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May 05, 2015 at 10:08 AM
Boosting the Securities and Exchange Commission’s fiscal 2016 budget by 15% is vital to helping the agency increase investment advisor exams, as the current level of examining 10% of advisors annually presents “a real investor protection issue of great concern,” the agency’s chairwoman, Mary Jo White, told lawmakers Tuesday.
President Barack Obama’s 2016 budget would fund the SEC at a level of $1.722 billion, 15% more than the agency’s fiscal 2015 budget of $1.5 billion.
From fiscal year 2001 to the start of this fiscal year, assets under management of SEC-registered investment advisors increased approximately 254% from $17.5 trillion to approximately $62 trillion, White said.
The boost in funding would allow the agency to hire an additional 431 staff in “critical, core areas,” White told members of the Senate Subcommittee on Financial Services and General Government Committee on Appropriations. The agency could reach 225 examiners total, with 180 devoted to investment advisor exams. Adding 180 examiners (once fully trained) would help the agency boost the advisor exam rate to approximately 14% per year.
Having more resources for advisor exams “raises the entire bar of compliance and translates directly into investor protection or the lack thereof,” White told lawmakers. The boost in funding would allow the agency to “have the boots on the ground,” White said, adding that as “BDs migrate to the investment advisor area because we’re less present there because of resources, the investor protection issue is quite, quite serious.”
Sen. Jerry Moran, R-Kansas, asked White if the Department of Labor’s 75-day comment period on its redraft to amend the definition of fiduciary under the Employee Retirement Income Security Act was “appropriate.”
White responded: “This [rule proposal] has been under study for a long time.”
As to the SEC, “the notice and comment period required by” the Administrative Procedures Act “is enormously useful,” she said, adding that “this is a particularly complicated area.”
White reiterated her previous comments that the SEC has been providing “technical assistance” to the DOL on its fiduciary rulemaking and again stated that the SEC and DOL are two separate agencies operating under different statutes. The SEC has assisted DOL as it relates to the “broker-dealer model,” White said, as well as the “possible impact” of a new fiduciary definition on lower-income individuals.
