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SEC OCIE exams to rise despite lower budget
More SEC examinations will target advisers as the agency shifts its projected lower funding toward RIAs and away from broker-dealers, according to the SEC’s 2018 budget request.

The Office of Compliance Inspections and Examinations, which probes more than 12,000 RIAs and 4,000 broker-dealers, is seeking $340.8 million from Congress for the next fiscal year. The division’s request would cut its budget by $5.4 million, or 1.5%, from this year’s continuing resolution.

Former SEC Chairwoman Mary Jo White led a shift in the division’s resources in her final year, according to the agency’s 2016 annual report. The division increased staff overseeing investment firms and RIAs by 20% through hiring and reassignment after 2,000 new advisers registered in the past two years.

The SEC also moved some OCIE staff to FINRA’s new Securities Industry Oversight office, which is “focused on assessing FINRA’s fulfillment of its core mission to regulate member broker-dealers,” according to the annual report.

The budget request, which current Chairman Jay Clayton presented last week in testimony before a Senate panel, reflects the change. The number of SEC exams of BDs will drop 43% this year to 310 from 543 in 2016, the document shows.

OCIE predicts the number of BDs who will face exams in 2018 to tick up to 320, despite the lower funding request. The division also forecasts the number of advisers examined to grow to 1,850, a 6% increase from this year and a 28% jump from last year.

Representatives for the agency didn’t respond to a request for an explanation on how the lower funding would yield more adviser exams.

OCIE will manage the higher workload with a lower budget through “the introduction of efficiencies” and 100 reassigned staff members, Clayton told lawmakers last week. Assets managed by RIAs have more than tripled to $70 trillion since 2001, he noted.

“I expect that for at least the next several years we will need to do more each year to increase the agency’s examination coverage of investment advisers in light of continuing changes in the markets,” Clayton said.

Compliance experts, however, expect both SEC and FINRA examinations to decline under President Trump, with a greater focus on enforcement in each case. Both agencies set records for enforcement actions in 2016.

Click through the slideshow for a full analysis of the budget request and its impact on advisers. Unless otherwise noted, data for 2017 is based on SEC’s continuing resolution and data for 2018 is based on the agency’s requests or estimates.


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