It’s belt-tightening time at the Securities & Exchange Commission’s (SEC’s) enforcement unit. Early indication was that when Wall Street bond deal-makers convened at their annual reunion in Las Vegas earlier this month, SEC Enforcement officials (regular attendees) were conspicuously absent.
According to Bloomberg News, the enforcement division, bulked up under Mary Jo White, is cutting expenses as it awaits its new budget. While this is interesting in that historically, SEC enforcers attended the Wall Street event in hopes of sniffing out their next big case, it doesn’t really signal a reduction in SEC enforcement activities. Rather, it signals a ban on “non-essential travel,” in concert with the Commission’s self-imposed hiring freeze and curbed the use of outside contractors who assist SEC lawyers with cases.
Anticipated budget squeeze cuts across many agencies
The SEC is not the only agency facing budget cuts. The current administration seeks to cut government overhead across a broad swatch of agencies, and many are looking to trim expenditures in anticipation. While Chris Carofine, a spokesperson for SEC Acting Chairman, Michael Piwowar, denied directing any agency division to make budget cuts or curtail spending, Piwowar previously indicated that the SEC should review how it allocates resources because the agency’s funding might be cut.
“Depending on which way the budget goes and stuff in the future, we’re going to have to make some tough choices in terms of using limited resources,” he said at a conference in Washington for investment advisers.
While former SEC Chairwoman Mary Jo White had drafted a regulation to outsource some exams to third parties, that is unlikely to happen, thanks in part to the addition of more OCIE staff. In the last two years, the OCIE has added approximately 170 new adviser examiners through a combination of new hires and job shifting. This means nearly 600 of OCIE’s 1,000 examiners are focused on adviser reviews.
But YOU are still in the regulator’s crosshairs
According to Peter Driscoll, acting OCIE director, advisor exams are “up 28% [on adviser exams] over last year at this point.” The agency has been under pressure for years to increase its adviser coverage. In 2016, it examined about 11% of the more than 12,000 registered investment advisers — an uptick unlikely to slow down.
Acting SEC Chairman Piwowar also believes regulatory oversight is best left in-house. “I prefer our own employees to do more difficult things [such as exams]. That allows them to see trends in the industry.”
In the meantime, the SEC will continue to try to boost its exam numbers.
So…the regulatory alphabet is still watching YOU!
The SEC is not the only regulatory body keeping an eye out for financial errors and omissions (or outright wrongdoing!). Most intend to keep on plowing the financial services fields in an effort to uncover bad actors acting badly. So, you should still be prepared. But don’t overpay! Noncompliance can be costly — we talk about fines and jail sentences in this blog all the time. But, compliance doesn’t have to break the bank. Patrina is offering a 90-day, FREE trial of its comprehensive 8-module compliance solution. And that’s just the tip of our iceberg!
Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliant data capture, file storage, and records archiving specifically designed for the financial services community.