SEC’s White asks for more examiners

In testimony before Congress on Tuesday, Mary Jo White, chair of the US Securities and Exchange Commission (SEC), reiterated the need to place more emphasis on the examination of investment advisors and investment companies and to expand its enforcement program.

White was testifying on the SEC’s $1.78 billion budget request for fiscal year 2017 before the US House of Representatives’ subcommittee on financial services and general government, and, the committee on appropriations.

“Funding at the requested level will permit the agency to hire an additional 250 staff in critical core areas and continue to improve our information and technology so that we can better oversee today’s markets with the sophisticated tools necessary to safeguard investors,” White said, according to a transcript on the SEC website.

The bulk of the new hires will be allocated to increase the SEC’s examination coverage of registered investment advisers and investment companies. Increasing this is “vital to the SEC’s ability to protect investors and the nation’s securities markets,” she added, noting that under the fiscal year 2017 budget request, a top priority will be to hire 127 additional examiners, primarily to conduct additional examinations of investment advisors.

As part of one of its most recent inquiries, the SEC requested last month information about The Carlyle Group’s historical monitoring fee acceleration practices. At the end of last year, the SEC also charged Fenway Partners and four executives $1.2 million for failing to disclose conflicts of interest related to payments by portfolio companies to an affiliated consulting entity.

The SEC is charged with overseeing about 27,000 market participants, including nearly 12,000 investment advisors, almost 11,000 mutual funds and exchange-traded funds and more than 4,000 broker-dealers.

The largest increase in entities registered with the SEC has occurred among investment advisors. A decade ago, there were about 9,000 investment advisors managing $28 trillion in assets. The current SEC projection is that these figures will grow to 12,500 investment advisors managing more than $70 trillion in assets by fiscal year 2017.