SEC to increase advisor exam staff by 35%

The US Securities and Exchange Commission’s (SEC’s) Office of Compliance Inspections and Examinations (OCIE) plans to add 100 examiners dedicated to registered investment advisors (RIAs) in 2016, representing a 35 percent increase over 2015 in its advisor examination staff, according to an alert from compliance consulting firm ACA Compliance.

These examiners will be a combination of new hires and current examiners reallocated from OCIE’s broker-dealer exam program. The SEC did not respond to requests for comment.

The increase in personnel shows the SEC is continuing to ramp up its oversight over RIAs, an area of focus for the commission since the passage of Dodd-Frank in 2012.

There have been talks to add more RIA-dedicated staff for a while now, noted ACA partner Barry Schwartz in a call with pfm, but “no one was expecting it to happen as quickly as it did.”

Adding staff trained in broker-dealer exams may have an impact on the types of issues examiners focus on during inspections, Schwartz noted. RIAs may be answering more questions related to trading or counter-party oversight and due diligence, as those are areas where broker-dealer examiners have expertise.

Although the 35 percent staff increase may seem dramatic, it amounts to only half of what the SEC requested in its FY 2016 budget proposal last year – 204 additional examiners to increase its coverage of RIAs.

Shifting staff from broker-dealers to RIAs is an acknowledgement that the exam program does not have the resources necessary to cover the more than 12,000 advisors registered with the SEC. The increase is not expected to significantly change the frequency of examinations, which will continue to be risk-based, according to Schwartz.

“It may not make a measurable difference, but exams may be more thorough, may wrap up more rapidly, and may have different areas of focus,” Schwartz said.