Description
U.s. Securities And Exchange Commission
U. S. SECURI TI ES AND EXCHANGE COMMI SSI ON
FY 2014 CONGRESSI ONAL BUDGET J USTI FI CATI ON
FY 2014 ANNUAL PERFORMANCE PL AN
FY 2012 ANNUAL PERFORMANCE REPORT
About This Report
The Congressional Budget Justification (CBJ) is the annual
presentation to the Congress that justifes the Securities and Exchange
Commission’s budget request and refects the continuing process
to provide improved strategic focus, data quality, and information
to Congress and the public. This report also includes the Annual
Performance Plan (APP) for fscal year (FY) 2014 and the Annual
Performance Report (APR) for FY 2012, focusing on the agency’s
strategic goals and performance results.
This report provides information that satisfes requirements contained
in the following laws and regulations:
• GPRA Modernization Act of 2010
• Offce of Management and Budget Circular A-11, Preparation,
Submission and Execution of the Budget
• Government Management Reform Act of 1994
• Reports Consolidation Act of 2000
• Offce of Management and Budget Circular A-136, Financial Reporting Requirements
An electronic version of this document and its components is available at www.sec.gov/about/offces/
ofm/ofm-documents.htm. To comment on the SEC’s FY 2014 CBJ & APP and FY 2012 APR, email
[email protected].
Contents
Agency and Mission Information 3
Executive Summary 4
Vision, Mission, Values, and Goals 9
History and Purpose 10
Organization Structure and Resources 11
FY 2014 Budget Request Tables 13
FTE and Positions by Program 14
Obligations by Object Class 15
FY 2014 Request by Strategic Goal and Program 16
Summary of Changes 17
Offsetting Collections and Spending Authority 18
FY 2014 Appropriations Language 19
FY 2012 Annual Performance Report and FY 2014 Annual Performance Plan 21
FY 2012 APR and FY 2014 APP Summary 22
A Reader’s Guide to the SEC’s Performance Information 22
Verifcation and Validation of Performance Data 23
Performance Summary by Strategic Goal 24
Strategic Goal 1: Foster and Enforce Compliance with the Federal Securities Laws 24
Strategic Goal 2: Establish an Effective Regulatory Environment 37
Strategic Goal 3: Facilitate Access to the Information Investors Need to Make Informed Investment Decisions 47
Strategic Goal 4: Maximize the Use of SEC Resources 55
FY 2014 Budget Request by Program 63
Other Information 149
Program Evaluations and Research 150
Cross-Agency Collaboration 151
Effciencies and Effectiveness 151
Management Reviews 153
Management Challenges 153
Hyperlinks to Other Reports 153
Appendixes 155
Appendix A: Summary of Changes in Performance Goals and Indicators 156
Appendix B: Acronyms 157
Available on the Web at www.sec.gov/about/offces/ofm/ofm-documents.htm
To contact the SEC, please see www.sec.gov or “Contact Us” at www.sec.gov/contact.shtml.
PAGE 2 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
AGENCY AND MISSION
INFORMATION
Executive Summary
investor assets, improving internal collaboration, bolstering
our risk assessment capacity, and recruiting more staff with
specialized expertise and experience. These efforts could
not have been possible without the support of the Congress
through the budget process.
However, the SEC’s current level of resources is not suffcient
to keep pace with the growing size and complexity of the
securities markets and of the agency’s broad responsibilities.
Currently, the SEC oversees approximately 35,000 entities,
including about 11,000 investment advisers, 9,700 mutual
funds and exchange traded funds, 4,600 broker-dealers
with more than 160,000 branch offces. The SEC also has
responsibility for reviewing the disclosures and fnancial
statements of approximately 9,500 reporting companies.
The SEC oversees approximately 460 transfer agents,
17 national securities exchanges, eight active clearing agen-
cies, and 10 nationally recognized statistical rating organiza-
tions (NRSROs), as well as the Public Company Accounting
Oversight Board (PCAOB), Financial Industry Regulatory
Authority (FINRA), Municipal Securities Rulemaking Board
(MSRB), the Securities Investor Protection Corporation
(SIPC), and the Financial Accounting Standards Board
(FASB). Also, as mentioned above, the agency has new or
expanded responsibilities over the derivatives markets, hedge
fund and other private fund advisers, municipal advisors,
credit rating agencies, and clearing agencies.
Meanwhile, the securities industry continues to grow at a
rapid pace. For example, during the past decade, trading
volume in the equity markets has more than doubled, as
have assets under management by investment advisers, with
these trends likely to continue for the foreseeable future.
A number of fnancial frms spend many times more each
year on their technology budgets alone than the SEC spends
annually on all its operations. Similarly, SEC enforcement
teams bring cases against frms that spend more on lawyers’
fees than the agency’s annual operating budget.
The U.S. Securities and Exchange Commission’s (SEC) is
pleased to submit the budget request for fscal year (FY)
2014. For FY 2014, the SEC is requesting $1.674 billion in
support of 5,180 positions and 4,638 FTE. This requested
budget level would allow the SEC to hire an additional 676
positions to accomplish the priorities the agency has set
forth, including:
• Strengthening core programs and operations;
• Acquiring the necessary skill sets to enhance the
agency’s oversight of the increasing complex and rapidly
changing markets and entities the SEC regulates;
• Making operational the signifcant new responsibilities
assigned to the agency over areas such as derivatives,
private fund advisers, and municipal advisors under
the Dodd-Frank Wall Street Reform and Consumer
Protection Act; and
• Implementing the new responsibilities created under
Title I of the Jumpstart Our Business Startups (JOBS)
Act of 2012.
In addition, this request would enhance the tools our staff
have at their disposal to better advance the SEC’s mission
through much-needed investments in technology and
training.
The requested funding is necessary for the SEC to fulfll our
responsibility to protect investors; maintain fair, orderly, and
effcient markets; and facilitate capital formation. While it is
understood that this request comes during a time of tremen-
dous fscal challenges, it is important to note that this budget
request is fully offset by matching collections of fees on secu-
rities transactions, and will not in any way impact the Federal
budget defcit.
The Commission over the past few years has completed a
number of important steps to reform operations and better
protect investors. These include revitalizing and restructuring
the enforcement and examination functions, revamping the
handling of tips and complaints, enhancing safeguards for
PAGE 4 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
While the agency’s long-term goal is to examine roughly the
same proportion of the adviser industry each year as the
Financial Industry Regulatory Authority (FINRA) achieves in
its examinations of broker-dealers, which is about half, the
SEC recognizes that a sustained, recurring investment will
be needed to achieve this outcome.
The National Examinations Program (NEP) also would add
30 positions to improve oversight and examination functions
related to broker-dealers, clearing agencies, transfer agents,
self-regulatory organizations (SROs), swap data reposito-
ries, and municipal advisors. In addition, a portion of these
positions will be used to support other critical program
initiatives such as expanding the program for registrants’
internal compliance, enhancing global risk assessment and
surveillance efforts, and improving technology capabilities.
These positions are vital as the agency continues to strive to
keep pace with the rapid change and increasing complexity
of the markets it regulates.
Focusing on Economic and Risk Analysis to Support
Rulemaking and Oversight
For FY 2014, the SEC plans growth of 45 positions in the
Division of Risk, Strategy and Financial Innovation (RSFI),
primarily to hire fnancial economists to perform economic
analyses and research in support of Commission rulemaking
activity. Specifcally, RSFI would seek economists with exper-
tise in analyzing:
• high frequency trading data and economic issues in
market structure and practices to support the Division
of Trading and Markets and the examination program;
• executive compensation and related areas of corporate
governance;
• complex structured products, including valuation of and
risks associated with those products; and
• swap dealers and fnancial responsibility requirements.
RSFI also plans to hire computer scientists with mathemat-
ical and statistical programming experience to support risk
assessment and risk metrics, analytics, rulemaking, and
economic analysis.
This budget request focuses on addressing these resource
challenges by increasing funding in the following areas:
• expanding oversight of investment advisers and
strengthening compliance;
• focusing on economic and risk analysis to support
rulemaking and oversight;
• bolstering enforcement;
• building oversight of derivatives and clearing agencies;
• supporting implementation of the JOBS Act and
enhancing reviews of corporate disclosures;
• leveraging technology; and
• enhancing training and development of SEC staff.
Each of these areas is described further below.
Expanding Oversight of Investment Advisers and
Strengthen Compliance
During FY 2012, the SEC examined only about eight percent
of registered advisers, and over 40 percent of advisers have
never been examined. Additionally, the number of regis-
tered advisers has increased by more than 40 percent over
the last decade, while the assets under management by
these advisers have increased more than two-fold, to almost
$50 trillion. At the same time, the industry has been moving
towards the increasing use of new and complex products,
including derivatives and certain structured products; the
use of technologies that facilitate high-frequency and algo-
rithmic trading; and the development of complex “families” of
fnancial services companies with integrated operations that
include both broker-dealer and investment adviser affliates.
While the agency has successfully focused our limited exami-
nation resources on those areas posing the greatest risk to
investor assets, the SEC’s low rate of examination coverage
poses too great a risk to investors to allow it to persist.
Therefore, under the FY 2014 request, one of the SEC’s top
priorities is to hire 250 additional examiners to increase the
percentage of advisors examined each year, the rate of frst-
time examinations, and the examination coverage of invest-
ment advisors and newly registered private fund advisers.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 5
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
In addition, the agency intends to focus on further enhancing
its oversight of clearing agencies. Currently, the average
transaction volume cleared and settled by the seven active
registered clearing agencies is approximately $6.6 trillion a
day. Yet the SEC only has approximately sixteen examiners
devoted to them, with limited on-site presence in only three
of the seven. Additionally, the SEC only has approximately a
dozen other staff focused on the monitoring and evaluation
of risk management systems used by the existing clearing
agencies, and will need to expand these efforts to address
the expected increase in the number of clearing agencies and
rule flings raising risk management issues. Without these
additional resources, the mismatch between the amount of
regulated clearing activity and staffng will be exacerbated
as additional clearing agencies will register with the SEC as
a result of their security-based swap activities, and others
likely will require expanded oversight due to their designation
as systemically important by the Financial Stability Oversight
Council. Accordingly, in the FY 2014 budget request the SEC
proposes to add 25 positions in the Division of Trading and
Markets and in the NEP to support these functions.
Supporting Implementation of the JOBS Act and Enhance
Reviews of Corporate Disclosures
For FY 2014, the SEC requests 25 new positions for the
Division of Corporation Finance (CF). These positions
primarily would be devoted to implementing Title I of the
Jumpstart Our Business Startups (JOBS) Act. The Act
establishes a new category of flers – “emerging growth
companies” – who may comply with scaled disclosure
requirements in their initial public offerings and subsequent
periodic reports. These companies may also submit draft
registration statements for confdential nonpublic review by
the staff of the Division. These provisions were intended
to increase the number of initial public offerings and the
number of companies who fle periodic reports with the SEC.
The new positions will be used to hire additional attorneys
and accountants to conduct reviews of registration state-
ments and other corporate flings, including the additional
flings expected to result from the JOBS Act, and to answer
Bolstering Enforcement
The ability to bring timely, high-quality enforcement actions
when violations of the Federal securities laws are identi-
fed is integral to the SEC’s core mission. The SEC must
expand its enforcement function to keep pace with the
growing size and complexity of our markets and the SEC’s
additional responsibilities, and to send strong messages
to wrongdoers that misconduct will be swiftly and aggres-
sively addressed. Additional resources are needed in
Enforcement to assist in following up on the high volume
of tips and complaints received through the Commission’s
new whistleblower program; achieve additional examina-
tions of advisers; and deploy more advanced analytical
and technological tools to detect securities law violations.
Specifcally, the Division of Enforcement will focus its hiring
of 131 staff on increased expertise in the securities industry
and new product areas, trial attorneys, and forensic accoun-
tants, as well as staff for the Offce of Market Intelligence, the
Offce of the Whistleblower, and the SEC’s collections and
distributions functions.
Building Oversight of Derivatives and Clearing Agencies
The Commission’s regulatory responsibilities are signifcantly
expanding with the addition of new categories of registered
entities (including security-based swap execution facilities,
security-based swap data repositories, security-based
swap dealers, and major security-based swap participants);
the required regulatory reporting and public dissemination
of security-based swap data; and the mandatory clearing of
security-based swaps. To avoid bottlenecks and unintended
market disruptions as the new requirements become opera-
tional, the agency will need additional staff with technical skills
and experience to process and review on a timely basis the
requests for interpretation, registration, or required approvals.
New staff also will be needed to help conduct improved risk-
based supervision of registered security-based swap dealers
and participants, that includes using newly-available data to
identify excessive risks or other threats to security-based
swap markets and investors.
PAGE 6 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
The agency also plans to make a signifcant investment in
its information security program. In FY 2013 and FY 2014,
the Offce of Information Technology (OIT) plans to deploy a
new set of security tools and develop and train IT analytical
staff to monitor, respond to, and remediate threats, as well as
to rapidly address security breaches. Rather than conduct
only periodic assessments of security, OIT will focus on
continuous risk monitoring. Additionally, in FY 2014, the SEC
is requesting resources needed to implement infrastructure
upgrades to achieve effciencies in business operations and
reduce long-term costs. For example, the agency plans a
number of initiatives to automate business processes and
share data across the agency, to improve collaboration and
content management across the agency, and continue stra-
tegic replacement of existing hardware and software in order
to hold down maintenance costs.
Enhancing Training and Development of SEC Staff
The SEC’s staff is the most important driver of the agency’s
successes. The FY 2014 request includes a signifcant
increase in the SEC’s total training budget to enable the
SEC to continue building an effective training program to
deepen expertise and skills, not only in the rapidly evolving
nature of the markets, but also in areas of new responsibility.
The planned investment principally supports training and
development for employees directly involved in examina-
tions, investigations, fraud detection, litigation, and other core
mission responsibilities of the SEC. The training will consist
of specialized in-depth training concerning new trends in
the securities industry and changing market conditions,
as well as analytics and forensics. The investment also will
fund certain specialized fnancial certifcations and regula-
tory credentials, as well as the advanced continuing educa-
tion required for maintaining legal and fnancial credentials.
The resources requested in the FY 2014 budget would bring
the SEC’s level of training investment more on par with other
Federal fnancial regulatory agencies. In FY 2013, the SEC
training and development budget was at $2,375 per capita.
The proposed 2014 budget would raise this fgure to $2,850
per capita.
interpretive questions that relate to those flings and other
matters relating to the companies making them.
In addition, the CF intends to use these new positions
to enhance disclosure reviews of large and fnancially
signifcant companies, to improve the information these
companies provide to investors, thereby facilitating informed
decision-making.
Leveraging Technology
Aside from the need to increase the number of experts dedi-
cated to overseeing the securities industry, it is also critically
important to continue leveraging technology to streamline
operations and increase the effectiveness of the agency’s
programs. While the SEC has made signifcant progress
over the past few years in modernizing our technology
systems, the agency must continue to make investments
if it is to keep pace with the markets and organizations that
the SEC regulates. The FY 2014 budget request would
add $56 million for technology to support a number of key
Information Technology (IT) initiatives, including enhance-
ments to the system for receiving tips, complaints, and refer-
rals (TCR), improvements to IT security, and infrastructure
upgrades to achieve effciencies in business operations and
reduce long-term costs.
The SEC plans to enhance its TCR Intake and Resolution
system by building an interface to the agency’s exam and
case management systems, adding intake and routing func-
tionality for referrals from the self-regulatory organizations
(SROs), expanding reporting, and constructing the ability to
create and route referral memos so that matters that require
follow-up action are routed quickly. Additionally, the agency
plans to develop a component of the TCR system that will
automatically receive new TCRs and determine the charac-
teristics and risks of each based on a set of defned business
rules and the use of SEC internal and external information.
This triage solution will be integrated with the TCR Intake
and Resolution system, thereby providing SEC staff with the
required data and will automate analyses that are currently
conducted manually.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 7
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
The EDGAR modernization effort leverages the EDW.
The EDW is a critical step in combining various streams of
data and helping the public gain easier access to more usable
market data. The centralized EDW will allow the organization
of data using standard defnitions and structures, integration
of large amounts of data to allow enhanced analytical capa-
bilities and predictive modeling, and strengthened gover-
nance of data controls and quality standards.
