More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
Securities and Exchange Commission Chairwoman Mary Jo White is running into the same problem that plagued her predecessors: getting the short shrift from lawmakers when prodding them for more money so the agency can properly do its job, including adding examiners for advisors.
In her first appearance before the House Subcommittee on Appropriations in early May, White said that the agency’s $1.67 billion budget request for FY 2014 would help it fulfill one of its top priorities: to add 250 examiners for advisors.
The 250 examiners, she said, would increase the proportion of advisors examined each year, the rate of first-time examinations, and the examination coverage of investment advisors and newly registered private fund advisors.
Fulfilling this goal “would be an important step in a multi-year effort to increase coverage by our examination program to meet our regulatory responsibilities to investors who increasingly turn to investment advisors for assistance navigating the securities markets and investing for retirement and family needs,” White told lawmakers.
While Rep. Ander Crenshaw, R-Fla., chairman of the subcommittee, reiterated the compliant that the SEC should not just get “thrown” additional funds considering its failures to catch the Bernie Madoff and Allen Stanford Ponzi schemes, White defended the SEC’s budget request, saying, “It is essential to get the funding, or we won’t be able to do our job.”
Crenshaw went on to note that since 2001, the SEC’s budget has increased by 300%. “Most agencies don’t get this kind of increase each year,” he said to White. “How do you think the average investor has benefited from these large increases?”
White responded that during her few weeks on the job she has “been struck by how vast, difficult and complex” the agency’s responsibilities are, and that the agency needs additional funding to keep up with the ever-changing markets and the SEC’s increased responsibilities under Dodd-Frank. She added that she would be a “faithful steward” of the additional funds.
The $1.67 billion budget request under President Obama’s budget is a 27% increase, or $353 million, over the $1.32 billion provided by the continuing resolution (CR) the SEC was operating under this year.
Under the sequester, the SEC’s budget was cut by $108 million for 2013. Rep. José Serrano, D-N.Y., ranking member on the subcommittee, noted that while it would be an “unwise investment choice” for the subcommittee to cut funding for the agency that’s the “cop on the beat” for Wall Street and that ensures “a fair playing field” for the nation’s markets, he told White that “further cuts” were likely from the subcommittee.
White said in her testimony that if enacted, the budget request would allow the agency to add 676 new staff positions, “both to improve core operations and implement the agency’s new responsibilities.” While the agency “understands that this request comes during a time of serious fiscal challenges, we have tried to be as targeted as we could in making these requests in the areas where the immediate deployment of resources is most critical.”
White also said the SEC’s National Examination Program, which is “critical to improving compliance, preventing and detecting fraud, and monitoring market risks,” lacks the resources to allow the SEC to examine regulated entities and enforce compliance with the securities laws “in a way that investors deserve and expect.” Under the budget request, the SEC would be able to add 60 positions to improve oversight and examination functions related to broker-dealers, clearing agencies, transfer agents, self-regulatory organizations (SROs) and municipal advisors.
White reiterated that her “top priority” is to finish the remaining rulemakings under the Dodd-Frank and JOBS Acts, stating that as of now the SEC has proposed or adopted 80% of those rules, “but there are a lot that remain to be done.”
When asked if she would do a further restructuring of the agency’s various divisions, White responded that she would be “looking across the agency for further enhancements” to those made by former SEC Chairwoman Mary Schapiro to the enforcement and examination divisions. “My management style is to break down silos anyway,” White said.