SEC Management Receives Stinging Report from Office of the Inspector General

The Securities and Exchange Commission (SEC), Office of Inspector General (OIG), has issued a report on the management of the SEC that criticizes multiple aspects of the Commission’s operations.

Aiming to promote integrity and efficiency, the OIG is an independent office within the SEC that conducts, supervises, and coordinates audits and investigations of the SEC.

This most recent report highlights multiple areas of the Commission that need improvement. For example, the investigators met with division leaders, (IE CorpFin, Trading & Markets, Enforcement, etc.), indicating that some have raised concerns in regard to management resources due to the increase in rule-making activity as well as an increase in attrition.

To quote the report:

“Although no one we met with identified errors that had been made, some believed that the more aggressive agenda—particularly as it relates to high-profile rules that significantly impact external stakeholders—potentially (1) limits the time available for staff research and analysis, and (2) increases litigation risk. Finally, some managers noted that fewer resources have been available to complete other mission-related work, as rulemaking teams have borrowed staff from other organizational areas to assist with rulemaking activities.”

The report states that challenges exist in coordination and communication in the rulemaking process due to potential overlaps and differences of opinion.

Modifications by the Office of the Chair apparently undermined the ability of the Office of the Advocate for Small Business Capital Formation and the Office of the Investor Advocate to “fulfill their advocacy roles.” It appears that information on proposed rules was not made available to these offices or “receiving only fatal flaw drafts of proposed rules for a brief period of time.”

The report mentions the opaque environment regarding crypto regulation and a question as to which agency, the SEC or CFTC, has jurisdiction,

“Such uncertainty can unsettle market factors and elevate risk for Main Street investors.”

Attrition at the Commission is mentioned as jumping from 3.8% in 2020 to 6.4% as of September 2022 – the highest it has been in over ten years. Most glaringly is attrition at senior levels – Senior Officer at 20.8% and Attorney positions at 8.4% for 2022.

Another interesting comment is the OIG’s observation that in the calendar year 2022, “peak occupancy across all SEC building locations has averaged around 7%.” This even after the Biden administration declared the pandemic was over.  The SEC’s return to office date is set for January 9, 2023.

While the past couple of years have been challenging for everyone in both the private and public sectors, and rapid changes in technology in financial services can swamp operations, the aggressive rulemaking agenda may have come with a cost to other aspects of the Commission. In just the first months eight months of 2022, the SEC proposed 26 new rules, which was more than double the preceding year and more than proposed in each of the last five years. This is an eye-opening report.

The report is available here.




Sponsored Links by DQ Promote



Send this to a friend