A Consolidated Audit Trail (CAT) repository will increase the
data available to regulators investigating illegal activities
such as insider trading and market manipulation, signif-
cantly improve the SEC’s ability to reconstruct broad-based
market events in an accurate and timely manner, monitor
overall market structure, assess how Commission rules are
affecting the markets, and decrease regulatory data produc-
tion burdens on SROs and broker-dealers by reducing the
number of ad hoc requests. The SEC plans to invest Reserve
Fund dollars to develop the SEC’s ability to intake CAT data
and store it in the EDW, as well as to develop analytical
tools and a single software platform that will allow the SEC
to identify patterns, trends, and anomalies in the CAT data.
The tools and platform will allow seamless searches of data
sets to examine activity to reveal suspicious behavior in
securities-related activities and quickly trace the origin.
Reserve Fund
In FY 2014, the SEC proposes to continue using its Reserve
Fund, established in statute, to fund large, multi-year,
mission-critical technology projects. The agency plans
to use $50 million from the Fund for modernization of the
Electronic Data Gathering, Analysis and Retrieval (EDGAR)
system. The funds also will be used for the construction
and enhancement of the Enterprise Data Warehouse (EDW)
and to develop the capability to intake, store and analyze
data from the Consolidated Audit Trail (CAT) Repository.
These key priorities will enhance the SEC’s ability to improve
service to registrants and the public; integrate large amounts
of data from disparate sources so the data can be more
readily searched and analyzed by SEC staff; and improve
SEC business and operational processes.
Specifcally, the agency would continue its multi-year effort to
overhaul EDGAR to create a new, modernized system that
will, among other things, meet Commission requirements for
real-time system updates, reduce fler burden by providing
simplifed search and fling options based on fler experience
(i.e., professional or novice), improve data capture by moving
to structured formats for various SEC forms, and reduce the
long term costs of operating and maintaining the system.
PAGE 8 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
Vision, Mission, Values and Goals
Vision
The SEC strives to promote a market environment that is worthy of the
public’s trust and characterized by transparency and integrity.
Mission
The mission of the SEC is to protect investors; maintain fair, orderly,
and effcient markets; and facilitate capital formation.
Values
Integrity Teamwork
Accountability Fairness
Effectiveness Commitment to Excellence
Strategic Goals and Outcomes
Goal 1: Foster and enforce compliance with
the Federal securities laws
Outcome 1.1: The SEC fosters compliance with the
Federal securities laws.
Outcome 1.2: The SEC promptly detects violations
of the Federal securities laws.
Outcome 1.3: The SEC prosecutes violations of Federal
securities laws and holds violators accountable.
Goal 2: Establish an effective regulatory environment
Outcome 2.1: The SEC establishes and maintains
a regulatory environment that promotes high-quality
disclosure, fnancial reporting, and governance, and
that prevents abusive practices by registrants, fnancial
intermediaries, and other market participants.
Outcome 2.2: The U.S. capital markets operate in a fair,
effcient, transparent, and competitive manner, fostering
capital formation and useful innovation.
Outcome 2.3: The SEC adopts and administers
rules and regulations that enable market participants
to understand clearly their obligations under the
securities laws.
Goal 3: Facilitate access to the information investors
need to make informed investment decisions
Outcome 3.1: Investors have access to high-quality
disclosure materials that are useful to investment decision
making.
Outcome 3.2: Agency rulemaking and investor
education programs are informed by an understanding
of the wide range of investor needs.
Goal 4: Enhance the Commission’s performance
through effective alignment and management of human,
information, and fnancial capital
Outcome 4.1: The SEC maintains a work environment
that attracts, engages, and retains a technically profcient
and diverse workforce that can excel and meet the
dynamic challenges of market oversight.
Outcome 4.2: The SEC retains a diverse team of
world-class leaders who provide motivation and
strategic direction to the SEC workforce.
Outcome 4.3: Information within and available to the
SEC becomes a Commission-wide shared resource,
appropriately protected, that enables a collaborative
and knowledge-based working environment.
Outcome 4.4: Resource decisions and operations
refect sound fnancial and risk management principles.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 9
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
History and Purpose
During the peak of the Depression, Congress passed the
Securities Act of 1933. This law, along with the Securities
Exchange Act of 1934 (Exchange Act), which created the SEC,
was designed to restore investor confdence in our capital
markets by providing investors and the markets with more
reliable information and clear rules of honest dealing. The main
purposes of these laws were to ensure that:
• Companies publicly offering securities for investment
dollars must tell the public the truth about their
businesses, the securities they are selling, and the risks
involved in investing.
• People who sell and trade securities – brokers, dealers
and exchanges – must treat investors fairly and honestly,
putting investors’ interests frst.
The SEC is responsible for overseeing the nation’s securities
markets and certain primary participants, including broker-
dealers, investment companies, investment advisers, clearing
agencies, transfer agents, credit rating agencies, and securi-
ties exchanges, as well as organizations such as the Financial
Industry Regulatory Authority (FINRA), Municipal Securities
Rulemaking Board (MSRB), and Public Company Account-
ing Oversight Board (PCAOB). Under the Dodd-Frank Wall
Street Reform and Consumer Protection Act
1
(Dodd-Frank
Act), the agency’s jurisdiction was expanded to include certain
participants in the derivatives markets, private fund advisers,
and municipal advisers among other changes.
The SEC consists of fve presidentially appointed Commission-
ers, with staggered fve-year terms. One of the Commissioners
is designated by the President as Chairman of the Commission
(see Appendix A: Chairman and Commissioners).
By law, no more than three of the Commissioners may belong
to the same political party. The Commission convenes regularly
at meetings that are open to the public and the news media
unless the discussion pertains to confdential subjects, such
as whether to begin an enforcement investigation.
Each year, the SEC brings hundreds of civil enforcement
actions against individuals and companies for violation
of securities laws. Examples of infractions include insider
trading, accounting fraud, and providing false or misleading
information about securities or the companies that issue
them. One of the major sources of information that the
SEC relies on to bring enforcement action is investors
themselves – another reason that educated and careful
investors are critical to the functioning of effcient markets.
To help inform investors, the SEC offers the public a wealth
of educational information on the website www.investor.gov,
as well as an online database of disclosure documents at
www.sec.gov/edgar/searchedgar/companysearch.html that
public companies and other market participants are required
to fle with the SEC.
1
Dodd-Frank Wall Street Reform and Consumer Protection Act www.sec.gov/about/laws/wallstreetreform-cpa.pdf
PAGE 10 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
Organizational Structure and Resources
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 11
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
SEC Offce Locations
The SEC’s headquarters are in Washington, D.C., and the agency has 11 regional offces located throughout the country.
The regional offces are responsible for investigating and litigating potential violations of the securities laws. The offces also
have examination staff, who inspect regulated entities such as investment advisers, investment companies and broker-dealers.
The map below shows the locations of the regional offces, and the states that are included in each region.
SEC Organization Structure
The SEC is an independent Federal agency established pursuant to the Exchange Act. It is headed by a bipartisan fve-
member Commission, comprised of the Chairman and four Commissioners, who are appointed by the President and confrmed
by the Senate. The Chairman serves as the Chief Executive Offcer. In fscal year (FY) 2012, the agency employed 3,770
full-time equivalents (FTE), including 3,739 permanent and 31 temporary FTEs. The SEC organization chart below is as of
September 30, 2012.
SEC ORGANIZATION CHART
PAGE 12 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
FY 2014
BUDGET REQUEST TABLES
FTE and Positions by Program
FY 2012
Actual
FY 2013
CR
FY 2014
Request
FTE Positions FTE Positions FTE Positions
Enforcement 1,219 1,218 1,302 1,350 1,401 1,481
Compliance Inspections and Examinations
1
820 880 916 974 1,127 1,299
Corporation Finance 448 467 471 515 494 540
Trading and Markets
1
225 249 285 307 284 332
Investment Management 153 161 172 180 184 205
Risk, Strategy and Financial Innovation 56 83 90 101 100 146
General Counsel 132 137 145 149 153 156
Other Program Offces
Chief Accountant 45 43 45 52 46 56
Investor Education and Advocacy 45 44 45 46 50 51
International Affairs 36 37 41 46 46 50
Administrative Law Judges 8 8 11 11 11 11
Investor Advocate 0 0 3 6 3 6
Credit Ratings 14 26 28 29 29 35
Municipal Securities 0 1 5 5 5 5
Total 148 159 178 195 190 214
Agency Direction and Administrative Support
Executive Staff 38 36 41 42 42 42
Public Affairs 8 9 9 10 11 11
Secretary 30 32 31 31 34 32
Chief Operating Offcer 9 10 16 18 16 21
Financial Management 74 78 79 84 83 86
Information Technology 120 135 158 183 174 203
Human Resources 82 87 102 101 113 134
Acquisitions 46 40 44 72 44 72
Operations Support 91 95 96 91 98 95
Ethics Counsel 11 13 14 14 15 16
Minority and Women Inclusion 3 5 8 8 8 13
Equal Employment Opportunity 7 7 7 9 7 11
Total 519 547 605 663 645 736
Inspector General 19 18 19 24 20 25
Total FTE and Positions 3,770 3,958 4,223 4,504 4,638 5,180
Permanent 3,739 3,919 4,183 4,458 4,598 5,134
Temporary 31 39 40 46 40 46
1
The Position and FTE fgures for Trading and Markets (TM) and the Offce of Compliance Inspections and Examinations (OCIE) include the transfer
of 19 positions for the Automated Review Program (ARP) from TM to OCIE during FY 2013.
PAGE 14 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
Obligations by Object Class
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
CR
FY 2014
Request
Personnel Compensation & Benefts
Total Personnel Compensation (11.9) $ 592,697 $ 686,894 $ 782,519
Civilian Personnel Benefts (12.1) 171,706 197,319 223,365
Subtotal Cost of Salaries $ 764,403 $ 884,213 $ 1,005,884
Other Expenses
Benefts for Former Personnel (13.0) 1,257 1,234 1,251
Travel and Transportation of Persons (21.0) 10,880 13,575 16,950
Transportation of Things (22.0) 47 83 84
Rent, Communications & Utilities (23.0) 47,102 108,134 133,534
Printing and Reproduction (24.0) 8,325 9,513 9,621
Other Contractual Services (25.0) 271,912 307,312 400,823
Supplies and Materials (26.0) 1,905 3,878 4,270
Equipment (31.0) 72,718 79,488 86,220
Building Alterations (32.0) 1,354 10,000 15,278
Claims and Indemnities (42.0) 9 84 85
Refunds (44.0) — — —
Undistributed (92.0) — — —
Subtotal Cost of Other Expenses $ 415,509 $ 533,301 $ 668,116
Spending Authority
$ 1,179,912 $ 1,417,514 $ 1,674,000
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 15
B U D G E T R E Q U E S T T A B L E S
FY 2014 Request by Strategic Goal and Program
(DOLLARS IN THOUSANDS) FY 2014 Request
Change over
FY 2012
Actual
Change over
FY 2013
CR
SEC Program
FY 2012
Actual
FY 2013
CR
Goal 1
Enforce
Securities
Laws
Goal 2
Effective
Regula-
tory
Environ.
Goal 3
Facilitate
Access
To Info.
Goal 4
Align &
Manage
Resources
FY 2014
Request $ % $ %
FY 2012 Actual $692,551 $113,896 $189,309 $184,157
FY 2013 CR $782,895 $142,609 $243,139 $248,871
Enforcement $416,815 $459,193 $488,439 $10,618 $5,309 $26,546 $530,912 $114,097 27 $71,719 16
Compliance Inspections
and Examinations 249,248 281,933 330,938 7,117 3,558 14,234 355,847 106,599 43 73,914 26
Corporation Finance 128,517 141,865 2,953 26,545 123,611 7,383 160,492 31,975 25 18,627 13
Trading and Markets 66,331 79,800 18,231 47,977 28,786 960 95,954 29,623 45 16,154 20
Investment Management 47,406 52,154 14,910 25,472 19,880 1,864 62,126 14,720 31 9,972 19
Risk, Strategy, and
Financial Innovation 19,083 33,536 19,515 19,515 2,218 3,105 44,353 25,270 132 10,817 32
General Counsel 40,922 44,284 31,810 8,584 1,515 8,584 50,493 9,571 23 6,209 14
Other Program Offces 44,266 52,823 22,882 16,543 19,982 2,733 62,140 17,874 40 9,317 18
Agency Direction and
Administrative
Support 161,021 265,051 5,758 14,097 64,939 219,109 303,903 142,882 89 38,852 15
Inspector General 6,303 6,875 78 — 78 7,624 7,780 1,477 23 905 13
Total SEC Funding $1,179,912 $1,417,514 $935,514 $176,468 $269,876 $292,142 $1,674,000 $494,088 42% $256,486 18%
Percent Increase over
Prior Year 19% 24% 11% 17%
PAGE 16 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
Summary of Changes
FY 2013
CR
FY 2014
Request
Net
Change
Spending Authority $1,417,514 $1,674,000 +$256,486
Full-time Equivalents 4,223 4,638 +415
Positions 4,504 5,180 +676
Explanation of Changes: Positions FTE Amount
FY 2013 Base Changes
Annualization of staff brought on-board in prior years — 219 +45,660
FY 2014 pay raise, 1.7% effective January 2014 — — +10,019
Merit pay increases for eligible staff — — +31,092
Non-compensation infation — — +9,329
Subtotal, Base Changes — 219 +96,100
Program Increases:
Information Technology Enhancements — — +56,070
Additional contracting needs including Enforcement litigation support,
risk and data analysis, and asset verifcation for exams
— — +17,000
Staff Training — — +9,000
Employee awards to address OIG Audit Report No. 492 — — +3,000
Staff Increases: — — +75,316
Enforcement 131 38
Compliance Inspections and Examinations 325 94
Corporation Finance 25 7
Trading and Markets 25 7
Investment Management 25 7
Risk, Strategy and Financial Innovation 45 13
General Counsel 7 2
Other Program Offces 19 6
Agency Direction & Admin. Support 73 21
Inspector General 1 1
Subtotal, Program Changes 676 196 +160,386
Total Change 676 415 +256,486
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 17
B U D G E T R E Q U E S T T A B L E S
Offsetting Collections and Spending Authority
SOURCE OF OFFSETTING COLLECTIONS
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Securities Transaction Fees under the Securities Exchange Act of 1934 (Section 31) $ 1,288,399 $ 1,321,000 $ 1,674,000
Securities Registration Fees under the Securities Act of 1933 (Section 6(b)), and Merger and
Tender Fees under the Securities Exchange Act of 1934 (Sections 13(e) and 14(g))
1
— — —
Total Offsetting Collections $ 1,288,399 $ 1,321,000 $ 1,674,000
SPENDING AUTHORITY
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
CR
FY 2014
Request
Current Year Appropriated Offsetting Collections $ 1,288,399 $ 1,321,000 $ 1,674,000
Available Balances from Prior Years — 96,514 —
Spending Authority from the General Fund, Resulting from Lower-Than-Expected Offsetting
Collections
32,601 — —
Total Authority $ 1,321,000 $ 1,417,514 $ 1,674,000
1
The Offsetting Collections and Spending Authority chart above presents the SEC’s budgetary authority derived from offsetting collections from fees collected on Sec-
tion 31 securities transactions and Section 6(b), 13(e), 14(g) and 24f-2 flings (referred to as “fling fees”) from FY 2004 through 2011. Pursuant to the Dodd-Frank Act
and beginning in FY 2012, fling fee collections are no longer offsetting collections, and are now either deposited into the Reserve Fund or the U.S. Treasury General
Fund. Thus, the FY 2012 column only presents amounts for Section 31 securities transaction fee collections. Beginning in FY 2012, the SEC was required to deposit
into the Reserve Fund up to $50 million a year in Section 6(b) registration fees, while the remainder is deposited into the Treasury as general revenue.
PAGE 18 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
FY 2014
APPROPRIATIONS LANGUAGE
FY 2014 Appropriations Language
For necessary expenses for the Securities and Exchange
Commission, including services as authorized by 5 U.S.C.
