On March 10, 2011, the Boston Consulting Group ("BCG") submitted a Report to Congress examining the internal operations, structure and need for reform at the SEC. As part of its work, BCG reviewed extensive documentation and conducted over 425 interviews. The Report (available here) recommended a series of initiatives designed to optimize the SEC's resources, but also recommended that Congress consider whether such improvements allow the Commission to meet congressional expectations. If not, Congress will either need to adjust the SEC's funding or change its role to fit available funding, the Report concluded.

The Report recommended that the SEC:

  • reprioritize its regulatory activity, which would include focusing on activities that the Commission deems critical to commerce or to strengthen the SEC itself, scaling back or stopping activities, or delegating them to self-regulatory organizations ("SROs");
  • reshape its organization by, among other things, taking into account the reprioritization described above and seeking flexibility on certain offices mandated by the Dodd-Frank Act;
  • invest in enabling infrastructure, particularly in the area of information technology and human resources; and
  •  enhance its role as an overseer and co-regulator with SROs by strengthening its oversight of them and centralizing its contacts with them.

BCG noted however, that its recommendations would only take the Commission "so far," due to constraints its faces: notably civil service laws limit the ability of the agency to attract, retain and manage personnel. The Report noted that, even with these changes, the SEC may not be able execute upon all activities necessary. If so, Congress will need to either relax funding constraints or alter the SEC's role to fit its existing funding and rely more heavily upon the SROs to fill regulatory needs.

In recent congressional testimony, the SEC sought additional funding to be able to fulfill its role. SEC Chairman Mary Schapiro testified on Thursday (March 10) before a Senate Committee and today (March 15) before a House Subcommittee in support of the Administration's proposed budget for Fiscal Year 2012, which seeks $1.4 billion for the SEC (an increase over the $1.2 billion sought Fiscal Year 2011). In a separate statement, she welcomed the BCG report and was pleased that it recognized "the many initiatives we have taken over the past two years to increase the agency's efficiency and effectiveness." However, she acknowledged that "there is more work to be done."