Here are a few interesting observations about the challenges faced by the SEC in regulating securities markets and investment activities.
1. The SEC staff consists of 4,500 people and their areas of oversight include:
- 26,000 market participants, 10,000 mutual funds and ETF’s, 4,000 broker dealers, 650 municipal advisors, 400 transfer agents, 21 national securities exchanges, 10 credit rating agencies, 7 active registered clearing agencies,
- the entire PCAOB
- all of FINRA
- the entire FASB
- the Municipal Securities Rulemaking Board
- the Securities Investor Protection Corporation (SIPC)
- and…is also responsible for reviewing financial statements for more than 8,000 reporting companies
3. That $1.74 billion request above is an annual number. For comparison purposes, NYSE daily average dollar traded in 2018 was $78.1 billion. NASDAQ daily average dollar traded in 2018 was $80.8 billion. Average dollar daily trading value in 2018 for Municipal, Treasury, Agency MBS, Non-Agency MBS, ABS, Corporate debt, and Federal Agency Securities was $11.5 billion, $565.3 billion, $227.5 billion, $2.6 billion, $1.5 billion, $34.1 billion, and $3.5 billion respectively.
4. When Alibaba (BABA) went public in September 2014, it paid $260 million to the investment banks who ran the IPO.
5. In 2018, SEC spend for the Division of Enforcement dropped nearly 29% to $578 million, the lowest amount since 2015. In 2018, the SEC returned $794 million to investors, which was down 26% from 2017.
6. In the past five years the number of registered investment advisers has grown by over 15% and assets under management have grown by 40%. Nearly 35% of all registered investment advisers have never been examined by the SEC.
7. In 2017, the SEC created a new “Cyber Unit” to address investment concerns related to emerging technologies, including things like initial coin offerings (ICOs). But the SEC itself also faces non-market cyber threats. In 2016 a Ukrainian hacker was able to extract nonpublic earnings results for 157 companies from EDGAR to generate $4.1 million in illegal trading profits.
8. In 2018, Jeff Kauflin published an article at Forbes.com entitled “Where Did The Money Go? Inside the Big Crypto ICOs of 2017”. Kauflin noted that:
“Since the ICO explosion began in 2017, some 800 ICOs have been offered, raising a total of about $20 billion…Of the 141 largest ICOs in 2017, 86% are trading below their listing price, and 30% have lost almost all their value, according to EY.”