3109, the rental of space (to include multiple year leases) in
the District of Columbia and elsewhere, and not to exceed
$3,500 for offcial reception and representation expenses,
[$1,329,000,000] $1,674,000,000, to remain available until
expended; of which not less than [$100,345,000] $75,000,000
shall be used to cover shortfalls in the Commission’s funding of
obligations incurred in past fscal years for ongoing multi-year
real property contracts; of which not less than [$6,795,000]
$7,092,381 shall be for the Offce of Inspector General; of
which not to exceed $50,000 shall be available for a permanent
secretariat for the International Organization of Securities
Commissions; and of which not to exceed $100,000 shall
be available for expenses for consultations and meetings
hosted by the Commission with foreign governmental and
other regulatory offcials, members of their delegations and
staffs to exchange views concerning securities matters, such
expenses to include necessary logistic and administrative
expenses and the expenses of Commission staff and foreign
invitees in attendance including: (1) incidental expenses
such as meals; (2) travel and transportation; and (3) related
lodging or subsistence: Provided, That fees and charges
authorized by section 31 of the Securities Exchange Act
of 1934 (15 U.S.C. 78ee) shall be credited to this account
as offsetting collections: Provided further, That not to
exceed [$1,329,000,000] $1,674,000,000 of such offsetting
collections shall be available until expended for necessary
expenses of this account: Provided further, That the total
amount appropriated under this heading from the general fund
for fscal year 2014 shall be reduced as such offsetting fees
are received so as to result in a fnal total fscal year 2014
appropriation from the general fund estimated at not more
than $0.
PAGE 20 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 4 A P P R O P R I A T I O N S L A N G U A G E
FY 2012 ANNUAL
PERFORMANCE REPORT
FY 2014 ANNUAL
PERFORMANCE PLAN
The SEC focuses its resources on (1) fostering and enforcing
compliance with the Federal securities laws, (2) establishing
an effective regulatory environment, (3) facilitating access to
the information investors need to make informed investment
decisions, and (4) enhancing the agency’s performance
through effective alignment and management of human,
information, and fnancial capital. In FY 2012, total SEC
obligations were $1.18 billion in support of 3,770 total full-
time equivalents (FTE). Of 72 total performance targets, the
agency met or exceeded 34, did not meet 19, and did not
have data to report on 19.
The budget request for FY 2014 totals $1.674 billion, an
increase of about $256 million (18 percent) over the agency’s
FY 2013 Continuing Resolution funding amount. The FY 2014
budget funds 4,638 full-time equivalents (FTE), an increase
of about 415 FTE (10 percent) over the FY 2013 level, and
increases the number of positions by 676 to a total of 5,180.
The additional resources requested for FY 2014 would bolster
the SEC’s efforts to achieve each of its four strategic goals,
and allow the agency to begin overseeing the new markets
and market participants that have been added to the SEC’s
jurisdiction. Resources that directly support fostering and
enforcing compliance with the securities laws would increase
approximately 19 percent from FY 2013 to FY 2014; resources
utilized in establishing an effective regulatory environment
would increase by approximately 24 percent compared to
FY 2013; and resources that support activities that aim to
facilitate access to the information investors need to make
informed investment decisions would receive an estimated
11 percent increase.
The agency is mindful that signifcantly increasing staffng in
the program areas requires a commensurate increase in staff
and funding for support offces. Additionally, refnements to
the tracking of resources devoted to the effective management
of human, information, and fnancial capital has led the
program offces to devote more staff time to these duties.
The requested funding will provide necessary resources for
investments in information technology that will improve the
agency’s technology security; tips, complaints, and referrals
(TCR) system; technology infrastructure; and workfow
processes.
To complement the FY 2014 performance budget, the agency
also presents its FY 2014 budget by program (beginning on
page 63). Each program chapter provides detailed information
on program priorities, initiatives, and workload fgures for the
relevant divisions and offces.
A Reader’s Guide to the SEC’s Performance Information
The following chapters comprise the agency’s FY 2012 Annual
Performance Report (APR) and FY 2014 Annual Performance
Plan (APP), which explains how the SEC uses resources to
achieve each of its four strategic goals.
The following outlines a brief description of each of the major
components of the performance section:
Strategic Goal Summary: Each strategic goal section opens
by reviewing the purpose of the goal, followed by information
identifying the resources allocated toward achieving the goal.
FY 2012 Performance Achievements: A brief summary that
spotlights the year’s performance achievements, including
resource data and an overall discussion of performance.
Budgeting for the Future (FY 2014): A brief discussion of how the
SEC plans to use resources requested in FY 2014 to achieve
the strategic goal.
Strategic Objective: This section provides a description of
the SEC’s strategic outcomes that gauges the agency’s
performance within each strategic goal.
Performance Goals and Indicators: Each strategic goal section
includes a presentation of performance measures and
performance indicators by outcome, comparing planned
and actual performance levels for FY 2011. Four years of
historical data is provided for performance measures and
performance indicators where available. A plan for improving
FY 2012 APR and FY 2014 APP Summary
PAGE 22 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
program performance is included for measures where non-
achievement was signifcant. Not applicable (N/A) in the
performance measures table indicates that performance data
The SEC’s programs require accurate data to properly assess
program performance and to make good management
decisions. Data verifcation and validation is used to evaluate
whether data has been generated according to specifcations,
satisfy acceptance criteria, and are appropriate and consistent
with their intended use. Data verifcation is a systematic
process for evaluating performance and compliance of a set
of data when compared to a set of standards to ascertain
its completeness, correctness, and consistency using the
methods and criteria defned in the project documentation.
Data validation follows the data verifcation process and uses
information from the project documentation to ascertain the
usability of the data in light of its measurement quality objectives
and to ensure that results obtained are scientifcally defensible.
The SEC ensures that the performance data presented in
this report is complete, reliable and accurate based upon the
following assessment steps:
(1) The agency develops performance measures through its
strategic planning process.
is not available. Performance indicators that do not include
targets also are included in this section, providing useful
information for understanding the SEC’s activities.
(2) The SEC’s divisions and offces perform the following
steps to ensure that data used in the calculation of
performance measures is accurate and reliable including
adequately documenting:
• the sources of the underlying data elements, and the
procedures used to gather the data;
• the procedures used to obtain assurance as to the
accuracy and reliability of the data;
• the data defnitions for reference;
• documenting and explaining the measure calculations.
(3) The divisions and offces calculate and report the
performance measures to the Office of Financial
Management, and the measures are approved by division
directors and offce heads. This process ensures that the
data used in the calculation of performance measures
is accurate and reliable and that internal control is
maintained through the approval process.
Verifcation and Validation of Performance Data
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 23
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
Strategic Goal 1: Foster and Enforce Compliance with the Federal Securities Laws
Fostering compliance with Federal securities laws is
interwoven through all of the SEC’s programs and is central
to fulflling the critical mission of the agency. Through
disclosure reviews and examinations of broker-dealers,
investment advisers, self-regulatory organizations (SROs)
and other market participants, the SEC seeks both to detect
violations of the securities laws and rules and to foster strong
compliance and risk management practices within these
frms and organizations. When violations occur, the SEC
aims to take prompt action to halt the misconduct, sanction
wrongdoers effectively, and return funds to harmed investors.
In FY 2012, approximately $692.5 million and 2,188 full-
time equivalents (FTEs) were directed at achieving results
in Goal 1. Of 17 performance targets, the agency met or
exceeded 7, did not meet 7, and did not have data to report
on 3.
In FY 2014, the agency is requesting a total of 2,868 FTE
for Goal 1. The additional resources will allow the SEC to
continue building out the agency’s new responsibility areas,
and begin addressing the disparity between the number
of exam staff and the growing number and complexity of
registered frms. Additionally, the Commission will be able to
take prompt action to halt misconduct, sanction wrongdoers
effectively, and return funds to harmed investors. In all, the
agency plans to devote approximately $935.5 million to
enforcing compliance with the federal securities laws.
Spotlight: FY 2012 Performance Achievements
While investigating and prosecuting violations of Federal
securities laws are integral aspects of the Commission’s
programs, working to detect and prevent violations of the
securities laws are also key to protecting investors and
enhancing market integrity. Efforts designed to promote
investor awareness are the frst line of defense against fraud.
In FY 2012, the SEC issued 24 Investor Alerts and Bulletins,
providing investors with information they need to make wise
investment decisions and limiting opportunities for investor
abuse (Performance Goal 1.1.1).
The SEC seeks to encourage within organizations of all sizes a
strong culture of compliance that fosters ethical behavior and
decision-making. In FY 2012, the SEC expanded its outreach
efforts for promoting compliance, conducting a number
of signifcant industry outreach and educational programs
(Performance Goal 1.1.2). Specifcally, the Compliance
Outreach program continues to offer information and resources
to investment adviser and broker-dealer frms, and the agency
is pleased that the majority of participants (over 84 percent)
found the program to be useful (Performance Goal 1.1.4). In
future years, the agency will track the number of Compliance
Alerts issued, post-examination compliance conferences
hosted, and other educational and training programs offered
to support continued compliance.
Additionally in FY 2012, the SEC improved its surveillance
capabilities by enhancing the methods and technologies
used to analyze data, which helped staff more effectively
prepare for and conduct examinations. While the number of
regulated entities is expected to grow, these efforts as well
as enhanced staff expertise are expected to help the SEC
increase the percentage of registrants examined each year
(Performance Goal 1.2.3).
When violations of the federal securities laws do occur, the
SEC investigates and brings enforcement actions against
regulated persons and entities, as well as other market
participants. The SEC brought 734 enforcement actions in
FY 2012, the second highest number ever fled in a fscal year
(and one less than the record 735 fled the prior year). Of these
actions, 20 percent were fled in investigations designated
as National Priority Cases, representing the Division’s most
important and complex matters (Performance Indicator
(Output) 1.3.4). A detailed discussion of the SEC’s most
signifcant cases can be found in SEC’s Agency Financial
Report (AFR) Appendix B: Major Enforcement Cases.
In addition, the Division obtained orders for $3.1 billion in
penalties and disgorgement (Performance Indicator
(Output) 1.3.6); distributed a total of $815 million to harmed
Performance Summary by Strategic Goal
PAGE 24 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
investors; continued to utilize the enhanced remedies
available under the Dodd-Frank Act to bar numerous
individual wrongdoers from working in the securities industry;
and obtained other forms of relief that send a strong deterrent
message and protect investors, including asset freezes,
trading suspensions, and penny stock bars. Finally, the
SEC made its frst whistleblower payout to an individual who
provided high-quality, signifcant information that helped stop
a multi-million dollar fraud. Enforcement is receiving many
excellent tips through the Whistleblower Program, resulting
in signifcant savings in investigative resources and time.
Budgeting for the Future (FY 2014)
In FY 2014, the SEC will continue to make improvements
to its National Examination and Enforcement programs.
These improvements include expanding the SEC’s training
programs, hiring staff with new skill sets, streamlining
processes, enhancing information sharing, leveraging the
knowledge of third parties, improving the processing of
the thousands of tips the agency receives annually, and
improving risk assessment techniques. These and other
signifcant efforts contribute to the agency’s objective of
creating an enduring structure for improved protection of
investors and markets.
In FY 2014, the National Examination program will continue
its focus on high-risk entities and activities. Additional staff
will, among other things, improve risk assessment and
surveillance functions and continue to address the disparity
between the number of staff and the size and complexity
of regulated entities. The staff will perform targeted, sweep,
and cause examinations, including examinations over new
or expanded areas of the agency’s jurisdiction. In FY 2014,
the SEC will also continue to promote industry compliance
efforts through the Compliance Outreach program, and will
maintain ongoing efforts to improve its risk assessment and
surveillance methodologies.
Additionally in FY 2014, the Division of Investment
Management (IM) will aim to hire additional examiners to
oversee funds and investment advisers. These examiners
will increase investor protection by supplementing and
coordinating with other examination efforts. They would
also bring skills and specialized experience to examinations
of funds and investment advisers. This specialization is
expected to directly inform, support and improve policies and
rulemakings that address industry practices observed during
exams. The exam function will be part of a larger Risk and
Examination Offce (REO) within IM. REO will be responsible
for conducting rigorous quantitative and qualitative fnancial
analysis of the investment management industry.
The SEC plans to increase its outreach efforts for promoting
compliance by performing approximately 16 industry outreach
and educational program initiatives in FY 2014 (Performance
Goal 1.1.2). Furthermore in FY 2014, the staff expects to
continue devoting a signifcant amount of time and resources
to make compliance outreach as relevant and benefcial as
possible for registered entities. The staff will continue to make
every effort to ensure that this program reaches as many
chief compliance offcers as possible and that it continues
to be extremely useful in helping registered frms with their
compliance efforts (Performance Goal 1.1.4).
The Enforcement program plans to build on signifcant changes
implemented in prior fscal years, and will work to meet
new challenges expected in FY 2014, including challenges
presented by the addition of several new classes of registrants
to the Commission’s jurisdiction (e.g., municipal advisors, new
categories of securities-based swap entities, and hedge fund
and other private fund advisers), which are likely to result in an
increase in the number of referrals to the Enforcement program.
In order to effectively meet these challenges, the Enforcement
program is aggressively adopting new methods, initiatives,
and organizational reforms to ensure the best possible use
of available resources to strengthen investor confdence in
the U.S. fnancial markets and to send a strong message of
deterrence to would-be violators of the securities laws.
To improve the quality and effciency of its investigations,
the SEC has put seasoned investigators on the front lines,
created specialized units focused on specifc programmatic
priorities, enhanced case management systems, and
increased coordination efforts with other offces and divisions
in the agency and other regulators. In FY 2014, the SEC
plans to resolve approximately 92 percent of enforcement
actions (Performance Goal 1.3.1), while also reducing in
FY 2014 the average number months between the opening
of an investigation and the fling of the frst enforcement action
arising out of that investigation (Performance Goal 1.3.6).
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 25
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
Strategic Objective 1.1: The SEC fosters compliance with the federal securities laws.
Goal Leader(s): Director, Offce of Compliance Inspections and Examinations; Director, Offce of Investor Education and Advocacy
PERFORMANCE GOAL 1.1.1
Number of new investor education materials designed specifcally to help investors protect themselves from fraud
Description: Through its Offce of Investor Education and Advocacy (OIEA), and often in conjunction with other organizations, the agency issues
Investor Alerts and other forms of educational material that inform investors about new or emerging types of fraud.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of education materials Prior-year data not available 16 24 24 24 26 26
Target: Met – This goal was developed in FY 2010 during the strategic planning process and prior year data is not available.
Analysis: In FY 2012, the SEC issued 24 new investor alerts and bulletins to meet its goal, focusing on salient topics for individual investors related
to investment products and potential investment scams.
Responsible Division/Offce: Offce of Investor Education and Advocacy
Data Source: www.sec.gov and www.investor.gov
PERFORMANCE GOAL 1.1.2
Number of industry outreach and education programs targeted to areas identifed as raising particular compliance risks
Description: Targeted communication with industry participants on topics shaping the examination program is intended to enhance compliance
practices and prevent violations before they occur. This measure identifes the number of major outreach efforts conducted including the agency’s
national and regional Compliance Outreach events, published Compliance Alerts, and other educational initiatives.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of major outreach efforts Prior-year data not available 6 5 12 13 14 16
Target: Exceeded – This goal was developed in FY 2010 during the strategic planning process and prior year data is not available.
Analysis: The SEC seeks to encourage a strong culture of compliance among organizations, to foster ethical behavior and decision-making.
As part of its efforts to promote compliance within the industry, OCIE conducted one Compliance Outreach event, published fve National Risk
Alerts and also published one public report during FY 2012. Senior staff also conducted an SRO Outreach meeting, represented OCIE at SEC
Speaks and published remarks from four critical speaking engagements during the year. In addition to these efforts, staff from throughout the
program participated in a number of additional outreach efforts, including speaking at numerous industry conferences and related engagements,
which are not refected in the above numbers.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Internal tracking, although the events noted above are referenced in the SEC’s Website
Under the Sarbanes-Oxley Act of 2002, the SEC can use
Fair Funds to redirect penalties collected from securities
law violators to the victims of their wrongdoing. The SEC
is committed to the timely collection and distribution of
penalties and disgorgement funds and has adopted a variety
of new measures for monitoring its progress, as described
further below.
