SEC Could Hire More RIA Examiners With Budget Boost: Gensler

Securities and Exchange Commission Chairman Gary Gensler told lawmakers on Wednesday that President Joe Biden's fiscal 2024 budget request of $2.436 billion for the SEC would help the agency's Division of Examinations grow to 1,144 full-time positions — 83 more than the division has now.

"The majority of this increase relates to full-year funding for those staff positions authorized and hired in FY 2023," Gensler told members of the House Appropriations Financial Services and General Government Subcommittee. (The government's fiscal year starts on Oct. 1 each year; FY 2023 began on Oct. 1, 2022.)

In FY 2023, "the number of positions funded by Congress was 5,303, a much-needed increase of 400," Gensler told the lawmakers. "We're now in the process of filling those positions."

The FY 2024 request seeks funding for an additional 170 positions, as well as full-year funding for those staff hired in FY 2023, Gensler continued. The president's FY 2024 budget would be a more than $200 million increase for the SEC over the agency's 2023 budget allocation.

The SEC has 30 divisions and offices across 11 regional locations and its Washington headquarters, Gensler said.

Under the FY 2024 budget request, the enforcement, exam and corporation finance divisions would see the biggest boost.

Source: SEC Chairman Gary Gensler's written testimony before Congress on 3/29/2023

Exams the 'First Line of Defense'

The exam division "is the first line of defense for the investing public relying on investment advisors," Gensler said.

The number of registered investment advisors has "grown significantly in the last five years," Gensler said, growing by 22% — to about 15,000, up from about 12,500 in 2017.

"During the same period, the number of private funds increased by 50% to approximately 50,000," Gensler testified. "This stretches thin the limited resources of the division."

The SEC's FY 2023 funding "for the first time brought the agency's staffing back above where we were seven years ago," Gensler testified. "The SEC now is approximately 3% larger than it was in FY 2016. Meanwhile, the demands on our talented staff have grown dramatically."

Gensler reiterated that in FY 2022, the SEC conducted more than 3,000 exams across its "tens of thousands of registrants, from investment [advisors] to broker-dealers to exchanges, to ensure they are following their legal obligations to customers, including seniors and other vulnerable investors."

In conjunction with the Financial Industry Regulatory Authority, "in each of the last five years, we jointly examined nearly half" of registered broker-dealers, Gensler said, "even as the number of daily transactions in the equity markets more than doubled."

Additional exam resources "would strengthen the Division's ability to protect American families by addressing risks in the crypto markets, cyber and information security, and the resiliency of critical market infrastructure," Gensler said.

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