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SEC Would Add 102 New Advisor Examiners Under Obama Budget

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President Barack Obama’s last budget request to Congress, released Tuesday, is a $4.1 trillion plan for fiscal 2017 that would double funding for the Securities and Exchange Commission and the Commodity Futures Trading Commission by 2021, with the SEC getting an 11% increase to $1.8 billion in 2017.

The SEC would use the 11% increase above the enacted 2016 level to hire 250 additional staffers, including 127 new examination staffers, of which 102 would be added to examine investment advisors and investment companies.

(The CFTC would get a 32% increase to $330 million in 2017.)

The 102 additional IA/IC examiners would be in addition to the 100 examiners that the agency is looking to shift from broker-dealer exams to advisor exams. With the additional examiners, the SEC hopes to increase its advisor exam rate — which currently stands at 10% of advisors per year — to 12%.

The SEC hopes to bolster frequency of advisor exams closer to broker-dealer coverage, which is about 50% per year between SEC and the Financial Industry Regulatory Authority exams.

Third-party advisor exams, which the agency is expected to propose this spring, will complement SEC exams.

Other hires under the Obama budget would include 52 enforcement personnel to study emerging risks, 24 new positions to bolster market oversight, and 47 positions in the areas of information technology, general counsel and investor education.


Obama’s plan — which Republican chairmen of the Senate and House budget committees refused to hold hearings on, in a break with a decades-long tradition — also pushes for new retirement, tax, climate change and college planning initiatives, directs $19 billion toward cybersecurity-related improvements and also creates a Cybersecurity National Action Plan to advance near- and long-term protections.

Obama’s budget, for the fiscal year beginning Oct. 1, projects revenue to increase by $308 billion in 2017 and spending to increase by $196 billion. The plan seeks to raise $2.6 trillion over the next decade through tax law changes, which includes eliminating some benefits for high-income individuals.

In releasing the budget, Obama said that cybersecurity is one of the nation’s “most important national security challenges.” As the economy becomes “increasingly digital, more sensitive information is vulnerable to malicious cyber activity. This challenge requires bold, aggressive action.”

The significant increase in cybersecurity investment via the National Action Plan, he said, includes “retiring outdated federal information technology (IT) systems that were designed in a different age and increasingly are vulnerable to attack, reforming the way that the federal government manages and responds to cyber threats, and recruiting the best cyber talent.”


Obama’s budget also includes a plan to boost workers’ access to retirement plans through state-run retirement programs as well as the launch of the administration’s myRA in November.

Labor Secretary Thomas Perez said on a Jan. 26 call the new proposals in the fiscal 2017 budget include “working with Congress” on ways to make it easier for employers to join multiple employer plans (MEPs) as well as an auto-IRA proposal.

White House National Economic Council Director Jeffrey Zients noted on the call with Perez that as Obama said during his State of the Union address, his administration has been promoting retirement savings in two ways: protecting consumers and promoting access.

DOL’s fiduciary — or conflict of interest — rule is intended to allow workers to “get retirement advice that’s truly in their best interest,” Zients said. DOL sent its rule to redefine fiduciary on retirement advice to the Office of Management and Budget for its mandatory review on Jan. 29; it is expected to undergo an expedited review and be out in final form by April.

While groups like the Securities Industry and Financial Markets Association said they support Obama’s myRA and MEP plans, the group opposes the plan’s “bank tax.”

“The imposition of a special, sector-only tax on the vast array of financial institutions captured by the president’s proposal under the guise of further limiting excessive risk completely ignores the changes this administration, Congress, regulators and industry have implemented,” SIFMA said.

“Tax rules are often blunt instruments, and the tax code is not the place for a broad, new and duplicative financial regulatory regime. This targeted tax increase on America’s most productive financial institutions could have far-reaching unintended consequences that will curtail economic growth and job creation while negatively impacting the allocation of credit and the provision of financial services to individuals and institutions.”

SIFMA also said that while it supports the administration’s proposal to encourage infrastructure investment through the introduction of America Fast Forward Bonds, the 28% cap on tax preferences would “impose a partial tax on municipal bond interest that would add further financial burdens to our cash-strapped state and local governments, ultimately discouraging investment in infrastructure projects and stifling job creation.”

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