It shouldn’t surprise anyone that there are lots and lots of asset managers whose doors have never been darkened by a Securities and Exchange Commission exam team. It’s been making pretty clear—through repeated initiatives focused on the “never-been-examined” crowd—that said crowd is bigger than one might like to believe. Hell, in January, the SEC told me without hesitation that some 40% of registered investment advisers hadn’t had the opportunity to extend their hospitality to the SEC.
The SEC’s done a lot to bring that number down, what with doubling spending on exams over the past 13 years and outsourcing broker exams to FINRA to get even more bodies to knock on hedge-fund doors. This has been to no avail. And in spite of the fact that SEC chief Mary Jo White and Sen. Elizabeth Warren likely agree on the culprit—too little money to probe a growing number of money managers—that doesn’t mean that the senior senator from Massachusetts isn’t preparing to give MJW an earful on her way out.
As the number of firms registered with the agency grows, its attempts to increase coverage have fallen short. The proportion of companies it visits each year has fallen from 18% in fiscal 2004 to an estimated 12% to 13% in fiscal 2016, according to the Journal’s analysis of SEC data; the figure hasn’t topped 13% since 2006….
“We’re on one of those hamster tracks,” Jane Jarcho, deputy director of the SEC’s examination program, said at a conference in February. “As we are able to do more exams, the number of advisers registering increases.”