Obama budget would allow for more SEC inspectors

A $350 million budget increase would allow the agency to exam more registered fund advisors.

The federal budget proposed by President Barack Obama on Tuesday would provide the Securities and Exchange Commission (SEC) a 26 percent budget boost, allowing the agency to hire hundreds of additional examiners to increase investment advisor oversight.

The $3.9 trillion budget proposal for fiscal 2015 allocates $1.7 billion to the SEC, a $350 million increase from its current $1.35 billion funding.

“I am pleased that the President's FY 2015 request recognizes the SEC's need for significant additional resources,” said SEC chair, Mary Jo White, in a statement.

In a budget request document last year, the agency said one of its top priorities was to hire 250 additional examiners to increase the percentage of advisers examined each year, the rate of first-time examinations and the examination coverage of investment advisors and newly registered private fund advisers. The regulator only examined about 8 percent of the 11,000 registered advisers under its watch in fiscal year 2012.

However the additional funding is by no means a guarantee for the agency. Last year Congress provided a $29 million increase in the SEC’s budget, $324 million less than what the White House wanted.

A long term goal of the SEC is to inspect 25 percent of the roughly 1,500 newly-registered private fund advisors under its supervision, Jane Jarcho, SEC examination director, said in a previous interview with PE Manager. To meet its objectives, the SEC would need to launch 380 presence exams.

President Obama’s budget also included a provision that would tax carried interest at the ordinary income rate, with a top rate of 23.8 percent as opposed to the ordinary income rate of 39.6 percent. However, Obama has unsuccessfully added this provision to previous budget proposals.