When Wall Street bond dealmakers congregated in Las Vegas last week for their annual get-together, one group of folks was conspicuously absent: SEC enforcement officials.
For years now, they’ve been crashing the marquee event, trying to, somewhat awkwardly, mingle and make industry contacts while sniffing around for their next big case. But those plans were scuttled this year when word came down from SEC headquarters recently that there was no room in the budget for investigators to attend.
The measure is part of a series of cuts that the enforcement department -- the division responsible for policing federal securities laws -- is implementing as it braces for deep spending reductions in President Donald Trump’s budget proposal, according to two people with knowledge of the matter. In addition to the ban on non-essential travel, the department has also imposed a hiring freeze and curbed the use of outside contractors who assist SEC lawyers with cases.
For those at the Vegas convention and more broadly across Wall Street, it’s one of the strongest signs yet that the Trump era may usher in a more lenient, hands-off approach from regulators. But critics worry about fewer cops on the beat.
“We’re already seeing a quieter enforcement regime” since the change of administration, said Urska Velikonja, a law professor at Emory University in Atlanta, who has studied the regulator’s enforcement history. “The number of enforcement cases is likely to be down considerably going forward.”
‘Tough Choices’
Chris Carofine, a spokesman for the SEC’s acting chairman, Michael Piwowar, denied that he had directed any agency division to make budget cuts or curtail spending. But last week, Piwowar said that the SEC should review how it allocates resources, particularly because the agency’s funding might be cut.
“Depending on which way the budget goes and stuff in the future, we’re going to have to make some tough choices in terms of using limited resources,” he said at a conference in Washington for investment advisers.
Trump’s nominee to lead the SEC, Wall Street lawyer Jay Clayton, is making progress towards winning Senate approval. The U.S. Office of Government Ethics is close to signing off on his financial disclosure form and an ethics agreement involving conflicts of interests, a person with knowledge of the matter said March 3.
Judy Burns, an SEC spokeswoman, declined to comment as did a White House spokeswoman.