PAGE 26 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
PERFORMANCE GOAL 1.1.3
Percentage of frms receiving defciency letters that take corrective action in response to all exam fndings
Description: At the conclusion of examinations, the staff communicates identifed defciencies to registrants in the form of a defciency letter.
Registrants are then given a chance to respond to staff fndings and often take action to remedy any problems and potential risks. Most often,
registrants respond that they have corrected the defciencies and implemented measures to prevent recurrence.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 94% 93% 94% 90% 93% 93% 92% 93% 94%
Target: Not Met
Analysis: During examinations in FY 2012, the staff reviewed a variety of books and records and identifed a number of areas where frms appeared
not to be in compliance with Federal securities laws. In response to defciency letters that were sent to frms by the staff, the vast majority of
registrants have asserted that they are taking corrective action in response to the staff’s fndings. In order to achieve this level of performance, the
staff made concerted efforts during the year to improve dialogue and communication with frms, including at the most senior levels. These efforts
have helped to ensure that there is a clear understanding of issues and concerns between the staff and registrants. Overall, this measure continues
to show that registrants are using examination results to improve operations and compliance with federal securities laws. The performance goal
was set at an approximate level and the deviation from that level is minimal. There was no effect on overall program or activity performance.
Plan for Improving Program Performance: OCIE will continue to enhance efforts to promote compliance by more proactive communications with
registrants and their personnel, including chief compliance offcers. These enhanced communication efforts will be aimed at increasing compliance
efforts or remedial actions taken by registrants. Additionally, the program anticipates using additional resources to perform corrective action reviews
at selected frms. Among other things, these reviews will be focused on ensuring that the corrective actions taken by frms are being implemented
in a manner to adequately address previously noted defciencies at those frms.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
PERFORMANCE GOAL 1.1.4
Percentage of attendees at the Compliance Outreach program that rated the program
as “Useful” or “Extremely Useful” in their compliance efforts
Description: The Compliance Outreach program is designed to educate, inform, and alert CCOs and other senior management of pertinent
information, including about effective compliance controls, that may assist them in administering compliance programs within registered frms.
Improving compliance programs will reduce violative activity, resulting in increased protection for investors. At the conclusion of all Compliance
Outreach events, CCOs are given the opportunity to rate the usefulness of the information provided in assisting them in their compliance efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 97% 92% 84% 77% 86% 80% 84% 85% 86%
Target: Exceeded
Analysis: The program formerly known as CCOutreach is now more broadly focused and is known as the Compliance Outreach program. During
FY 2012, the staff devoted signifcant resources to the Compliance Outreach program in order to make it as relevant and benefcial as possible
for registered entities. There was one national seminar during FY 2012, and staff from OCIE and the Division of Investment Management worked
together, utilizing feedback from chief compliance offcers, to ensure that this event covered key topics of interest. Feedback from this seminar
indicated that more than 84 percent of attendees completing evaluations agreed that the program would improve job performance.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Internal tracking
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 27
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PERFORMANCE INDICATOR (EFFICIENCY & CUSTOMER SERVICE) 1.1.1
Annual increases or decreases in the number of CCOs attending Compliance Outreach programs
Description: While the raw number of CCOs in the industry may vary depending on factors outside of the SEC’s control, the Commission seeks to
provide educational programs that are highly valued by attendees and their employers. Analyzing changes in participation levels will foster continued
improvement in both program content and outreach efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available N/A N/A N/A
Analysis: This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this performance
indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
Strategic Objective 1.2: The SEC promptly detects violations of the federal securities laws.
Goal Leader(s): Director, Offce of Compliance Inspections and Examinations
PERFORMANCE GOAL 1.2.1
Percentage of cause and special exams (sweeps) conducted as a result of risk assessment processes that includes multi-divisional input
Description: As SEC staff expands its use of risk-based methods and has more data available for risk analysis, staff anticipates that the percentage
volume of exams driven by a more robust risk assessment process will increase.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this
performance indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Analysis: Overall, the SEC focuses its resources on those frms and activities presenting the most risk to investors. Firms with higher risk
characteristics or profles may be identifed at any time based on any number of factors, including input from other offces and divisions within the
Commission. Examinations of high risk frms may be for cause, as part of a risk targeted examination sweep, or simply due to the presence of
certain higher risk characteristics.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
PERFORMANCE GOAL 1.2.2
Percentage of advisers deemed “high risk” examined during the year
Description: To conduct oversight of investment advisers, the staff conducts a risk-based program of examinations. Certain advisers are identifed
as high risk at the beginning of every fscal year, and then inspections are planned on a cyclical basis. The staff’s goal is to inspect high risk advisers
at least once every three years. Meeting this target will depend upon the SEC having suffcient resources to keep pace with growth in the industry
and the need for examiners to check compliance with evolving regulatory requirements.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 33% 33% 22% N/A N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this
performance indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Analysis: OCIE does not have FY 2012 information for this measure. Given developments in the program, this measure is no longer tracked and
will not be measured in the future. That being said, it should be noted that the SEC focuses its resources on those frms and activities presenting
the most risk to investors. Firms with higher risk characteristics or profles may be identifed at any time based on any number of factors and will
be examined as quickly as possible.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
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PERFORMANCE GOAL 1.2.3
Percentage of investment advisers, investment companies, and broker-dealers examined during the year
Description: This measure indicates the number of registrants examined by the SEC or an SRO as a percentage of the total number of registrants.
This measure includes all types of examinations: risk priority examinations, cause inspections to follow up on tips and complaints, limited-scope
special inspections to probe emerging risk areas, oversight examinations of broker-dealers to test compliance and the quality of examinations by
the Financial Industry Regulatory Authority (FINRA).
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Investment advisers 13% 14% 10% 9% 8% 9% 8% 10% 14%
Investment companies 20% 23% 29% 10% 13% 13% 12% 14% 16%
Broker-dealers (exams by SEC
and SROs)
54% 57% 54% 44% 58% 55% 49% 50% 51%
Target: Investment Advisers – Not Met; Investment Companies – Not Met; Broker-Dealers – Not Met
Analysis: The staff continued to spend considerable time and effort during the year on improving its risk assessment and surveillance capabilities
to ensure that the program is spending its limited time and resources on those frms presenting the highest risk. As part of these efforts, the staff
spent signifcant resources on collecting and analyzing data about all registrants. The results of these efforts help to ensure that the program is
focusing on the highest risk entities and selecting appropriate candidates for onsite examination. Examinations of these high risk frms often take
signifcant time to complete and are frequently of large and complex entities. For example, the investment advisers examined in FY 2012 represent
more than 20 percent of the overall assets under management of currently registered advisers. In addition to these efforts, examination resources
have been reallocated during the last year to other areas intended to improve the long-term performance of the program, including industry outreach
initiatives and other program improvement efforts.
Plan for Improving Program Performance: During FY 2013 and FY 2014, the staff will continue to implement improved processes and procedures
that have been identifed as part of its ongoing self-improvement process. Over 50 signifcant improvement initiatives in the areas of strategy,
structure, people, processes, and technology have been completed in the last several years or are currently underway. The agency expects that
these improvements, which include further refnements to the exam program’s risk assessment processes, will lead to more effective coverage of
registered entities.
Responsible Division/Offcee: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
(IA, IC, and BD SEC data) and SRO Databases (BD SRO Data)
PERFORMANCE GOAL 1.2.4
Percentage of non-sweep and non-cause exams that are concluded within 120 days
Description: The staff conducts examinations each year of investment advisers, investment company complexes, transfer agents, and broker-
dealers. The staff strives to complete its examinations in the most effcient and effective manner. When possible, the staff attempts to conclude its
examinations within 120 days of the end of any feld work completed. However, some examinations require signifcantly more time so that potential
violations are fully reviewed. To ensure that time pressure does not impair quality, the target for this benchmark should not be set too high.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available 48% 53% 55% N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process.
Analysis: While the program strives to complete examinations as quickly and effciently as possible, there is no longer a focus on this specifc
deadline. Rather, the program is primarily concerned with completing examinations within OCIE’s statutory deadline. In this regard, 100 percent
of the staff’s examinations in FY 2012 have been completed within the statutory deadlines outlined in the Dodd-Frank Act.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS)
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PERFORMANCE INDICATOR (CONTEXTUAL) 1.2.1
Percentage of exams that identify defciencies, and the percentage that result in a “signifcant fnding”
Description: Examiners fnd a wide range of defciencies during examinations. Some of the defciencies are more technical in nature, such as failing
to include all information that is required to be in a record. However, other defciencies may cause harm to customers or clients of a frm, have a
high potential to cause harm, or refect recidivist misconduct. The latter defciencies are among those categorized as “signifcant.” This measure
identifes the percentage of exams by registrant category that identifed defciencies, and that resulted in signifcant defciency fndings.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage that identify defciencies Prior-year data not available 72% 82% 80%
Percentage that result in a
“signifcant fnding”
Prior-year data not available 42% 42% 42%
Analysis: In FY 2012, examiners continued to use risk assessment techniques to focus examinations on those areas most likely to reveal signifcant
issues. Overall, the majority of examinations resulted in the identifcation of defciencies, and more than 40 percent revealed signifcant fndings.
While it is diffcult to predict these numbers in future years, they do refect an effective risk-focused approach that is identifying issues in order to
protect investors, prevent fraud and improve compliance.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
PERFORMANCE INDICATOR (OUTPUT) 1.2.2
Number of cause exams that result from tips
Description: Analysis of a tip can support the request for a cause exam. This indicator would identify the volume of SEC cause exams that result
from tips collected through outreach efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of cause exams Prior-year data not available N/A N/A N/A
Analysis: The data for this metric was not available for FY 2012; however, it will be tracked in future years. More broadly, the staff conducted
more than 525 cause examinations of investment advisers, broker-dealers, investment company complexes, and transfer agents during FY 2012.
Many of these examinations were conducted due to the receipt of critical tips by the Commission.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
PAGE 30 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
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Strategic Objective 1.3: The SEC prosecutes violations of federal securities laws and holds violators accountable.
Goal Leader(s): Director, Division of Enforcement; Director, Offce of International Affairs
PERFORMANCE GOAL 1.3.1
Percentage of enforcement actions resolved
Description: This measure assesses the rate at which the SEC’s fled enforcement actions are resolved. Specifcally, the measure identifes, as
to all parties to enforcement actions that were resolved in the fscal year, the percentage against whom the Commission obtained a judgment or
order entered on consent, a default judgment, a judgment of liability on one or more charges, and/or the imposition of monetary or other relief.
The Division is currently assessing the value of this metric, and evaluating how to incorporate qualitative considerations of the results of the Division’s
enforcement actions.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 92% 92% 92% 92% 93% 92% 89% 92% 92%
Target: Not Met
Analysis: The Enforcement Division is in the process of developing a new metric that will focus on qualitative ratings of fled Enforcement actions.
This metric will measure the output of the Division from a qualitative point of view, and will complement existing metrics designed to capture the
level of investigative activity and the number and timeliness of enforcement actions.
Plan for Improving Program Performance: The Division has implemented controls and strategies to resolve actions on a favorable basis, while at the
same time, it will not be reluctant to fle precedent setting or complex matters that are programmatically important, even if success is not assured.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE GOAL 1.3.2
Percentage of frst enforcement actions fled within two years
Description: This measure concerns the pace of investigations that lead to the fling of enforcement actions. Specifcally, this measure captures
the rate at which the frst enforcement actions arising out of an investigation was fled within two years of the opening of the investigation. If the
investigation was preceded by a matter under inquiry, the measure draws on the date of the opening of the matter under inquiry. In conducting
investigations, the Enforcement program continually strives to balance the need for complete, effective and fair investigations with the need to fle
enforcement actions in as timely a manner as possible.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 54% 62% 70% 67% 61% 64% 63% 65% 65%
Target: Not Met
Analysis: Filing enforcement actions in a timely manner is an important measure of the Division’s effectiveness. Timely actions have an increased
deterrent impact; conversely, unnecessarily delayed periods between conduct and sanctions can weaken deterrent effect and undermine the
public’s faith in the effectiveness of law enforcement. Of course, timeliness of actions will be negatively impacted by cases that are complex and
large, which can take extended periods of time to develop successfully. In the last three years, the Division has focused its efforts on pursuing
such cases. For example, a signifcant priority for the Division has been to investigate and hold accountable frms and individuals who committed
securities law violations linked to the fnancial crisis. Many of these cases involved complex fnancial products, market transactions and conduct that
can be diffcult to detect and take longer to investigate. In addition, the Division is focusing on emerging threats involving new trading technologies
such as high-frequency and algorithmic trading, large volume trading, as well as systemic insider trading and manipulation schemes.
Plan for Improving Program Performance: Recognizing the challenges of bringing complex cases in a timely manner, the Division has streamlined its
processes to enable the staff to bring cases more quickly. In addition, the Division has developed and implemented metrics designed to capture the
nature and level of investigative activity, the number and timeliness of enforcement actions, as well as Division overall effciency and performance.
The Division will continue to utilize these and other tools in evaluating and improving its effciency and timeliness.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE GOAL 1.3.3
Percentage of debts where either a payment has been made or a collection activity has been
initiated within 180 days of the due date of the debt
Description: The SEC can seek a wide range of remedies for failure to comply with the securities laws. These remedies include civil monetary
penalties and disgorgement. When the remedies are imposed by the Commission or the federal district court, payments must be made by a certain
date. This measure identifes the percentage of debts where debtors have made payments or the SEC has initiated a collection activity within 180
days of the due date. Such collection activities include, among other things, demand letters, negotiation of payment plans, enforcing the payment
of the debt through the courts, or other judicial remedies.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage N/A 88% 90% 86% 91% 92% 92% 92% 92%
Target: Met
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. This measure is reported on
an annual basis through combined efforts of the Offce of Information Technology, Offce of Financial Management and Division of Enforcement.
Responsible Division/Offce: Division of Enforcement
Data Source: Case Activity Tracking System, Phoenix, relevant case fles
PERFORMANCE GOAL 1.3.4
Percentage of Fair Fund and disgorgement fund plans that have distributed 80 percent of the available
funds for distribution within twenty four (24) months of the approval of the distribution plan
Description: In addition to other types of relief, the Commission may seek orders requiring parties to disgorge any money obtained through wrongdoing.
The Commission also is empowered to seek civil penalties for violations of the securities laws. Where appropriate, the Commission has sought to
return disgorged funds to harmed investors and, as a result of the Fair Funds provision of the Sarbanes-Oxley Act, to combine amounts paid as
penalties with disgorged funds, or to create a Fair Fund from penalties only, to reduce losses to injured parties in order to maximize funds available
for distribution. This measure identifes the percentage of distribution plans that reached the majority of funds distributed milestone during the
fscal year and within twenty four (24) months of the approval of the distribution plan. The distribution plan includes the timeline and procedures
required to return the funds to injured investors. This refects Commission-wide efforts to implement plans returning money to investors quickly.
Any funds not returned to investors are sent to the U.S. Treasury or the Investor Protection Fund established pursuant to Section 21F(g) of the
Securities Exchange Act of 1934. Neither disgorgement nor penalties are used for the Commission’s own expenses.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available 72% 80% 80% 80%
Target: Exceeded – This measure was developed in FY 2010 during the strategic planning process, and it will be re-considered as part of the
SEC’s Strategic Plan update.
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. FY 2012 reporting refects these
system upgrades and improved data elements for Distribution measures.
Responsible Division/Offce: Division of Enforcement
Data Source: Distributions Management System
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PERFORMANCE GOAL 1.3.5
Total amount distributed within the fscal year, and the number of Fair Funds from which those distributions came
Description: In its enforcement actions, the Commission may seek to return funds to harmed investors through disgorgement of ill-gotten gains or
through the Fair Funds provision of the Sarbanes-Oxley Act. This provision permits the Commission to combine amounts paid as penalties with
disgorged funds, or to create a Fair Fund from penalties only, to reduce losses to injured parties. This refects the Commission’s efforts to return
funds to injured investors. This measure identifes the total amount distributed within the fscal year, and the number of fair funds from which those
distributions came. Due to the variation in reporting timelines established for each individual distribution, reported amounts are based on the
agency’s best available information. Reported amounts do not include those funds distributed through receiverships. Any funds not returned to
investors are sent to the U.S. Treasury or the Investor Protection Fund established pursuant to Section 21F(g) of the Securities Exchange Act of
1934. Neither disgorgement nor penalties are used for the Commission’s own expenses.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Amount distributed (in millions) Prior-year data not available 457 815 TBD TBD
Number of Fair Funds Prior-year data not available 63 31 TBD TBD
Target: Amount Distributed – Exceeded; Number of Fair Funds – Not Met
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. FY 2012 reporting refects these
system upgrades and improved data elements for Distribution measures.
