SEC to increase advisor exams by 20% in 2017

The Commission anticipates the number of investment advisor exams could rise by a further 5% in 2018 while it also plans to ramp up cybersecurity-related inspections.

The US Securities and Exchange Commission is on track to deliver a 20 percent boost in the number of investment advisor examinations in 2017, according to chairman Jay Clayton's testimony before the Senate on the regulator's fiscal year 2018 budget request.

“Registered investment advisors now manage more than $70 trillion in assets, which is more than three times 2001 levels,” he said before the Senate's subcommittee on financial services and general government committee on appropriations on Tuesday.

In 2016, the SEC reassigned about 100 staff to the national examination programme's investment advisor examination unit, which along with the introduction of efficiencies will eventually contribute to that 20 percent increase, he said.

For fiscal year 2018, the SEC's office of compliance, inspections and examinations (OCIE) anticipates being able to deliver a further 5 percent increase in the number of investment advisor exams.

“I expect that for at least the next several years we will need to do more each year to increase the agency's examination coverage of investment advisors in light of continuing changes in the markets,” Clayton added.

In the coming fiscal year, OCIE also plans to increase the number of inspections to assess compliance with Commission rules designed to ensure the strength of the cybersecurity infrastructure of the US securities markets, according to Clayton.

“It appears that the Clayton SEC will continue the examinations and enforcement focus of the Mary Jo White SEC,” Todd Cipperman, founding principal of Cipperman Compliance Services, wrote in a note on Wednesday. “The more things change, the more they stay the same.”

The SEC has requested a $1.6 billion budget for 2018, which Clayton said is essentially the same as its 2017 appropriation.

“There was an assumption the SEC budget would be cut and so staffing would have been hit dramatically,” a chief compliance officer recently said. “But things seem to be where they were so anecdotally people don't think there will be a dramatic change in activity.”