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SEC Chairman Gary Gensler

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SEC Budget Boost Would Support 5% More Advisor Examiners: Gensler

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Securities and Exchange Commission Chairman Gary Gensler plans to tell Congress Wednesday that the agency would use an 8% increase in its budget to support a 5% increase examiners to oversee advisors, but needs more examiners to oversee broker-dealers’ compliance with Regulation Best Interest.

President Joe Biden’s Fiscal Year 2023 budget requested $2.149 billion for SEC operations, an 8% increase over fiscal 2022.

“This request would allow us to maintain current services, add full-time equivalents in critical growth areas, and devote more resources to technology,” Gensler states in his prepared testimony.

The Division of Examinations has grown modestly (4% ) since fiscal 2016, Gensler says.

The fiscal 2023 budget request would support an additional 4% increase in full-time examiners compared with fiscal 2021, he says.

“About another quarter of the staff works in our Division of Examinations. This Division serves as the eyes and ears of the Commission, conducting about 3,000 exams per year, compared with 2,427 in 2016,” Gensler states.

In part, he continued, “we’ve maintained this level of productivity because we’re doing remote exams due to the pandemic. There’s no replacement for on-site exams, though. As registrants are coming back, we will need to factor in additional resources for our Examinations Division to conduct on-site exams.”

He states: “Given the evolving markets, heightened geopolitical environment, and increased attention paid to cyber risks, I expect the demands on Examinations to continue to grow.”

Since 2016, the number of registered investment advisers has increased 25%, to 15,000.

“This growth directly affects our work. Unlike many other aspects of the markets, including broker-dealers, investment advisers do not have a self-regulatory organization,” Gensler says.

The SEC examined about 15% of advisors registered with the agency in fiscal 2020 and 2021.

“The funds we requested will support only about a 5% increase in the number of staff that examine investment advisers,” Gensler states.

The Division, he continued, “also needs to increase its capacity to examine broker-dealers, particularly when it comes to compliance with Regulation Best Interest.”

Also, “last year, security-based swap dealers and major security-based swap participants were required to register with the Commission for the first time,”  Gensler’s testimony states. “The Division has begun standing up a team to examine them and to spot risks and issues.”