Plan for Improving Program Performance: The Commission is authorized to establish Fair Funds to return recovered monies, in the form of disgorgement
and penalties, back to harmed investors. The Commission may establish Fair Funds when suffcient recovered monies are available, and where it
is otherwise deemed appropriate. The Commission is authorized to establish Fair Funds to return recovered monies, in the form of disgorgement
and penalties, back to harmed investors. The Commission may establish Fair Funds when suffcient recovered monies are available, and where
it is otherwise deemed appropriate.
Responsible Division/Offce: Division of Enforcement
Data Source: Distributions Management System
PERFORMANCE GOAL 1.3.6
Average months between opening a matter under inquiry or an investigation and commencing an enforcement action
Description: This measure concerns the pace of investigations that lead to the fling of enforcement actions. Specifcally, this measure captures
average number months between the opening of an investigation and the fling of the frst enforcement action arising out of that investigation. If the
investigation was preceded by a matter under inquiry, the measure draws on the date of opening of the matter inquiry. In conducting investigations,
the enforcement program continually strives to balance the need for complete, effective, and fair investigation with the need to fle enforcement
actions in as timely a manner as possible.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Months Prior-year data not available 22 21 21 20 20
Target: Met
Analysis: Filing enforcement actions in a timely manner is an important measure of the Division’s effectiveness. Timely actions have an increased
deterrent impact; conversely, unnecessarily delayed periods between conduct and sanctions can weaken deterrent effect and undermine the
public’s faith in the effectiveness of law enforcement. Of course, timeliness of actions will be negatively impacted by cases that are complex and
large, which can take extended time to develop successfully. In the last two years, the Division has focused its efforts on pursuing such cases.
For example, a signifcant priority for the Division has been to investigate and hold accountable frms and individuals who committed securities law
violations linked to the fnancial crisis. Many of these cases involved complex fnancial products, market transactions and conduct that can be
diffcult to detect and take longer to investigate. In addition, the Division is focusing on emerging threats involving new trading technologies such
as high-frequency and algorithmic trading, large volume trading, as well as systemic insider trading and manipulation schemes. Recognizing the
challenges of bringing complex cases in a timely manner, the Division has streamlined its processes to enable the staff to bring cases more quickly.
In addition, the Division has developed and implemented metrics designed to capture the nature and level of investigative activity, the number and
timeliness of enforcement actions, as well as Division overall effciency and performance. The Division will continue to utilize these and other tools
in evaluating and improving its effciency and timeliness.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (CONTEXTUAL) 1.3.1
Percentage of fled enforcement actions refecting characteristics that present enhanced risk to investors and markets,
as measured by the nature of the investigation, conduct, parties and impact
Description: This measure assesses the quality of the cases fled by the Enforcement Division. The measure focuses on cases fled by the SEC
that involve factors refecting enhanced risk to investors and markets. Such cases may involve: (i) those identifed through risk analytics and cross-
disciplinary initiatives to reveal diffcult-to-detect or early stage misconduct, thus minimizing investor loss and preventing the spread of unlawful
conduct and practices; (ii) particularly egregious or widespread misconduct and investor harm; (iii) vulnerable victims; (iv) high degree of scienter;
(v) involvement of individuals occupying substantial positions of authority, or having fduciary obligations or other special responsibilities to investors;
(vi) involvement of recidivists; (vii) high amount of investor loss prevented; (viii) misconduct that is diffcult to detect due to the complexity of products,
transactions, and practices; (ix) use of innovative investigative or analytical techniques; (x) effective coordination with other law enforcement partners;
and/or (xi) whether the matter involves markets, transactions or practices identifed as an enforcement priority, or that advances the programmatic
priorities of other SEC Divisions or Offces.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available N/A
Analysis: The Division is currently unable to report on this indicator. This metric, which is new this fscal year, captures the Division’s qualitative
ratings of fled enforcement actions. To date, the Division has defned the criteria by which it will qualitatively rate enforcement actions and
implemented a preliminary process to make those ratings. Beginning in May 2012, the Division initiated a pilot program in which qualitative ratings
were assigned to enforcement actions fled by two regional offces and one Home Offce SO group. The Division is planning on expanding the pilot
to include additional regional and home offce SO groups. The pilot has allowed the Division to analyze, revise, and improve the processes that
were implemented as part of the qualitative metrics initiative. The Division is presently assessing and devising processes that would allow for full
implementation of the initiative to all enforcement groups.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (OUTPUT) 1.3.2
Number of investigations or inquiries originating from a tip or complaint
Description: Analysis of a tip or complaint can result in the need for further enforcement investigation. The indicator identifes the volume of SEC
investigations that result from tips and complaints received by the SEC.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of investigations Prior-year data not available 303 349 296
Analysis: The results of this indicator are based on investigations opened during the fscal year that were generated from a tip or complaint.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (OUTPUT) 1.3.3
SEC investigations in which requests for access to information were granted by the SEC to other authorities,
such as SROs or other state, federal, and foreign enforcement authorities
Description: The SEC works closely with other regulators and authorities. This measure identifes the number of investigations in which the SEC
granted one or more authorities access to information concerning an investigation during the fscal year. This may include requests for access to
SEC investigative fles concerning investigations that the SEC continues to pursue, as well as those in which the SEC has completed its investigation.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of investigations Prior-year data not available 492 586 515
Analysis: In circumstances where an authority may have an interest in information obtained by the SEC, the SEC may grant the authority access to
that information, pursuant to Section 24(c) of the Securities Exchange Act and Rule 24c-1. Results are based on investigations in which requests
for access to information were granted to authorities during the fscal year.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (OUTPUT) 1.3.4
Percent of enforcement actions fled that arose out of national priority investigations
Description: The Division of Enforcement conducts many enforcement actions each year that can be characterized as high impact and of national
priority. High impact or national priority investigations include those investigations which are signifcant for one or more of the following reasons – the
matter: (i) presents an opportunity to send a particularly strong and effective message of deterrence, including with respect to markets, products
and transactions that are newly developing, or that are long established but which by their nature present limited opportunities to detect wrongdoing
and thus to deter misconduct; (ii) involves particularly egregious or extensive misconduct; (iii) involves potentially widespread and extensive harm to
investors; (iv) involves misconduct by persons occupying positions of substantial authority or responsibility, or who owe fduciary or other enhanced
duties and obligations to a broad group of investors or others; (v) involves potential wrongdoing as prohibited under newly-enacted legislation
or regulatory rules; (vi) concerns potential misconduct that occurred in connection with products, markets, transactions or practices that pose
particularly signifcant risks for investors or a systemically important sector of the market; (vii) involves a substantial number of potential victims and/
or particularly vulnerable victims; (viii) involves products, markets, transactions or practices that the Enforcement Division has identifed as priority
areas (i.e., conduct relating to the fnancial crisis; fraud in connection with mortgage-related securities; fnancial fraud involving public companies
whose stock is widely held; misconduct by investment advisers; and matters involving priorities established by particular regional offces or the
specialized units); and/or (ix) provides an opportunity to pursue priority interests shared by other law enforcement agencies on a coordinated basis.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available 10% 20%
Analysis: A matter can be deemed high impact for a variety of reasons, as outlined above. The best proxy for the cases with the highest impact
are the Division’s national priority investigations. The Enforcement program has focused efforts and resources on such investigations and cases,
and as a result has signifcantly increased the proportion of all enforcement actions in these areas.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (CONTEXTUAL) 1.3.5
Criminal actions related to conduct under investigation by the SEC
Description: In some instances, conduct may involve both civil and criminal violations and may be investigated by both the SEC and the criminal
authorities. This measure identifes the number of criminal actions that are related to conduct under investigation by the SEC.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of criminal investigations Prior-year data not available 139 134 126
Analysis: This indicator identifes the number of actions fled by criminal authorities that bear some relation to conduct under investigation by the
SEC. To determine the number of criminal investigations related to SEC investigations, a query is run in the SEC’s Case Management System (the
HUB). This query counts the number of SEC matters in which a related criminal action was initiated.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (OUTPUT) 1.3.6
Disgorgement and penalties ordered and the amounts collected
Description: In addition to other types of relief, the SEC may seek orders requiring parties to disgorge any money obtained through wrongdoing.
The SEC is also empowered to seek civil penalties for violations of the securities laws. In some cases, the SEC will seek to obtain large monetary
sanctions even in instances where the prospects of collecting on a judgment are slight. The rationale for seeking monetary relief in these circumstances
is that such relief, even when likely uncollectible, might become collectible in the future based on the defendant’s changed circumstances, and
also because such relief can serve to deter others from violating the securities laws. Where appropriate, the SEC has sought to return disgorged
funds to harmed investors. Funds not returned to investors are sent to the Treasury or the Investor Protection Fund established pursuant to Section
21F(g) of the Securities Exchange Act of 1934. This indicator lists disgorgement and penalties ordered as a result of SEC cases and the amounts
collected in those actions. This indicator could increase or decrease based on various factors.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Ordered amounts (in millions) 1,601 1,030 2,442 2,846 2,806 3,104
Collected amounts (in millions) 979 521 1,694 1,775 1,281 1,048
Analysis: Collected amounts include payments through the end of the year being reported. Amounts are recognized in the fscal year during which
the debts were ordered rather than the fscal year in which they were paid.
Responsible Division/Offce: Division of Enforcement
Data Source: Phoenix Report – “Total Amounts of Disgorgement, ITSA, Remedies Act Penalties and Undertakings Ordered and Paid”
PERFORMANCE INDICATOR (OUTPUT) 1.3.7
Requests from foreign authorities for SEC assistance and SEC requests for assistance from foreign authorities
Description: Each year, the SEC makes hundreds of requests for enforcement assistance to foreign regulators, while responding to hundreds of
such requests from other nations. To facilitate this type of assistance, and encourage other countries to enact laws necessary to allow regulators to
cooperate with their foreign counterparts, the SEC has entered into bilateral information sharing arrangements, as well as the Multilateral Memorandum
of Understanding, an information-sharing arrangement negotiated through the International Organization of Securities Commissions (IOSCO).
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of requests from foreign
authorities
454 414 408 457 492 450
Number of SEC requests 556 594 774 605 772 718
Analysis: In FY 2012, the SEC experienced a decline in the number of requests to and from foreign authorities as compared to the previous fscal
year. Nonetheless, the SEC’s FY 2012 requests to foreign authorities were generally more complex than in FY 2011 and often asked for information
for litigation purposes including requests for dispositions. Likewise, FY 2012 requests from foreign authorities were more complicated and often
asked for the SEC’s assistance to obtain witnesses in the United States.
Responsible Division/Offce: Offce of International Affairs
Data Source: International Program Oversight Database and Business Objects reports
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Strategic Goal 2: Establish an Effective Regulatory Environment
The Commission believes that its rules and regulations
should be drafted to enable market participants to clearly
understand their obligations under the Federal securities
laws and to conduct their activities in compliance with law.
Just as the securities laws require that disclosures be clear
and precise, the Commission aims to promulgate rules that
are clearly written, easily understood, and tailored toward
specifc ends. In addition, the agency recognizes that
regular reviews of Commission regulations and its rulemaking
processes are necessary to confrm that intended results are
being achieved.
In FY 2012, approximately $113.9 million and 387 full-time
equivalents (FTEs) were directed at achieving results in Goal 2.
Of 16 performance targets, the agency met or exceeded 9,
did not meet 3, and did not have data to report on 4. During
FY 2014, the SEC plans to pursue a vigorous investor-focused
rulemaking agenda that will help protect investors and ensure
that markets operate fairly. Under the recently enacted Dodd-
Frank Act the agency will continue to implement a more effective
regulatory structure. In FY 2014, the agency is requesting a
total of $176.5 million and 507 FTEs toward achieving results
in establishing an effective regulatory environment.
Spotlight: FY 2012 Performance Achievements
In FY 2012, the SEC continued to pursue a robust, investor-
focused rulemaking agenda. Propelled in part by the
demands of the Dodd-Frank Act and the recognition that
investor protection regulation needs to refect the reality of
today’s modern technology-driven global market structure,
the Commission acted, and continues to act, aggressively
on a number of fronts. The Commission’s rulemaking has
been supported by detailed economic analysis provided by
the Division of Risk, Strategy, and Financial Innovation (RSFI).
RSFI has provided guidance that provides a road map for
the rulemaking divisions and offces, listing concepts that
the analysis should cover and helping ensure that economic
analysis is integrated throughout the entire rule development
and rule writing process.
The SEC devotes a large share of resources responding to
no-action letters, and interpretive and other requests from
regulated entities, public companies, and other outside
parties. The agency is committed to speeding the response
to such requests. In FY 2012, the Divisions of Trading and
Markets (TM), Corporation Finance (CF), and Investment
Management (IM) met or exceeded their response rate
targets for Performance Goal 2.3.1. In particular, IM
processed 100 percent of initial comments on no-action
letters, interpretive requests and exemptive applications
within a fscal year, and CF continued to surpass its targets
to complete initial comments on no-action letters, interpretive
requests and shareholder proposals. TM also continued to
exceed its target for no-action letters, exemptive applications,
and written interpretive requests.
In addition to rulemaking initiatives in FY 2012, the SEC
worked effciently to review SRO rule proposals and closed
75 percent of the flings within 45 days (Performance Goal
2.3.3). Although the SEC did not meet the standard of
reviewing 80 percent of rule flings within 45 days, it did meet
all of the Dodd-Frank statutory timeframes 99 percent of the
time for all rule flings.
TM continued to perform inspections of the automated
trading and clearance processes of markets and clearing
organizations. In FY 2012, 98 percent of transaction dollars
was settled on time (Performance Goal 2.2.1), down slightly
from prior years. Staff from TM maintain regular supervisory
contacts with personnel at relevant clearing agencies to ensure
operational and other issues that may arise are promptly
identifed and addressed. TM expanded its resources devoted
to clearance and settlement matters over the past year to
prepare for the increased focus on this area contemplated by
the Dodd-Frank Act.
The SEC also monitors the industry’s efforts to provide
stable trading platforms. The agency continued to assess
the resiliency of market systems in FY 2012, reporting that
market outages were corrected well above targeted time-
frames (Performance Goal 2.2.3).
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Budgeting for the Future (FY 2014)
In FY 2014, SEC staff will work towards completion of
Dodd-Frank Act rulemaking, flling regulatory gaps that
were highlighted by the fnancial crisis and that posed
risks for both individual and institutional investors. Staff will
also focus on further implementation of the Jumpstart Our
Business Startups (JOBS) Act, designed by Congress to give
entrepreneurs greater access to early-stage capital.
Investor protection, market stability, and capital formation
remain central to the SEC’s rulemaking agenda. TM will work
to develop measures to improve the design, deployment,
integrity, and operation of automated systems controlled by
exchanges, other market centers, and market participants.
TM will also, in coordination with other divisions and offces,
work to improve its ability to quickly review and analyze equity
and equity options market data.
The Dodd-Frank Act rulemaking process – informed by
an unprecedented level of communication between the
Commission and market participants of every type – continues
to progress. The result will be a system that is more transparent,
stable and responsive to investors. In FY 2013 and FY 2014,
the SEC expects to continue to implement the comprehensive
regulatory framework for over-the-counter derivatives, and
work to fnalize rules regarding improvements to the regulation
of credit rating agencies, as well as the removal of certain
credit rating references in Commission rules.
Strategic Objective 2.1: The SEC establishes and maintains a regulatory environment that promotes high quality disclosure,
fnancial reporting, and governance, and that prevents abusive practices by registrants, fnancial intermediaries, and
other market participants.
