Speaking at SIFMA’s annual conference in New York City this week, SEC Chair Mary Jo White indicated that her agency is looking to increase exams of RIAs as much as possible, budget permitting. Currently, the SEC is only able to examine 8% of its 11,000 members, or fewer than 1,000 firms. FINRA, on the other hand, audits 45% of its 4,600 members, or just over 2,000 firms. Though budgets are — and will continue to be — an issue, the SEC has requested more money to hire an additional 250 examiners.
Meanwhile, a securities attorney commenting in Investment News noted that SEC exams are getting much tougher, with more experienced and better equipped people. Key among issues that examiners look for are puffing up of AUM, reporting composite returns, custody issues and discretionary trustees — with “doing better next time” not an acceptable outcome.
