Give SEC Money for the Job

Word that the Securities and Exchange Commission may be about to slap Martha Stewart with civil charges is more than grist for the gossip mills. Stewart’s relatively pipsqueak case illustrates the depth and breadth of the net the agency has cast while investigating allegations that insiders have been using confidential information, flaky accounting and other illegal vehicles to take innocent investors for a ride.

The style maven is accused of profiting from insider information provided by the founder and chief executive of ImClone Systems, who last week pleaded guilty to criminal charges. But Stewart’s questionable stock sale is just a high-profile sideshow amid ongoing SEC investigations into failed dot-coms, media giants, energy companies, drug manufacturers and investment banks.

As the number and complexity of investigations grow, so does pressure on the agency’s anemic budget. Investor confidence won’t be restored, however, until Americans are convinced that a strong, well-funded and independent agency is actively policing publicly traded companies.

The Sarbanes-Oxley Act that Congress passed in the summer began reviving the SEC by providing a long-overdue surge in funding. President Bush signed the bill July 30 and used the assembled news cameras to declare that “corporate misdeeds will be found and punished.” Now the president is refusing to give regulators the money needed to get the job done. The bill that Bush signed called for the SEC’s fiscal 2003 budget to grow by 77% to $776 million. But the president now maintains that the SEC can make do with $568 million. Sen. Paul S. Sarbanes (D-Md.), who co-authored the act, cautions that the commission is in danger of being “seriously compromised.”

Indeed, a shortage of lawyers, accountants and examiners hamstrings the SEC. Computer systems can’t digest the complex wave of data spun off by publicly traded companies. The agency needs money to strengthen security, rebuild New York City offices destroyed in the terrorist attacks and fund the much-needed accounting oversight board.

Meanwhile, investors are still footing the bill for the painful lack of oversight that led to the string of corporate accounting scandals in Enron’s wake. Bush keeps talking tough, but that, of course, is cheap: Show us the money.