SEC Desires to Hire Examiners, But Need for Many More is Greater

The Securities and Exchange Commission (SEC) is seeking greater institutional funding to be used towards staffing more examiners for investment advisers, but according to an industry source, the agency needs many more positions than they estimate to increase its reach. The SEC’s Chair Mary Jo White will present to the Senate Appropriations Subcommittee for Financial Services and General Government this week to ask for an increase in its 2014 fiscal budget, which would allow for White’s proposed addition of 250 investment-adviser examiners to the agency’s current 400 examiners. The creation of these examiner positions, however, will only bolster the annual adviser coverage rate to around 16%, a rate that remains low in comparison to the 45-55% examination coverage of brokers under the Financial Industry Regulatory Authority’s (FINRA’s) purview.

The SEC, an unidentified industry source contends, would in fact need around 1,800-2,000 new examiners added to the agency in order to noticeably increase the scale of their financial policing – a range that will likely not be implemented due to lack of funding resources. With almost 11,000 investment advisers under its authority, the SEC has long sought ways to expand examination coverage throughout its registered base. Without a significant boost in funding, however – or, as a self-regulatory organization (SRO) supporters suggest, without the creation of a Congress-approved adviser SRO – the SEC may continue to stretch the limits of their examination resources well into the next few years.

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