Not just “broke” as in it failed to regulate Wall Street or that it missed catching Bernard L. Madoff’s Ponzi scheme. But “broke” as in it is out of money.

At least that’s what Mary L. Schapiro, the S.E.C.’s chairwoman, has been telling anyone who will listen about the agency’s financial problems. With President Obama planning to freeze the budget and Congress looking for cuts, the department could be deprived of a $160 million budget increase, keeping its annual funds flat at $1.1 billion.

“It is a strain that is already having an impact on our core mission — separate and apart from the new responsibilities that Congress gave us to regulate derivatives, hedge fund advisers and credit rating agencies,” she told a roomful of lawyers in Washington on Friday.

Amid the looming financial constraints, the S.E.C. is cutting back on investigations, halting hiring — Ms. Schapiro was supposed to hire 800 new people this year — and canceling much-needed technology upgrades to monitor the markets. (Think “flash crash.”)

You might expect that most Wall Street lawyers would be quietly breathing a sigh of relief.

But, perhaps curiously, some of the industry’s best-known lawyers, many of whom once worked at the agency, have been not-so-secretly lobbying Congress for the S.E.C. to get more money.

In an open letter to lawmakers, 41 prominent securities lawyers and professionals wrote: “Investors sidelined with decimated 401(k)s will be unwilling to again risk their capital if Wall Street’s cop-on-the-beat increasingly comes to be seen by the public as a cop-on-furlough.”

Stephen J. Crimmins — a partner at K&L Gates and a former S.E.C. deputy chief litigation counsel — spearheaded the letter-writing campaign because he was worried that the department was being purposely gutted.

“It’s absurd,” he said of the S.E.C’s budget issues. “You can’t run it on a shoestring. I don’t know if it is political games or what?”

“For many of us, the S.E.C. is where we started,” Mr. Crimmins added, almost sounding wistful. “We remember what it could be. It’s not like the post office. We were working 60 to 70 hours for government pay.”

The group of lawyers petitioning Congress is going a step further than calling for a budget increase at the S.E.C. They say they believe that the department should be able to “self budget,” meaning that it should set its own annual budget.

The S.E.C. is one of the few government agencies that is self-funding, in that taxpayers don’t pay for the agency’s operations. The regulator’s entire budget comes from Wall Street firms and the like. Under the law, the agency must “collect transaction fees and assessments that are designed to recover the costs to the government of the supervision and regulation of securities markets and securities professionals.” It does not, however, use the proceeds of the penalties and fines from civil cases to pay for itself, which many believe could pervert the legal process.

But the S.E.C. is not allowed to decide how much of those funds it receives each year. Other bank regulators, like the Federal Deposit Insurance Corporation, are not only self-funded but also are allowed to self-budget. In the waning hours of the Dodd-Frank legislation over the summer, Congress eliminated a provision that would have given the S.E.C. the same budgeting power.

“In light of the S.E.C.’s questionable record, Congress must maintain some authority over the agency’s budget. Ceding that authority would make the S.E.C. unaccountable to the American people,” Senator Richard C. Shelby of Alabama, who pushed to revoke the responsibility, recently said of his decision.

David Albrecht, a professor of accounting at Concordia College, a fervent critic of the idea of self-budgeting, wrote on his blog, “The budgetary review process provides an opportunity for Congressional oversight of the S.E.C. When the S.E.C. is performing poorly, a Congressional budget cut is a natural and effective response.”

He added that self-budgeting, “gives them a pass from oversight. Who wouldn’t want that?” Worse, he contends, “Giving a governmental agency a free hand in levying taxes (or fees) leads inescapably to exorbitant rates and inefficient service.”

Giving the S.E.C. broader control of its finances may also seem like a fool’s errand given its recent troubles with money. My colleague, Edward Wyatt, wrote last week that the S.E.C.’s accounting of its own books has turned out to be suspect.

All of that may be true.

But the budget situation also has the potential to create a self-fulfilling prophecy at the agency. Without the extra funds to help police the markets and make long-term investments in the department, the S.E.C. faces the increased probability of weak enforcement and lax oversight.

If that’s the outcome, then the system really is broke.