Goal Leader(s): Director, Offce of Investor Education and Advocacy; Director, Offce of International Affairs; Director, Division of
Risk, Strategy, and Financial Innovation
PERFORMANCE GOAL 2.1.1
Survey on quality of disclosure
Description: Under this metric, the SEC plans to conduct surveys of individual investors to elicit feedback on the quality of disclosures and the
Commission’s disclosure requirements. The SEC would track whether the percentage of respondents answering positively improves over time.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage of positive response Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: This performance measure identifes the usability of specifc disclosure documents for the individual investor. Reportable results are not
currently available, and OIEA is exploring options for providing data for this metric.
Responsible Division/Offce: Offce of Investor Education and Advocacy
Data Source: N/A
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PERFORMANCE GOAL 2.1.2
Number of consultations; joint events, reports, or initiatives; and joint examinations and other mutual
supervisory efforts with SROs and other federal, state, and non-U.S. regulators
Description: This metric gauges how much the SEC is coordinating with other fnancial regulatory agencies within a given fscal year. Also, as
securities markets around the world become increasingly integrated and globalized, it is essential that the SEC work frequently and effectively with
its partner regulators both in the U.S. and abroad.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: The SEC will continue to coordinate efforts and consult with other fnancial regulatory agencies in future years when possible. The staff will
leverage existing relationships and look to build additional alliances in order to ensure that regulation for registered entities is as effective as possible.
Responsible Division/Offce: Several SEC Offces
Data Source: N/A
PERFORMANCE GOAL 2.1.3
Number of non-U.S. regulators trained
Description: This metric shows the reach of the SEC’s technical assistance programs for regulators around the world. The SEC conducts these
training sessions to assist countries in developing and maintaining robust protections for investors and promote cross-border enforcement and
supervisory assistance.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of non-U.S. regulators Prior-year data not available 1,997 1,765 1,785 1,355 1,370 1,385
Target: Not Met – This measure was developed in FY 2010 during the strategic planning process and prior-year data is not available.
Analysis: The number of foreign regulators trained may vary from year to year and is impacted by the realignment of priorities due to resource
limitations.
Plan for Improving Program Performance: OIA will conduct a variety of international technical assistance training programs in FY 2014. The training will
include three annual institutes at SEC headquarters, including the Institute for Securities Market Development, the Institute for Securities Enforcement,
and the Institute for Compliance, Examination and Inspection of Market Participants. OIA also will offer regional and bilateral training programs in
Asia, Africa, Eastern Europe, the Middle East and Latin America, which will promote cross-border supervisory and enforcement assistance and
implementing laws and regulations that refect high regulatory standards.
Responsible Division/Offce: Offce of International Affairs
Data Source: International Program Oversight Database and Business Objects reports
PERFORMANCE INDICATOR (CONTEXTUAL) 2.1.1
Average cost of capital in U.S. relative to the rest of the world
Description: Countries’ cost of capital can vary according to their protections for investors, the strength of their disclosure regimes, and the presence
of fair, orderly, and effcient markets, among other factors. Therefore, although this metric is affected by other economic factors, it can provide some
indication of the quality of securities regulation in a given country.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average cost of capital Prior-year data not available 10.99% 10.67% 8.96%
Analysis: The cost of capital as estimated by the World CAPM model estimates that the cost of capital in the United States declined from the
2011 level of 10.67 percent to 8.96 percent in 2012, which results in the United States having a relative ranking of number 7 out of 43 countries
included in the study.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Morningstar International Cost of Capital Report (Annual)
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Strategic Objective 2.2: The U.S. capital markets operate in a fair, effcient, transparent, and competitive manner,
fostering capital formation and useful innovation.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Risk, Strategy, and Financial Innovation
PERFORMANCE GOAL 2.2.1
Percentage of transaction dollars settled on time each year
Description: This metric measures the effciency of the U.S. clearance and settlement system for equity securities.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage N/A 99% 99% 99% 99% 99% 98% 98% 98%
Target: Not Met
Analysis: The U.S. clearance and settlement system for equity securities continues to perform at a high rate of timely settlement. Staff from the
Division of Trading and Markets maintains regular supervisory contacts with personnel at relevant clearing agencies to ensure operational and other
issues that may arise are promptly identifed and addressed.
Plan for Improving Program Performance: The Division of Trading and Markets has expanded its resources devoted to clearance and settlement
matters over the past year to prepare for the increased focus on the area contemplated by the Dodd-Frank Act.
Responsible Division/Offce: Division of Trading and Markets
Data Source: National Securities Clearing Corporation
PERFORMANCE GOAL 2.2.2
Average institutional transaction costs for exchange listed stocks on a monthly basis
Description: This performance metric captures the actual cost of trading in large (institutional size) transactions.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Average transaction costs Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: This metric is subjective to a multitude of assumptions that are intrinsic to each institutional frm and as such, institutional transaction
costs vary from frm to frm and trade by trade.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: N/A
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PERFORMANCE GOAL 2.2.3
Percentage of market outages at SROs and electronic communications networks (ECNs) that are corrected within targeted timeframes
Description: Market outages refect problems in the systems underlying the securities markets that could have an adverse effect on the markets’
ability to function as required. The SEC assesses the reliability and resiliency of these systems to minimize the number and duration of outages.
This metric gauges how quickly outages are resolved, so that market activity can resume.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Within 2 hours 81% 84% 87% 74% 88% 60% 71% 60% 60%
Within 4 hours 91% 96% 98% 85% 94% 75% 89% 75% 75%
Within 24 hours 100% 100% 98% 100% 100% 96% 100% 96% 96%
Target: Within 2 hours – Exceeded; Within 4 hours – Exceeded; Within 24 hours – Exceeded
Analysis: The SROs have implemented enhancements to their systems incident handling procedures, and have placed greater emphasis on
100 percent uptime during the trading day hours of operation. The SEC has continued to work with critical SROs on improving their continuity
of operations, availability of critical production systems, and recovery time objectives. SROs also have shown greater system availability and the
ability to open even during disaster events, such as hurricanes, earthquakes and power outages.
Responsible Division/Offce: Division of Trading and Markets
Data Source: ECN outage data is derived from SROs
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.1
Average quoted spread for exchange listed stocks on a monthly basis
Description: This indicator gauges the hypothetical cost of trading in small amounts at the quoted markets, based solely on published quotations.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average quoted spread Prior-year data not available 1.70 cents 2.52 cents 1.76 cents 1.84 cents
Analysis: The average quoted spread for FY 2012 is 1.84 cents, indicating that the market is exhibiting normal conditions and suffered no large
abnormal quoted spreads.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.2
Average effective spread for exchange listed stocks on a monthly basis
Description: This indicator captures the cost of trading in small amounts based on actual trade prices and the quotes at the times of those trades.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average effective spread Prior-year data not available 2.19 cents 2.65 cents 1.72 cents 1.68 cents
Analysis: The average effective spread for FY 2012 is 1.68 cents, which remains considerably lower than that seen in prior years. This is indicative
of market and marketable limit orders receiving price improvement.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
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PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.3
Speed of execution
Description: This indicator gauges how quickly transactions are executed in the U.S. securities markets.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Speed of execution Prior-year data not available 1.59 seconds 1.77 seconds 1.02 seconds 0.9 seconds
Analysis: The speed of execution for FY 2012 is 0.9 seconds, continuing a trend of faster execution speeds on retail orders.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.4
Average quoted size of exchange listed stocks on a monthly basis
Description: This indicator measures the amount of liquidity visible to the market at the displayed quotes.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average quoted size Prior-year data not available 606 shares 687 shares 606 shares 588 shares
Analysis: Average quoted size of exchange listed stocks on a monthly basis has decreased in FY 2012, commensurate with a decrease in the
average quoted spread for exchange listed stocks compared to the prior year.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.5
Average daily volatility of exchange listed stocks on a monthly basis
Description: This statistic gauges short term price changes, which are an indicator of the risk of holding stock.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average daily volatility in the
S&P 500
Prior-year data
not available
1.60% 2.69% 1.18% 1.26% 1.08%
Analysis: The average daily volatility for exchange listed stocks was 1.08 percent for FY 2012. Market volatility is impacted by myriad factors so it
is diffcult to ascertain with certainty why changes (particularly small changes) in volatility occur.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Bloomberg
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Strategic Objective 2.3: The SEC adopts and administers rules and regulations that enable market participants to
understand clearly their obligation under the securities laws.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Investment Management; Director, Division of
Corporation Finance
PERFORMANCE GOAL 2.3.1
Length of time to respond to written requests for no-action letters (NAL), exemptive applications, and written interpretive requests
Description: The SEC staff responds to requests for guidance from individuals and companies about specifc provisions of the federal securities
laws. These queries can ask for proper interpretations of the securities laws or regulations, or for assurances that no enforcement action will be
taken in certain circumstances. The staff also reviews applications for exemptions from the securities laws. Written responses to such requests for
guidance, when provided, generally are publicly available, as are applications and related notices and orders, when issued. This measure gauges
whether the Divisions of Trading and Markets, Investment Management, and Corporation Finance are issuing initial comments on these requests
on a timely basis.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Trading and Markets: No-action letters, exemptive applications, and written interpretive requests (combined fgure)
Percentage 91% 63% 70% 91% 98.5% 85% 89% 85% 85%
Target: Exceeded
Analysis: For FY 2012, the Division of Trading and Markets exceeded expectations for timely responses to written requests. The Division responded
to written inquiries within the required timeframes 89 percent of the time. Responses to these inquiries generally promote an effective regulatory
environment by clarifying ambiguity, which permit private entities to more effciently use their compliance resources.
Responsible Division/Offce: Division of Trading and Markets
Data Source: TM Offce of Chief Counsel Electronic Log
Investment Management
No-action letters and interpretive
requests
91% 98% 100% 100% 100% 90% 100% 90% 90%
Exemptive applications N/A 81% 95% 100% 100% 80% 100% 80% 80%
Target: No-action letters – Exceeded; Exemptive applications – Exceeded
Analysis: For the fourth year in a row, IM processed 100 percent of initial comments on no-action letters within three weeks, surpassing its target
of 90 percent within three weeks. IM has been able to achieve this level of success because providing initial comments within the targeted time
frame has been a continuing priority. Given prior data and trends, the target of 90 percent within three weeks is reasonable and appropriate. For
the fourth year in a row, IM exceeded its target for initial comments on exemptive applications. The Division considered but decided against raising
its target percentage because the ability to meet the target is dependent on factors that could change materially during any fscal year, such as the
total number of applications fled, concentration of flings at any particular time period (surges), and the types and complexity of the applications fled.
Responsible Division/Offce: Division of Investment Management
Data Source: OCC Letter Log, OICR and OIP Applications Tracking Systems (Access), Excel spreadsheet
Corporation Finance
No-action letters and interpretive
requests
66% 66% 85% 97% 97% 90% 98% 90% 90%
Shareholder proposals 100% 100% 100% 100% 100% 100% 100% 100% 100%
Target: No-action letters – Exceeded; Shareholder proposals – Met
Analysis: CF surpassed its FY 2012 target by completing 98 percent of initial comments on no-action letters within 30 days. CF continues to
achieve its target of issuing comments on 100 percent of proposals before the company’s proxy fling date.
Responsible Division/Offce: Division of Corporation Finance
Data Source: Division No-Action Letter database and Division Shareholder Proposal database
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PERFORMANCE GOAL 2.3.2
Survey on whether SEC rules and regulations are clearly understandable
Description: The SEC aims to promote a regulatory environment in which market participants clearly understand their obligations. Through this
metric, the SEC intends to survey market participants to determine whether they believe the Commission’s regulatory requirements are clear.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: There are no methods or procedures in place to capture data for this measure. TM will review the measure and determine a timeframe
for establishing a methodology during FY 2013.
Responsible Division/Offce: Division of Trading and Markets
Data Source: N/A
PERFORMANCE GOAL 2.3.3
Time to complete SEC review of SRO rules that are subject to SEC approval
Description: The SEC reviews SRO rule proposals for consistency with the Exchange Act standards of investor protection, fair and orderly operation
of the markets and market structure, as well as other statutory requirements. This metric gauges how long it takes the SEC to approve a fling after
publication of notice of the proposal for comment.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Within 35 days Prior-year data not available 73% 0% 0% 0% 0% 0%
Within 45 days Prior-year data not available 99% 82% 80% 75% 70% 70%
Target: Within 35 days – Met; Within 45 days – Not Met
Analysis: During FY 2012, the SEC approved or disapproved 308 SRO rule changes fled pursuant to Section 19(b)(2) of the Exchange Act, which
represents a 40 percent increase over the prior fscal year. Although the SEC did not meet the 45-day standard for reviewing rule flings, it did
meet all of the Dodd-Frank statutory timeframes 99 percent of the time. One fling was covered by the pre-Dodd-Frank standard of 35 days from
the date of publication of notice in the Federal Register and fnal approval, but did not meet the measure. While the time to act on flings covered
by the pre-Dodd-Frank standard can be extended by the SEC or the SRO, we expect the remaining 20 flings still covered by the 35 day standard
to be either withdrawn or acted upon, given the complex and/or novel issues presented, but not within the 35 day timeframe.
Plan for Improving Program Performance: The enactment of the Dodd-Frank Act in July 2010 required the SEC to approve or disapprove within
certain statutory timeframes from the date of publication of a rule change. The staff must publish a rule fling for comment within 15 days from
when it is received, or otherwise the publication date reverts to the day the SRO publishes the fling on their website, (i.e., within two days of fling
with the SEC). Once a rule fling is published for comment, the SEC must complete a review within 45 days, or such longer period time as noted
in the statute. As a result, the SEC believes that the compliance with these Congressionally-mandated times should serve as the appropriate
data points going forward. Of the 307 SRO rule changes subject to the Dodd-Frank standards, 100 percent of the flings were published within
15 days of fling. 229 flings were subsequently approved or disapproved within 45 days of publication of notice in the Federal Register. The
remaining 79 flings were approved or disapproved within the other statutory benchmarks 99 percent of the time (i.e., within 90 days, within 180
days, within 240 days). Therefore, despite the 40 percent increase in rule flings over the previous fscal year, the SEC met the statutory standards
set by Dodd-Frank 99 percent of the time, and expects to be able to meet the statutory times frames going forward.
Responsible Division/Offce: Division of Trading and Markets
Data Source: SRO Rule Tracking System (SRTS). Information was extracted from the SRTS data tables into an Excel fle. The information was
then analyzed to determine the applicable population of flings. Simple formulas were used to calculate the time from fling after publication of
notice to approval of fling.
PAGE 44 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
PERFORMANCE INDICATOR (PROCESS) 2.3.1
Percentage of SRO rule flings that are submitted for immediate effectiveness
Description: This metric gauges the proportion of SRO rule proposals that can be submitted for immediate effectiveness, without Commission approval.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available 69% 77% 72%
Analysis: This indicator gauges the percentage of rule flings submitted by SROs for immediate effectiveness. Rule proposals can be submitted
for immediate effectiveness for certain types of flings, including non-controversial changes, rules relating to fee flings, or so called “copy-cat” rule
flings related to proposed rule changes other than trading rules. Rule proposals not submitted for immediate effectiveness require Commission
review and approval or disapproval.
Responsible Division/Offce: Division of Trading and Markets
Data Source: SRO Rule Tracking System (SRTS)
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 45
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
Strategic Goal 3: Facilitate Access to the Information Investors Need to Make Informed
Investment Decisions
The SEC promotes informed investment decisions through
two main approaches. The frst is to require that investors
have accurate, adequate, and timely public access to
disclosure materials that are easily understood and analyzed.
The second is to implement a variety of investor education
initiatives aimed at giving investors a better understanding of
the operations of the nation’s securities markets.
In FY 2012, the agency dedicated approximately $189.4
million and 701 FTEs toward achieving results in Goal 3. Of
18 performance targets, the agency met or exceeded 11, did
not meet 1, and did not have data to report on 6. The agency
is requesting in FY 2014 a total of $269.9 million and 783 FTEs
towards achieving results in Strategic Goal 3.
Spotlight: FY 2012 Performance Achievements
The Federal securities laws require that corporations, investment
companies, and other entities provide investors with timely
and meaningful information about, among other things, their
operations and fnances. Because an educated and informed
investor ultimately provides the best defense against fraud and
costly mistakes, these laws place great emphasis on providing
the investing public with meaningful information.
