Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—Funding for SEC held steady for remainder of FY24, (Mar 21, 2024)
Negotiations over the second minibus focused on non-securities issues with the exception of financial agency funding over which both Republicans and Democrats reached a draw and held funding level.
The grand bargain struck over the second, and last, FY24 minibus appropriations bill treats the SEC the same as the first minibus, signed into law March 9, 2024, that held funding for the CFTC at FY23 levels by also holding funding for the SEC at those same levels. Stronger language contained in an earlier House version of the Financial Services and General Government (FSGG) bill was left out of the final version but an old policy rider on corporate political spending remains intact. House members have 72 hours to review the second appropriations minibus (Further Consolidated Appropriations Act, 2024) and the Senate must then also pass it, so there is a possibility that the federal government could experience a brief, partial, shut-down pending enactment, in a final series of actions that would bring to a close an unusual, bifurcated, appropriations process.
SEC funding. The SEC’s FY24 funding will be held at the FY23 level of $2.149 billion. The agency had requested $2.436 billion for FY24 but with the change in House leadership after the mid-term election’s widespread expectations were that lawmakers would only allow modest, if any, budget increases for financial regulators (the GOP-led House FSGG bill, for example, would have funded the SEC at slightly less than $2 billion for FY24). The SEC’s FY24 allocation also includes $39.7 million for the agency’s replacement office lease. The SEC’s FY25 budget request calls for $2.594 billion.
Both Republicans and Democrats claimed victory in having drafted a compromise bill that prevented the opposition party from including more drastic provisions. “We defeated outlandish cuts that would have been a gut punch for American families and our economy—and we fought off scores of extreme policies that would have restricted Americans’ fundamental freedoms, hurt consumers while giving giant corporations an unfair advantage, and turned back the clock on historic climate action,” said Patty Murray (D-Wash), Chair of the Senate Appropriations Committee, in a press release.
Representative Kay Granger (R-Texas) said via press release that “House Republicans made a commitment to strategically increase defense spending, make targeted cuts to overfunded non-defense programs, and pull back wasteful spending from previous years. I am proud to say that we have delivered on that promise, and this bill is proof.” She ended her statement by outlining the GOP’s negotiating stance during the extended FY24 appropriations process: “With the odds stacked against us, House Republicans have refocused spending on America's interests, at home and abroad, and I urge support of this bill.”
Policy language. Section 633 of the appropriations minibus contains the now familiar policy rider that prohibits the SEC from using any funds to finalize regulations that would require corporations to make public disclosures about their political spending. This policy rider has been part of appropriations bills since the closing years of the Obama Administration.
The SEC’s private fund advisers rulemaking had been a special target of some lawmakers. The FY24 minibus eases language contained in a prior House report to now only direct the SEC to report to Congress on how the now-final rulemaking affects “underserved businesses and communities.” The report is due within 180 days of the minibus being enacted into law.
The private fund advisers regulation was adopted in final form on August 23, 2023 and contains a set of related rules, including the quarterly statement rule, private fund audit rule, adviser-led secondaries rule, restricted activities rule, and the preferential treatment rule. The prior House report on the FSGG portion of the minibus would have called on the SEC to, pre-adoption, “reconduct a full economic analysis” of the regulation’s potential “disparate impact on underserved businesses and communities.”
The private fund advisers regulation became effective on November 13, 2023 and compliance was to be required for some provisions 60 days after publication in the Federal Register, but compliance dates, referred to by the SEC as “transition periods,” for the several main provisions were set generally at 18 months, with an accelerated pace for larger private funds advisers (those with $1.5 billion or more in private funds assets under management) of only 12 months regarding the adviser-led secondaries rule, the preferential treatment rule, and the restricted activities rule.
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