In testimony this week before the Subcommittee on Financial Services and General Government of the House Appropriations Committee, SEC Chair Gary Gensler talked about the budget request for SEC operations for next year. He emphasized that, over the last five years, while the capital markets have grown to $100 trillion, the SEC has “shrunk.” And for Corp Fin, the “shrinkage” has been quite significant.
During the period from 2016 to 2021, Gensler said, the number of registered entities subject to SEC oversight has increased by 12% (from 26,000 to 29,000), the number of private funds managed by registered investment advisers has grown by 40% and the amount of data that the SEC processes has increased by 20% annually for each of the last two years. Not to mention the growth of crypto, changes in technology (such as predictive data analytics), mounting cybersecurity risks and new legislation—such as the Holding Foreign Companies Accountable Act—all of which have compounded the challenges faced by the SEC staff. At the same time, from 2016 to 2021, total full-time equivalent headcount at the SEC decreased by about 2%, from 4,554 for fiscal 2016 to 4,459 for fiscal 2021. It’s no wonder that Gensler said that he was pleased to support the fiscal 2023 budget request of $2.149 billion, representing an 8% increase over fiscal 2022. According to Gensler, the requested number would support a “modest growth” (about 6%) in overall headcount above the peak in 2016.
While overall decline in SEC headcount from 2016 to 2021 was about 2%, headcount at Corp Fin has declined during the same period by a whopping 19% (477 to 388). But check out the increase in workload over the period: in fiscal 2016, Gensler reported, Corp Fin “reviewed filings related to approximately 510 new registrants. That grew almost fourfold last year, to 1,960.” What’s more, Corp Fin’s “ability to review filings of existing registrants is more limited given transaction volume and complexity of deals.” For example, Corp Fin has “sought enhanced disclosures from China-based variable interest entities.” Although the budget request would provide for about a 13% growth in headcount, it would still leave Corp Fin 8% “shy of the number of FTEs we had in FY16.”