In FY 2012, as part of their disclosure programs, the Divisions
of Corporation Finance (CF) and Investment Management (IM)
continued to meet the requirements of the Sarbanes-Oxley
Act (Performance Goal 3.1.1). This volume of disclosure
review helped deter fraud and assured that investors had
access to relevant information about emerging issues.
Additionally, CF continued to issue initial comments on 1933
and 1934 Act registration statements and other transactional
flings within its target goal of 30 days of fling (Performance
Goal 3.1.2).
Investors who have access to complete and accurate
information are also more likely to invest wisely. In FY 2012,
the SEC continued to focus on educating investors about
products commonly marketed to them and provided
educational programs and materials to help investors
detect and avoid potential scams. The Offce of Investor
Education and Advocacy (OIEA) reached approximately 16
million investors through various communication methods
(Performance Goal 3.2.1), and partnered with other
Federal and state agencies, fnancial industry associations,
consumer groups, and educational organizations to produce
11 education campaigns (Performance Goal 3.2.2).
In FY 2012, the SEC tackled both practical investor protection
concerns and more broader, policy-oriented examinations
of the capital markets. The agency issued a comprehensive
report on municipal securities that discusses potential
legislative changes that could help improve disclosures
to investors, including authorizing the SEC to set baseline
disclosure standards and require municipal issuers to have
audited fnancial statements, as well as suggestions for
changes in business practices and regulations. Additionally,
OIEA completed a Dodd-Frank Act mandated study of
fnancial literacy among investors, drawing on numerous
sources, including online survey research, focus group
research, public comments to the Commission, and a Library
of Congress review of studies of fnancial literacy among U.S.
retail investors. The study identifed investor perceptions
and preferences regarding information available to them and
examined pre-investment disclosures; the fees, objectives,
performance, strategy and risks of funds; and the professional
background, disciplinary history, and conficts of interest of a
fnancial professional.
Budgeting for the Future (FY 2014)
An educated investing public ultimately provides the best
defense against fraud and costly mistakes. The Federal
securities laws place great emphasis on assuring that
corporations, investments companies, and other entities
provide investors with timely, clear, complete and accurate
fnancial and non-fnancial information, allowing investors to
make wise investment decisions. As part of its disclosure
program, CF and IM will continue in FY 2014 to meet the
requirements of the Sarbanes-Oxley Act (Performance Goal
3.1.1). Additionally, agency staff are expected to sustain
the rate from the number of days to issue initial comments
PAGE 46 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
on Securities Act flings (Performance Goal 3.1.2), and
exceed timeliness targets for reviewing investment company
disclosures (Performance Goal 3.1.3). Also, in FY 2014,
CF will continue to improve the quality of information provided
to investors by focusing on disclosure by companies of the
information most material to investment decision-making.
OIEA responds to investment-related complaints and questions
from tens of thousands of investors each year. In FY 2014, staff
is expected to close approximately 50 percent of complaints
and inquiries within seven days and about 90 percent within
30 days (Goal 3, Measure 10). The seven-day target has been
adjusted to refect new workload demands. In FY 2014, OIEA
will continue to refne internal processes and promote staff
training to resolve matters.
The SEC developed Performance Goals 3.1.4, 3.1.5, and
3.1.6 to monitor the availability of and access to securities
industry information so that investors are armed with timely
and meaningful information. The agency intended to use these
measures to explore whether its disclosure requirements,
review criteria, approach to comments, and professional and
technology resources are utilized to provide maximum beneft
to investors. These measures will be reviewed during the SEC’s
strategic planning process for FY 2014.
Strategic Objective 3.1: Investors have access to high-quality disclosure materials that are useful to investment
decision making.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Investment Management; Director, Division of
Corporation Finance; Director, Offce of Investor Education and Advocacy
PERFORMANCE GOAL 3.1.1
Percentage of public companies and investment companies with disclosures reviewed each year
Description: The Sarbanes-Oxley Act requires that the SEC review the disclosures of all companies and investment company portfolios reporting
under the Exchange Act at least once every three years. These reviews help improve the information available to investors and may uncover
possible violations of the securities laws.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Division of Corporation Finance
Corporations 36% 39% 40% 44% 48% 33% 48% 33% 33%
Target: Exceeded
Analysis: The SEC exceeded its planned level of review of companies in FY 2012. This review level is expected to deter fraud in public securities
transactions and should help investors receive accurate material information about the companies they invest in.
Responsible Division/Offce: Division of Corporation Finance
Data Source: Electronic, Data Gathering, Analysis, and Retrieval (EDGAR)/Filing Activity Tracking System
Division of Investment Management
Investment Company Portfolios 38% 36% 35% 35% 33% 33% 36% 33% 33%
Target: Exceeded
Analysis: Consistent with Section 408 of the Sarbanes Oxley-Act of 2002, IM strives to review disclosures made by certain public issuers, including
issuers’ fnancial statements, no less frequently than once every three years. IM has continued to meet or exceed this statutory goal.
Responsible Division/Offce: Division of Investment Management
Data Source: Microsoft Offce Suite Tools
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 47
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
PERFORMANCE GOAL 3.1.2
Time to issue initial comments on Securities Act flings
Description: The target of 30 days or less has become a de facto industry standard for the maximum time to receive initial comments.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Days 25.5
days
25.2
days
25.3
days
24.1
days
24.4
days
U.s. Securities And Exchange Commission
U. S. SECURI TI ES AND EXCHANGE COMMI SSI ON
FY 2014 CONGRESSI ONAL BUDGET J USTI FI CATI ON
FY 2014 ANNUAL PERFORMANCE PL AN
FY 2012 ANNUAL PERFORMANCE REPORT
About This Report
The Congressional Budget Justification (CBJ) is the annual
presentation to the Congress that justifes the Securities and Exchange
Commission’s budget request and refects the continuing process
to provide improved strategic focus, data quality, and information
to Congress and the public. This report also includes the Annual
Performance Plan (APP) for fscal year (FY) 2014 and the Annual
Performance Report (APR) for FY 2012, focusing on the agency’s
strategic goals and performance results.
This report provides information that satisfes requirements contained
in the following laws and regulations:
• GPRA Modernization Act of 2010
• Offce of Management and Budget Circular A-11, Preparation,
Submission and Execution of the Budget
• Government Management Reform Act of 1994
• Reports Consolidation Act of 2000
• Offce of Management and Budget Circular A-136, Financial Reporting Requirements
An electronic version of this document and its components is available at www.sec.gov/about/offces/
ofm/ofm-documents.htm. To comment on the SEC’s FY 2014 CBJ & APP and FY 2012 APR, email
[email protected].
Contents
Agency and Mission Information 3
Executive Summary 4
Vision, Mission, Values, and Goals 9
History and Purpose 10
Organization Structure and Resources 11
FY 2014 Budget Request Tables 13
FTE and Positions by Program 14
Obligations by Object Class 15
FY 2014 Request by Strategic Goal and Program 16
Summary of Changes 17
Offsetting Collections and Spending Authority 18
FY 2014 Appropriations Language 19
FY 2012 Annual Performance Report and FY 2014 Annual Performance Plan 21
FY 2012 APR and FY 2014 APP Summary 22
A Reader’s Guide to the SEC’s Performance Information 22
Verifcation and Validation of Performance Data 23
Performance Summary by Strategic Goal 24
Strategic Goal 1: Foster and Enforce Compliance with the Federal Securities Laws 24
Strategic Goal 2: Establish an Effective Regulatory Environment 37
Strategic Goal 3: Facilitate Access to the Information Investors Need to Make Informed Investment Decisions 47
Strategic Goal 4: Maximize the Use of SEC Resources 55
FY 2014 Budget Request by Program 63
Other Information 149
Program Evaluations and Research 150
Cross-Agency Collaboration 151
Effciencies and Effectiveness 151
Management Reviews 153
Management Challenges 153
Hyperlinks to Other Reports 153
Appendixes 155
Appendix A: Summary of Changes in Performance Goals and Indicators 156
Appendix B: Acronyms 157
Available on the Web at www.sec.gov/about/offces/ofm/ofm-documents.htm
To contact the SEC, please see www.sec.gov or “Contact Us” at www.sec.gov/contact.shtml.
PAGE 2 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
AGENCY AND MISSION
INFORMATION
Executive Summary
investor assets, improving internal collaboration, bolstering
our risk assessment capacity, and recruiting more staff with
specialized expertise and experience. These efforts could
not have been possible without the support of the Congress
through the budget process.
However, the SEC’s current level of resources is not suffcient
to keep pace with the growing size and complexity of the
securities markets and of the agency’s broad responsibilities.
Currently, the SEC oversees approximately 35,000 entities,
including about 11,000 investment advisers, 9,700 mutual
funds and exchange traded funds, 4,600 broker-dealers
with more than 160,000 branch offces. The SEC also has
responsibility for reviewing the disclosures and fnancial
statements of approximately 9,500 reporting companies.
The SEC oversees approximately 460 transfer agents,
17 national securities exchanges, eight active clearing agen-
cies, and 10 nationally recognized statistical rating organiza-
tions (NRSROs), as well as the Public Company Accounting
Oversight Board (PCAOB), Financial Industry Regulatory
Authority (FINRA), Municipal Securities Rulemaking Board
(MSRB), the Securities Investor Protection Corporation
(SIPC), and the Financial Accounting Standards Board
(FASB). Also, as mentioned above, the agency has new or
expanded responsibilities over the derivatives markets, hedge
fund and other private fund advisers, municipal advisors,
credit rating agencies, and clearing agencies.
Meanwhile, the securities industry continues to grow at a
rapid pace. For example, during the past decade, trading
volume in the equity markets has more than doubled, as
have assets under management by investment advisers, with
these trends likely to continue for the foreseeable future.
A number of fnancial frms spend many times more each
year on their technology budgets alone than the SEC spends
annually on all its operations. Similarly, SEC enforcement
teams bring cases against frms that spend more on lawyers’
fees than the agency’s annual operating budget.
The U.S. Securities and Exchange Commission’s (SEC) is
pleased to submit the budget request for fscal year (FY)
2014. For FY 2014, the SEC is requesting $1.674 billion in
support of 5,180 positions and 4,638 FTE. This requested
budget level would allow the SEC to hire an additional 676
positions to accomplish the priorities the agency has set
forth, including:
• Strengthening core programs and operations;
• Acquiring the necessary skill sets to enhance the
agency’s oversight of the increasing complex and rapidly
changing markets and entities the SEC regulates;
• Making operational the signifcant new responsibilities
assigned to the agency over areas such as derivatives,
private fund advisers, and municipal advisors under
the Dodd-Frank Wall Street Reform and Consumer
Protection Act; and
• Implementing the new responsibilities created under
Title I of the Jumpstart Our Business Startups (JOBS)
Act of 2012.
In addition, this request would enhance the tools our staff
have at their disposal to better advance the SEC’s mission
through much-needed investments in technology and
training.
The requested funding is necessary for the SEC to fulfll our
responsibility to protect investors; maintain fair, orderly, and
effcient markets; and facilitate capital formation. While it is
understood that this request comes during a time of tremen-
dous fscal challenges, it is important to note that this budget
request is fully offset by matching collections of fees on secu-
rities transactions, and will not in any way impact the Federal
budget defcit.
The Commission over the past few years has completed a
number of important steps to reform operations and better
protect investors. These include revitalizing and restructuring
the enforcement and examination functions, revamping the
handling of tips and complaints, enhancing safeguards for
PAGE 4 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
While the agency’s long-term goal is to examine roughly the
same proportion of the adviser industry each year as the
Financial Industry Regulatory Authority (FINRA) achieves in
its examinations of broker-dealers, which is about half, the
SEC recognizes that a sustained, recurring investment will
be needed to achieve this outcome.
The National Examinations Program (NEP) also would add
30 positions to improve oversight and examination functions
related to broker-dealers, clearing agencies, transfer agents,
self-regulatory organizations (SROs), swap data reposito-
ries, and municipal advisors. In addition, a portion of these
positions will be used to support other critical program
initiatives such as expanding the program for registrants’
internal compliance, enhancing global risk assessment and
surveillance efforts, and improving technology capabilities.
These positions are vital as the agency continues to strive to
keep pace with the rapid change and increasing complexity
of the markets it regulates.
Focusing on Economic and Risk Analysis to Support
Rulemaking and Oversight
For FY 2014, the SEC plans growth of 45 positions in the
Division of Risk, Strategy and Financial Innovation (RSFI),
primarily to hire fnancial economists to perform economic
analyses and research in support of Commission rulemaking
activity. Specifcally, RSFI would seek economists with exper-
tise in analyzing:
• high frequency trading data and economic issues in
market structure and practices to support the Division
of Trading and Markets and the examination program;
• executive compensation and related areas of corporate
governance;
• complex structured products, including valuation of and
risks associated with those products; and
• swap dealers and fnancial responsibility requirements.
RSFI also plans to hire computer scientists with mathemat-
ical and statistical programming experience to support risk
assessment and risk metrics, analytics, rulemaking, and
economic analysis.
This budget request focuses on addressing these resource
challenges by increasing funding in the following areas:
• expanding oversight of investment advisers and
strengthening compliance;
• focusing on economic and risk analysis to support
rulemaking and oversight;
• bolstering enforcement;
• building oversight of derivatives and clearing agencies;
• supporting implementation of the JOBS Act and
enhancing reviews of corporate disclosures;
• leveraging technology; and
• enhancing training and development of SEC staff.
Each of these areas is described further below.
Expanding Oversight of Investment Advisers and
Strengthen Compliance
During FY 2012, the SEC examined only about eight percent
of registered advisers, and over 40 percent of advisers have
never been examined. Additionally, the number of regis-
tered advisers has increased by more than 40 percent over
the last decade, while the assets under management by
these advisers have increased more than two-fold, to almost
$50 trillion. At the same time, the industry has been moving
towards the increasing use of new and complex products,
including derivatives and certain structured products; the
use of technologies that facilitate high-frequency and algo-
rithmic trading; and the development of complex “families” of
fnancial services companies with integrated operations that
include both broker-dealer and investment adviser affliates.
While the agency has successfully focused our limited exami-
nation resources on those areas posing the greatest risk to
investor assets, the SEC’s low rate of examination coverage
poses too great a risk to investors to allow it to persist.
Therefore, under the FY 2014 request, one of the SEC’s top
priorities is to hire 250 additional examiners to increase the
percentage of advisors examined each year, the rate of frst-
time examinations, and the examination coverage of invest-
ment advisors and newly registered private fund advisers.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 5
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
In addition, the agency intends to focus on further enhancing
its oversight of clearing agencies. Currently, the average
transaction volume cleared and settled by the seven active
registered clearing agencies is approximately $6.6 trillion a
day. Yet the SEC only has approximately sixteen examiners
devoted to them, with limited on-site presence in only three
of the seven. Additionally, the SEC only has approximately a
dozen other staff focused on the monitoring and evaluation
of risk management systems used by the existing clearing
agencies, and will need to expand these efforts to address
the expected increase in the number of clearing agencies and
rule flings raising risk management issues. Without these
additional resources, the mismatch between the amount of
regulated clearing activity and staffng will be exacerbated
as additional clearing agencies will register with the SEC as
a result of their security-based swap activities, and others
likely will require expanded oversight due to their designation
as systemically important by the Financial Stability Oversight
Council. Accordingly, in the FY 2014 budget request the SEC
proposes to add 25 positions in the Division of Trading and
Markets and in the NEP to support these functions.
Supporting Implementation of the JOBS Act and Enhance
Reviews of Corporate Disclosures
For FY 2014, the SEC requests 25 new positions for the
Division of Corporation Finance (CF). These positions
primarily would be devoted to implementing Title I of the
Jumpstart Our Business Startups (JOBS) Act. The Act
establishes a new category of flers – “emerging growth
companies” – who may comply with scaled disclosure
requirements in their initial public offerings and subsequent
periodic reports. These companies may also submit draft
registration statements for confdential nonpublic review by
the staff of the Division. These provisions were intended
to increase the number of initial public offerings and the
number of companies who fle periodic reports with the SEC.
