General Accounting Office Study Examines SEC Operations

Washington, DC, March 8, 2002 - The U.S. General Accounting Office (GAO) has issued a study examining the operations of the SEC. The study is in response to concerns that the SEC’s workload has outgrown its resources and has impaired its ability to accomplish its duties.

The GAO study states that SEC and industry officials believe that the SEC’s ability to fulfill its mission has become increasingly strained due, in part, to imbalances between the SEC’s workload and staff resources. For example, the study states that while total assets under management by investment companies and investment advisers increased by about 264 percent over 10 years, the number of investment company and investment adviser examination staff has increased by only 166 percent.

This, in turn, has created several challenges for the SEC. In particular, the study found that resource constraints have contributed to substantial delays in the turnaround time for many SEC regulatory and oversight activities, such as approvals for rule filings and exemptive applications; has contributed to bottlenecks in the examination and inspection area; and has forced the SEC to be more selective in its enforcement activities and lengthened the time required to complete certain enforcement investigations. The study also found that certain filings were subject to less frequent and less complete reviews as workloads increased. Finally, SEC and industry officials said that the SEC has been increasingly challenged in addressing emerging issues, including technology-driven innovations such as exchange-traded funds.

The study notes other challenges facing the SEC and recommends several short- and long-term strategies to address these challenges. In particular, the study notes the SEC’s high turnover rate as a major challenge in managing its workload and recommends that the SEC explore innovative ways to attract senior level staff and bring in additional information technology expertise to better position itself to oversee evolving securities markets. In the long-term, the study recommends that the SEC address several issues relating to strategic planning by broadening the SEC’s strategic planning process to systematically determine regulatory priorities and resource levels needed to fulfill its mission.

Recently, legislation was passed that includes pay parity for SEC staff. H.R. 1088, the “Investor and Capital Markets Fee Relief Act,” reduces SEC filing and securities transaction fees, and allows more of the fees collected by the SEC to be used to cover SEC expenses.