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U.S. Financial Market Oversight to Continue During Shutdown

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Oct. 1 (Bloomberg) -- U.S. oversight of financial markets and institutions will operate largely as usual during the government shutdown because most regulators are funded with independent revenue or conduct functions deemed essential.

At the Commodity Futures Trading Commission, an exception in that it relies on congressional funding, a small number of workers considered essential to surveillance of markets for derivatives including those tied to oil, natural gas and interest rates, will be on duty.

“The vast bulk of the CFTC’s oversight and surveillance functions will cease during a lapse of appropriations,” the agency said in documents outlining its plan for the partial shutdown, which began with the new fiscal year at midnight.

The CFTC’s four commissioners are exempt. Meanwhile, hundreds of CFTC employees pursuing enforcement investigations, legislative affairs and implementing Dodd-Frank Act regulations would be furloughed, according to the planning documents.

The Securities and Exchange Commission, which also relies on appropriations, has enough carryover funding to remain open for “a few weeks” if Congress doesn’t pass a funding bill, John Nester, an agency spokesman, said yesterday. Activities such as enforcement investigations, company filings and investor disclosures, and market surveillance will continue.

David M. Lynn, a former chief counsel of the SEC’s corporation finance division, said the regulator’s functions weren’t affected by the last government shutdown, in late 1995 and early 1996.

“There was no change whatsoever in how we conducted business,” Lynn, now a partner at Morrison & Foerster, said in a telephone interview.

Independent Funding

Banking regulators’ doors will remain open because their money comes from the industry they oversee. The Federal Deposit Insurance Corp. is funded by the premiums it charges banks for deposit insurance and the Office of the Comptroller of the Currency is funded by assessments on banks and federal savings associations.

Government operations essential to providing liquidity to the housing market also will be unaffected. The Federal Housing Finance Agency and the enterprises it regulates, including Fannie Mae and Freddie Mac, are independent of the congressional appropriations process. Meanwhile, a skeleton staff will maintain operations at the Federal Housing Administration and Ginnie Mae, both arms of the Department of Housing and Urban Development.

The Consumer Financial Protection Bureau, which is funded through the Federal Reserve’s revenue stream from its investments, likewise would keep operating.

To contact the reporter on this story: Clea Benson in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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