The United States Securities and Exchange Commission (SEC) has presented a formal request to Congress seeking an additional $158 million in funding for the upcoming fiscal year. This request, outlined in the SEC’s March 11 Congressional Budget Justification, aims to address the evolving landscape of financial markets, including the complexities of the burgeoning crypto markets.
Rising challenges in financial markets
SEC Chair Gary Gensler highlighted the rapid transformation of markets and business models driven by technology. He pointed out the emergence of novel communication channels, such as Reddit forums and celebrity influencers, which have altered the dynamics of investor interactions. Moreover, Gensler emphasized the regulatory challenges posed by the “Wild West” nature of the crypto markets, characterized by noncompliance and speculative behavior, putting investors’ assets at risk.
To effectively tackle these challenges, the SEC seeks to bolster its regulatory capabilities through increased staffing and resources across its divisions. The proposed budget includes provisions for adding 148 new positions, bringing the total target for 2025 to 5,621 positions. Notably, the Division of Examinations (EXAMS) aims to augment its workforce by 23 positions to address evolving risks, particularly in crypto assets and emerging financial technologies.
Within the SEC, specialized units such as the Office of Investor Education and Advocacy (OIEA) and the Office of the General Counsel (OGC) are gearing up to combat fraudulent activities in the crypto space.
OIEA intends to allocate resources to handle fraud-related inquiries and complaints involving crypto asset securities, underscoring the agency’s commitment to safeguarding retail investors. Meanwhile, OGC seeks additional positions to manage the surge in civil and administrative litigations and support its whistleblowing program, which has witnessed a notable uptick in activity.
Performance targets and enforcement actions
In its 2023 performance report, the SEC asserted that it met or exceeded 28 out of 36 performance targets, falling short on six and lacking sufficient data for two. These targets encompass a wide range of metrics, including the number of examinations conducted and the success rate in litigation.
Despite not meeting its target for litigation success rate in 2023, the SEC continues to pursue its overarching goals outlined in Gensler’s four-year plan, which emphasize protecting the public against fraud, establishing a robust legal framework, and promoting workforce diversity.
Crypto enforcement actions on the rise
Of particular note are the SEC’s efforts in crypto enforcement, with the number of related actions increasing since Gensler assumed the chairmanship. In 2023 alone, the SEC initiated 46 enforcement actions of crypto, constituting nearly 6% of its total 784 actions for the year. This surge underscores the agency’s heightened focus on addressing regulatory infractions and misconduct within the crypto markets.
As financial markets undergo rapid evolution fueled by technological advancements and changing investor behavior, regulatory bodies like the SEC are tasked with adapting to ensure investor protection and market integrity.
The agency’s request for additional funding reflects its proactive approach to addressing emerging challenges, particularly in the dynamic landscape of crypto assets. With enhanced resources and staffing, the SEC aims to strengthen its oversight and enforcement efforts, signaling its commitment to maintaining the integrity and stability of the financial markets.
