SEC: Private funds’ assets exceed banks’

Facts pack the SEC’s annual budget justification plan – the agency’s document to persuade Congress for requested funds. In its new plan for fiscal year 2025, the report reveals that private fund advisers now manage $26 trillion in assets – more than the total $23 trillion held by US commercial banks.

The report asks Congress to approve a $2.5 billion fiscal year 2025 budget. The federal year begins in October. “As the SEC’s funding is deficit neutral, any amount appropriated to the agency will be offset by transaction fees,” the report states.

The agency now supports more than 5,600 positions and oversees 40,000 entities, including 15,540 registered investment advisers. In the last five years, “the population of advisers has grown by over 2,300 and the assets managed by these entities has increased by approximately $30 trillion,” the report continues.

It also documents the growth of private funds. In “the last five years, the number of funds has increased 54 percent to approximately 56,000.”

In FY 2025, the SEC seeks to add 33 positions in its Enforcement Division, 23 in exams and four in Investment Management.

An exam scorecard

The report notes that about 15 percent of SEC RIAs were examined in FY 2023, on par with the percentages seen in recent years. However, the report predicts examiners will get to only 14 percent of RIAs this FY and in FY 2025. In FY 2023, the Division of Examinations examined 2,362 advisers. That number’s predicted to be 2,282 this fiscal year, and 2,324 in FY ’25.

The DOE examined 49 percent of B-Ds in FY 2023 – similar to recent years – but this percentage is predicted to shrink to 45 percent this and next fiscal year. The DOE examined 344 B-Ds last FY, and expects to visit 381 this year, and 389 in FY 2025. The report noted that “FINRA and the SEC exchange monthly data on firms and activities of interest, which is supplemented with a quarterly call.”

Goals within the DOE include focusing on the following risk areas: “Information security and operational resiliency, crypto assets and emerging financial technology, compliance with recently adopted rules and additional areas representing significant risks to individual investors, such as the custody and safekeeping of client assets, conflicts of interest and the activities of advisers to private funds.”

New rules

The Division of Investment Management plans to continue to recommend “new rules and amendments to the Commission that modernize regulation and ensure investor protection,” as well as to focus on “reviewing new investment products, such as funds seeking investments in a limited set of crypto-related assets.”

For the first time, the online version of the report comes with four attached Excel files. The spreadsheets show staffing by program (Enforcement tops with 1,512); some itemized spending; costs per division (again, Enforcement comes out at the head of the list); and staffing changes by division.