SEC’s White: PE exams bring ‘value-add’

During a Senate hearing, the SEC chair made the case for more funding, citing successful private equity exams as a reason for more resources. 

US Securities and Exchange chair Mary Jo White cited private equity fee abuses to support the agency’s $1.72 billion budget request for fiscal 2016, a 9 percent increase from 2015 levels.

Speaking before a Senate subcommittee on financial services, White said the commission’s recent sweep of newly-registered private fund advisers has returned “tens of millions of dollars” to investors harmed by “improper allocation of fees and expenses.”

“Everywhere we show up with these examiners there is value-add,” she said.

Earlier this year, in one of its most high-profile cases, the SEC ordered Kohlberg Kravis Roberts to return millions of dollars to investors after failing to notify them of certain fees.

White said a top priority for the commission is to hire 225 additional examiners that would allow inspectors to go from visiting 10 percent of registered advisers per year to 14 percent.

During questioning, the Republican-controlled subcommittee appeared opposed to White’s budget request. Sen. John Boozman (R-AK), the subcommittee’s chairman, noted an 11 percent increase the commission received as part of an omnibus fiscal 2015 spending package that was “more generous than those provided to any other agencies in the bill.”

Based on the reception of past SEC budget proposals, it is doubtful that the regulator will receive the total amount requested. The White House has sought to fund the SEC at roughly $1.7 billion for the past several years, but has been blocked each time by Republican lawmakers.

For fiscal year 2015, Congress agreed to boost the SEC’s funding to $1.5 billion in a last-minute federal spending plan last December, marking $250 million less than what the commission originally sought.