEN with any funding to do so;
  • although Community Development Financial Institutions ("CDFIs") have received a substantial expansion in funding with supplemental appropriations, it is difficult for CDFIs to distribute resources and expand their programs without increased administrative funding; and
  • nearly $7 trillion could "fall through the cracks of our tax system" because the IRS does not have enough auditors.


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Primary Sources

  1. SEC Testimony, Gary Gensler: Testimony before the Subcommittee on Financial Services and General Government, U.S. House Appropriations Committee
  2. Treasury Testimony, Janet Yellen: Testimony of Secretary of the Treasury Janet L. Yellen to the Subcommittee on Financial Services and General Government Committee on Appropriations, U.S. House of Representatives

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