SEC Examined 15% of Advisers Last Year and Wants to Expand Exam Program

In recent testimony before Congress, SEC Chairman Jay Clayton reported that the SEC examined approximately 15% of all investment advisers in fiscal 2017, a 40% increase over the prior year.  Mr. Clayton said that the SEC achieved these results through the reallocation of resources, advancements in technology, and “other efficiencies.”  He advocated for continuing to increase investment adviser coverage levels by requesting 24 additional positions in his 2019 budget request.

OUR TAKE: The SEC still falls short of FINRA who claims to examine 40% of broker-dealers per year.  Perhaps, Chairman Clayton should reconsider requiring third party compliance reviews, a revenue-neutral policy idea, championed by former Republican Commissioner Dan Gallagher.  Regardless, the chance of an exam continues to increase every year.