FM: Some of the Dodd-Frank deadlines have been delayed and there is legislation that would push them back much further. How has the political pushback affected you and your staff’s ability to work on the rules?
MS: We really try to ignore the politics and do what the law requires and what we believe is in the best interest of investors. Of the more than 90 mandatory rulemaking provisions [under Dodd-Frank], we already proposed or adopted rules for about two-thirds of them. That has been a huge undertaking, especially for an agency of our size. While some deadlines will pass, the important thing is to get the rules right because that will have the most lasting and important impact.
FM: Even when Dodd-Frank takes effect, those in Congress who oppose it greatly can alter it by restricting the budgets of regulators. Are you looking at contingencies for the possibility of having a greater workload without additional—or perhaps fewer—resources?
MS: Even before the added responsibilities that we got from Dodd-Frank, we were an agency with a significant role to play and not always enough resources so it is a set of issues we have dealt with over many years. It is important to remember that under Dodd-Frank the spending for the SEC is deficit-neutral because fees on the industry automatically match whatever our appropriation is. Resources should not be an issue, but they of course will be because we are appropriated and frankly resources have always been a challenge for the agency. And now with the new responsibilities that we are taking on under Dodd-Frank (our share of the currently unregulated derivatives industry, hedge funds that will be required to register with us for the first time, extensive new responsibilities for credit rating agencies, registration of municipal advisors and oversight of that very large group) absolutely will tax the agency going forward. Today we spend less to run the entire SEC then some financial firms spend annually on just their IT budget. While we always try to find a way to do more with the resources we have and continue to do our best in that regard, at the end of the day if we don’t have sufficient resources our ability to affectively police Wall Street and implement these new protections coming out of the financial crisis will be at risk.