The Securities and Exchange Commission (SEC) recently presented the President’s Fiscal Year 2017 budget request for the SEC to Congress. Among the notable requests, the SEC seeks significant additional resources for increased examination coverage, primarily of investment advisers and investment companies but also related to broker dealers, crowdfunding portals, and other entities. The SEC also seeks additional resources for its Enforcement Division, which continues to pursue a record number of cases.
With respect to investment advisers and investment companies, the SEC noted that the number of IAs will increase from approximately 9,000 a decade ago to about 12,500 by FY 2017. The SEC projects that assets managed by IAs will increase from $28 trillion to $70 trillion during the same period. In addition to these increases, the SEC also noted the “additional challenges to examination staff” posed by the increased use of new and complex products by both IAs and broker dealers, as well as the use of high-frequency and algorithmic trading, and the growth of “families” of financial services companies that include both broker dealer and investment adviser affiliates. In its budget request, the SEC seeks to add 127 additional examiners, “primarily to conduct additional examinations of investment advisers, but also to improve oversight and examination functions related to broker-dealers, clearing agencies, transfer agents, SROs, swap data repositories, municipal advisors, and crowdfunding portals, among others.”
With respect to enforcement, the SEC noted that it brought a record number of actions in 2015. Nevertheless, the agency seeks additional resources so that it can “continue to enhance its enforcement function to keep pace with the growing size and complexity of the nation’s markets and to swiftly and aggressively address misconduct.” The SEC is requesting fifty-two (52) additional positions for the Enforcement Division, to support three core functions: (1) intelligence analysis, (2) investigation, and (3) litigation. The positions would include forensic accountants, industry experts, data analytics experts, and technology staff needed to “promptly detect, prioritize, and investigate areas appropriate for enhanced enforcement efforts,” as well as experienced trial attorneys “to prosecute the growing number of highly-complex enforcement actions.”