In testimony before the House Committee on Appropriations regarding the SEC’s fiscal year 2015 budget, Chair Mary Jo White addressed the $1.7 billion budget request, stating that the funds would enable the SEC to accomplish several key and pressing priorities. Among these priorities, Chair White focused on the following:
- Bolstering examination coverage for investment advisers and other key areas within the agency’s jurisdiction;
- Strengthening the agency’s enforcement program’s efforts to detect, investigate and prosecute wrongdoing;
- Continuing the agency’s investments in the technologies needed to keep pace with today’s high-tech, high-speed markets; and
- Enhancing the agency’s oversight of rapidly changing markets and its ability to carry out increased regulatory responsibilities.
Chair White further covered the development of the SEC’s new tool, MIDAS (“Market Information Data Analytics System”), which she stated is being used to facilitate the analysis of trade and order data that reflects, among other things, “high-frequency trading and trading on off-exchange venues where pre-trade prices are not typically available to the public.” White went on to note that the SEC has several ongoing investigations into trading practices by high-frequency trading firms.
Chair White’s remarks were made on the day after it was revealed that the FBI is conducting insider-trading probes into high-speed trading firms.
Bondi Comment: In general, very little of Chair White’s testimony differs from that of the prior Chair before the appropriation committee. Chair White reiterated the importance of aggressive enforcement, examinations, technology and training – all areas that were emphasized in the past. What is notable about the context of Chair White’s testimony is this: (1) the SEC seeks from Congress a record high budget of $1.7 billion, which represents over a 50% increase from the SEC’s budget prior to the financial crisis; (2) the SEC clearly anticipates pressing for more “admissions” in enforcement matters, which likely will result in more litigation costs to the SEC, a cost not discussed in the testimony; (3) the SEC clearly intends to increase the number and frequency of examinations of registered entities; Chair White observed that the SEC examined “only about 9%” of the registered investment advisors, “comprising approximately 25% of the assets under management”; and (4) in order to keep up with evolving technology in the marketplace (including with respect to high-frequency traders), the SEC seeks to employ new technology, such as MIDAS, and to continue to encourage tips from whistleblowers.