Despite “stresses” brought on by the coronavirus pandemic and the agency’s “rapid move to a mandatory telework environment,” Securities and Exchange Commission Chairman Jay Clayton touted in mid-October the agency’s accomplishments in 2020.
Looking to 2021, the agency wants to add more examiners to help monitor advisor and broker-dealer compliance with Regulation Best Interest and Form CRS.
While the pandemic “significantly impacted how we do our work, it did not negatively impact the work itself,” Clayton stated at the annual SEC Speaks conference, held virtually by the Practising Law Institute.
The agency’s “planned oversight, examination, rulemaking, and enforcement work continued with vigor, rigor and transparency,” just as the agency “added to its workload,” Clayton said.
The securities regulator’s enforcement division brought over 700 actions in FY20, “a significant percentage” of which occurred after March 15 — when the agency began to telework.
Financial remedies reached more than $4 billion; “The Division’s activities during the pandemic have included three dozen trading suspensions, six COVID-related fraud actions, and over 150 newly opened COVID-related investigations and inquiries,” Clayton reported.
The Commission also awarded 39 individual whistleblowers approximately $175 million — “more, much more, than in any prior fiscal year,” he said.
More Examiners Needed in 2021
As to exams, in FY2020 the Office of Compliance Inspections and Examinations conducted exams that covered 15% of all SEC-registered investment advisors, Clayton stated. OCIE is conducting most exams remotely.
According to the agency’s 2021 budget request, the agency wants to add four positions to its exam division in 2021 to address “emerging risks facing market participants.” Three of those examiners will focus on investment advisor and broker-dealer compliance with Regulation Best Interest and Form CRS, as well as cyber and information security risks.
The size of the SEC-regulated community continues to grow in volume and complexity and significantly exceeds the office’s bandwidth at existing resource levels, the agency states in the request.
At the beginning of FY 2021, OCIE anticipates that it will oversee more than 13,800 investment advisors with over $85 trillion in assets under management; nearly 775 investment company complexes managing over 15,000 investment company portfolios; over 3,700 broker-dealers with more than 155,000 branch offices; approximately 550 municipal advisors; 23 national securities exchanges; and more than 300 transfer agents.
The Investment Management Division, meanwhile, reviewed disclosures relating to more than 10,700 funds, including more than 1,200 new funds — an increase of 7% over last year.
Ensure Reg BI Lives Up to its Potential
SEC Commissioner Caroline Crenshaw, a Democrat, who joined the agency in mid-August, said during the SEC Speaks event that her priorities in the coming year includes focusing “on investors, particularly retail investors. Investor protection is one of our core, and basic, mandates.”
She stated: “Given that investors are relying more and more on themselves to contribute to a 401(k), to find their financial advisors and be responsible for their savings for retirement, it’s absolutely critical that investors are getting the best advice possible.”
Crenshaw noted her particular interest in Reg BI.