- The Washington Times - Wednesday, February 12, 2003

WASHINGTON, Feb. 12 (UPI) — Financial markets are more prepared for a potential terrorist attack than they were about 18 months ago, but more government funding will be needed to ensure that disruptions will not occur in the event of another strike, senior government officials said Wednesday.

"Limited resources … have affected the (Securities and Exchange Commission's) ability to more effectively oversee an increasing number of organizations and more technically complex market operations," said Davi D'Agostino, director of financial markets and community investment of the General Accounting Office.

Testifying before the House Committee on Financial Services's subcommittee on capital markets, D'Agostino pointed out that while the SEC oversees financial institutions and clearing organizations through its Automation Review Policy program, one key problem it faces is being able to hire and retained qualified personnel for the job.

"At current staff levels, SEC staff report being able to conduct examinations of only seven of the 32 organizations subject to the ARP program each year," D'Agostino said.

Such calls for more SEC funding comes at a time not only when the federal budget struggles under a ever-ballooning budget deficit, but also as the agency itself has called for more money to beef up its anti-corruption mechanisms in light of the corporate malfeasances over the past year. The Bush administration has already committed itself to boosting funding to the SEC so that the agency can enhance its market oversight efforts under the new chairman, William Donaldson.

"The level of preparedness for a major disruption of the nation's financial market system are critical ones … ensuring the continued health and operation of our nation's financial marketplace in the event of an emergency such as the attacks of Sept. 11 must be a top priority for the financial regulators and industry as well," said committee Chairman Michael Oxley, R-Ohio.

To be sure, the SEC may need more funding to be able to fulfill its role as financial regulator. Yet, it is also worth bearing in mind that following the Sept. 11, 2001, attacks, financial markets were able to reopen with few problems less than a week later on Sept. 17, and many investors praised the government's decision to allow financial institutions to test whether they could start up trading without any disruptions once they reopened.

"Deciding when to reopen the markets will involve an assessment of the operational capabilities of the markets and major market participants, as well as the clearance and settlement system," said Robert Colby, deputy director of the SEC's market regulation division.

He noted that while share prices tumbled nearly 3 percent on Sept. 17, that was a result of market concerns about another terrorist attack, rather than a failure on the part of the market system.

Since the terrorist attacks, the SEC is "better off now (than it was), but there's still work to be done," Colby told committee members.

"Were any single securities market to become incapacitated, trading could be shifted to one or more of the remaining markets. Of course, sufficient preparation is required for any such arrangement to work smoothly and promptly," Colby said, pointing out that there was still work to be done, namely in diversifying the location of securities companies and ensuring coordination between the brokerages as well as with the markets.

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