The new positions will be used to hire additional attorneys
and accountants to conduct reviews of registration state-
ments and other corporate flings, including the additional
flings expected to result from the JOBS Act, and to answer
Bolstering Enforcement
The ability to bring timely, high-quality enforcement actions
when violations of the Federal securities laws are identi-
fed is integral to the SEC’s core mission. The SEC must
expand its enforcement function to keep pace with the
growing size and complexity of our markets and the SEC’s
additional responsibilities, and to send strong messages
to wrongdoers that misconduct will be swiftly and aggres-
sively addressed. Additional resources are needed in
Enforcement to assist in following up on the high volume
of tips and complaints received through the Commission’s
new whistleblower program; achieve additional examina-
tions of advisers; and deploy more advanced analytical
and technological tools to detect securities law violations.
Specifcally, the Division of Enforcement will focus its hiring
of 131 staff on increased expertise in the securities industry
and new product areas, trial attorneys, and forensic accoun-
tants, as well as staff for the Offce of Market Intelligence, the
Offce of the Whistleblower, and the SEC’s collections and
distributions functions.
Building Oversight of Derivatives and Clearing Agencies
The Commission’s regulatory responsibilities are signifcantly
expanding with the addition of new categories of registered
entities (including security-based swap execution facilities,
security-based swap data repositories, security-based
swap dealers, and major security-based swap participants);
the required regulatory reporting and public dissemination
of security-based swap data; and the mandatory clearing of
security-based swaps. To avoid bottlenecks and unintended
market disruptions as the new requirements become opera-
tional, the agency will need additional staff with technical skills
and experience to process and review on a timely basis the
requests for interpretation, registration, or required approvals.
New staff also will be needed to help conduct improved risk-
based supervision of registered security-based swap dealers
and participants, that includes using newly-available data to
identify excessive risks or other threats to security-based
swap markets and investors.
PAGE 6 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
The agency also plans to make a signifcant investment in
its information security program. In FY 2013 and FY 2014,
the Offce of Information Technology (OIT) plans to deploy a
new set of security tools and develop and train IT analytical
staff to monitor, respond to, and remediate threats, as well as
to rapidly address security breaches. Rather than conduct
only periodic assessments of security, OIT will focus on
continuous risk monitoring. Additionally, in FY 2014, the SEC
is requesting resources needed to implement infrastructure
upgrades to achieve effciencies in business operations and
reduce long-term costs. For example, the agency plans a
number of initiatives to automate business processes and
share data across the agency, to improve collaboration and
content management across the agency, and continue stra-
tegic replacement of existing hardware and software in order
to hold down maintenance costs.
Enhancing Training and Development of SEC Staff
The SEC’s staff is the most important driver of the agency’s
successes. The FY 2014 request includes a signifcant
increase in the SEC’s total training budget to enable the
SEC to continue building an effective training program to
deepen expertise and skills, not only in the rapidly evolving
nature of the markets, but also in areas of new responsibility.
The planned investment principally supports training and
development for employees directly involved in examina-
tions, investigations, fraud detection, litigation, and other core
mission responsibilities of the SEC. The training will consist
of specialized in-depth training concerning new trends in
the securities industry and changing market conditions,
as well as analytics and forensics. The investment also will
fund certain specialized fnancial certifcations and regula-
tory credentials, as well as the advanced continuing educa-
tion required for maintaining legal and fnancial credentials.
The resources requested in the FY 2014 budget would bring
the SEC’s level of training investment more on par with other
Federal fnancial regulatory agencies. In FY 2013, the SEC
training and development budget was at $2,375 per capita.
The proposed 2014 budget would raise this fgure to $2,850
per capita.
interpretive questions that relate to those flings and other
matters relating to the companies making them.
In addition, the CF intends to use these new positions
to enhance disclosure reviews of large and fnancially
signifcant companies, to improve the information these
companies provide to investors, thereby facilitating informed
decision-making.
Leveraging Technology
Aside from the need to increase the number of experts dedi-
cated to overseeing the securities industry, it is also critically
important to continue leveraging technology to streamline
operations and increase the effectiveness of the agency’s
programs. While the SEC has made signifcant progress
over the past few years in modernizing our technology
systems, the agency must continue to make investments
if it is to keep pace with the markets and organizations that
the SEC regulates. The FY 2014 budget request would
add $56 million for technology to support a number of key
Information Technology (IT) initiatives, including enhance-
ments to the system for receiving tips, complaints, and refer-
rals (TCR), improvements to IT security, and infrastructure
upgrades to achieve effciencies in business operations and
reduce long-term costs.
The SEC plans to enhance its TCR Intake and Resolution
system by building an interface to the agency’s exam and
case management systems, adding intake and routing func-
tionality for referrals from the self-regulatory organizations
(SROs), expanding reporting, and constructing the ability to
create and route referral memos so that matters that require
follow-up action are routed quickly. Additionally, the agency
plans to develop a component of the TCR system that will
automatically receive new TCRs and determine the charac-
teristics and risks of each based on a set of defned business
rules and the use of SEC internal and external information.
This triage solution will be integrated with the TCR Intake
and Resolution system, thereby providing SEC staff with the
required data and will automate analyses that are currently
conducted manually.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 7
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
The EDGAR modernization effort leverages the EDW.
The EDW is a critical step in combining various streams of
data and helping the public gain easier access to more usable
market data. The centralized EDW will allow the organization
of data using standard defnitions and structures, integration
of large amounts of data to allow enhanced analytical capa-
bilities and predictive modeling, and strengthened gover-
nance of data controls and quality standards.
A Consolidated Audit Trail (CAT) repository will increase the
data available to regulators investigating illegal activities
such as insider trading and market manipulation, signif-
cantly improve the SEC’s ability to reconstruct broad-based
market events in an accurate and timely manner, monitor
overall market structure, assess how Commission rules are
affecting the markets, and decrease regulatory data produc-
tion burdens on SROs and broker-dealers by reducing the
number of ad hoc requests. The SEC plans to invest Reserve
Fund dollars to develop the SEC’s ability to intake CAT data
and store it in the EDW, as well as to develop analytical
tools and a single software platform that will allow the SEC
to identify patterns, trends, and anomalies in the CAT data.
The tools and platform will allow seamless searches of data
sets to examine activity to reveal suspicious behavior in
securities-related activities and quickly trace the origin.
Reserve Fund
In FY 2014, the SEC proposes to continue using its Reserve
Fund, established in statute, to fund large, multi-year,
mission-critical technology projects. The agency plans
to use $50 million from the Fund for modernization of the
Electronic Data Gathering, Analysis and Retrieval (EDGAR)
system. The funds also will be used for the construction
and enhancement of the Enterprise Data Warehouse (EDW)
and to develop the capability to intake, store and analyze
data from the Consolidated Audit Trail (CAT) Repository.
These key priorities will enhance the SEC’s ability to improve
service to registrants and the public; integrate large amounts
of data from disparate sources so the data can be more
readily searched and analyzed by SEC staff; and improve
SEC business and operational processes.
Specifcally, the agency would continue its multi-year effort to
overhaul EDGAR to create a new, modernized system that
will, among other things, meet Commission requirements for
real-time system updates, reduce fler burden by providing
simplifed search and fling options based on fler experience
(i.e., professional or novice), improve data capture by moving
to structured formats for various SEC forms, and reduce the
long term costs of operating and maintaining the system.
PAGE 8 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
Vision, Mission, Values and Goals
Vision
The SEC strives to promote a market environment that is worthy of the
public’s trust and characterized by transparency and integrity.
Mission
The mission of the SEC is to protect investors; maintain fair, orderly,
and effcient markets; and facilitate capital formation.
Values
Integrity Teamwork
Accountability Fairness
Effectiveness Commitment to Excellence
Strategic Goals and Outcomes
Goal 1: Foster and enforce compliance with
the Federal securities laws
Outcome 1.1: The SEC fosters compliance with the
Federal securities laws.
Outcome 1.2: The SEC promptly detects violations
of the Federal securities laws.
Outcome 1.3: The SEC prosecutes violations of Federal
securities laws and holds violators accountable.
Goal 2: Establish an effective regulatory environment
Outcome 2.1: The SEC establishes and maintains
a regulatory environment that promotes high-quality
disclosure, fnancial reporting, and governance, and
that prevents abusive practices by registrants, fnancial
intermediaries, and other market participants.
Outcome 2.2: The U.S. capital markets operate in a fair,
effcient, transparent, and competitive manner, fostering
capital formation and useful innovation.
Outcome 2.3: The SEC adopts and administers
rules and regulations that enable market participants
to understand clearly their obligations under the
securities laws.
Goal 3: Facilitate access to the information investors
need to make informed investment decisions
Outcome 3.1: Investors have access to high-quality
disclosure materials that are useful to investment decision
making.
Outcome 3.2: Agency rulemaking and investor
education programs are informed by an understanding
of the wide range of investor needs.
Goal 4: Enhance the Commission’s performance
through effective alignment and management of human,
information, and fnancial capital
Outcome 4.1: The SEC maintains a work environment
that attracts, engages, and retains a technically profcient
and diverse workforce that can excel and meet the
dynamic challenges of market oversight.
Outcome 4.2: The SEC retains a diverse team of
world-class leaders who provide motivation and
strategic direction to the SEC workforce.
Outcome 4.3: Information within and available to the
SEC becomes a Commission-wide shared resource,
appropriately protected, that enables a collaborative
and knowledge-based working environment.
Outcome 4.4: Resource decisions and operations
refect sound fnancial and risk management principles.
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 9
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
History and Purpose
During the peak of the Depression, Congress passed the
Securities Act of 1933. This law, along with the Securities
Exchange Act of 1934 (Exchange Act), which created the SEC,
was designed to restore investor confdence in our capital
markets by providing investors and the markets with more
reliable information and clear rules of honest dealing. The main
purposes of these laws were to ensure that:
• Companies publicly offering securities for investment
dollars must tell the public the truth about their
businesses, the securities they are selling, and the risks
involved in investing.
• People who sell and trade securities – brokers, dealers
and exchanges – must treat investors fairly and honestly,
putting investors’ interests frst.
The SEC is responsible for overseeing the nation’s securities
markets and certain primary participants, including broker-
dealers, investment companies, investment advisers, clearing
agencies, transfer agents, credit rating agencies, and securi-
ties exchanges, as well as organizations such as the Financial
Industry Regulatory Authority (FINRA), Municipal Securities
Rulemaking Board (MSRB), and Public Company Account-
ing Oversight Board (PCAOB). Under the Dodd-Frank Wall
Street Reform and Consumer Protection Act
1
(Dodd-Frank
Act), the agency’s jurisdiction was expanded to include certain
participants in the derivatives markets, private fund advisers,
and municipal advisers among other changes.
The SEC consists of fve presidentially appointed Commission-
ers, with staggered fve-year terms. One of the Commissioners
is designated by the President as Chairman of the Commission
(see Appendix A: Chairman and Commissioners).
By law, no more than three of the Commissioners may belong
to the same political party. The Commission convenes regularly
at meetings that are open to the public and the news media
unless the discussion pertains to confdential subjects, such
as whether to begin an enforcement investigation.
Each year, the SEC brings hundreds of civil enforcement
actions against individuals and companies for violation
of securities laws. Examples of infractions include insider
trading, accounting fraud, and providing false or misleading
information about securities or the companies that issue
them. One of the major sources of information that the
SEC relies on to bring enforcement action is investors
themselves – another reason that educated and careful
investors are critical to the functioning of effcient markets.
To help inform investors, the SEC offers the public a wealth
of educational information on the website www.investor.gov,
as well as an online database of disclosure documents at
www.sec.gov/edgar/searchedgar/companysearch.html that
public companies and other market participants are required
to fle with the SEC.
1
Dodd-Frank Wall Street Reform and Consumer Protection Act www.sec.gov/about/laws/wallstreetreform-cpa.pdf
PAGE 10 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
Organizational Structure and Resources
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 11
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
SEC Offce Locations
The SEC’s headquarters are in Washington, D.C., and the agency has 11 regional offces located throughout the country.
The regional offces are responsible for investigating and litigating potential violations of the securities laws. The offces also
have examination staff, who inspect regulated entities such as investment advisers, investment companies and broker-dealers.
The map below shows the locations of the regional offces, and the states that are included in each region.
SEC Organization Structure
The SEC is an independent Federal agency established pursuant to the Exchange Act. It is headed by a bipartisan fve-
member Commission, comprised of the Chairman and four Commissioners, who are appointed by the President and confrmed
by the Senate. The Chairman serves as the Chief Executive Offcer. In fscal year (FY) 2012, the agency employed 3,770
full-time equivalents (FTE), including 3,739 permanent and 31 temporary FTEs. The SEC organization chart below is as of
September 30, 2012.
SEC ORGANIZATION CHART
PAGE 12 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
A G E N C Y A N D M I S S I O N I N F O R M A T I O N
FY 2014
BUDGET REQUEST TABLES
FTE and Positions by Program
FY 2012
Actual
FY 2013
CR
FY 2014
Request
FTE Positions FTE Positions FTE Positions
Enforcement 1,219 1,218 1,302 1,350 1,401 1,481
Compliance Inspections and Examinations
1
820 880 916 974 1,127 1,299
Corporation Finance 448 467 471 515 494 540
Trading and Markets
1
225 249 285 307 284 332
Investment Management 153 161 172 180 184 205
Risk, Strategy and Financial Innovation 56 83 90 101 100 146
General Counsel 132 137 145 149 153 156
Other Program Offces
Chief Accountant 45 43 45 52 46 56
Investor Education and Advocacy 45 44 45 46 50 51
International Affairs 36 37 41 46 46 50
Administrative Law Judges 8 8 11 11 11 11
Investor Advocate 0 0 3 6 3 6
Credit Ratings 14 26 28 29 29 35
Municipal Securities 0 1 5 5 5 5
Total 148 159 178 195 190 214
Agency Direction and Administrative Support
Executive Staff 38 36 41 42 42 42
Public Affairs 8 9 9 10 11 11
Secretary 30 32 31 31 34 32
Chief Operating Offcer 9 10 16 18 16 21
Financial Management 74 78 79 84 83 86
Information Technology 120 135 158 183 174 203
Human Resources 82 87 102 101 113 134
Acquisitions 46 40 44 72 44 72
Operations Support 91 95 96 91 98 95
Ethics Counsel 11 13 14 14 15 16
Minority and Women Inclusion 3 5 8 8 8 13
Equal Employment Opportunity 7 7 7 9 7 11
Total 519 547 605 663 645 736
Inspector General 19 18 19 24 20 25
Total FTE and Positions 3,770 3,958 4,223 4,504 4,638 5,180
Permanent 3,739 3,919 4,183 4,458 4,598 5,134
Temporary 31 39 40 46 40 46
1
The Position and FTE fgures for Trading and Markets (TM) and the Offce of Compliance Inspections and Examinations (OCIE) include the transfer
of 19 positions for the Automated Review Program (ARP) from TM to OCIE during FY 2013.
PAGE 14 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
Obligations by Object Class
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
CR
FY 2014
Request
Personnel Compensation & Benefts
Total Personnel Compensation (11.9) $ 592,697 $ 686,894 $ 782,519
Civilian Personnel Benefts (12.1) 171,706 197,319 223,365
Subtotal Cost of Salaries $ 764,403 $ 884,213 $ 1,005,884
Other Expenses
Benefts for Former Personnel (13.0) 1,257 1,234 1,251
Travel and Transportation of Persons (21.0) 10,880 13,575 16,950
Transportation of Things (22.0) 47 83 84
Rent, Communications & Utilities (23.0) 47,102 108,134 133,534
Printing and Reproduction (24.0) 8,325 9,513 9,621
Other Contractual Services (25.0) 271,912 307,312 400,823
Supplies and Materials (26.0) 1,905 3,878 4,270
Equipment (31.0) 72,718 79,488 86,220
Building Alterations (32.0) 1,354 10,000 15,278
Claims and Indemnities (42.0) 9 84 85
Refunds (44.0) — — —
Undistributed (92.0) — — —
Subtotal Cost of Other Expenses $ 415,509 $ 533,301 $ 668,116
Spending Authority
$ 1,179,912 $ 1,417,514 $ 1,674,000
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 15
B U D G E T R E Q U E S T T A B L E S
FY 2014 Request by Strategic Goal and Program
(DOLLARS IN THOUSANDS) FY 2014 Request
Change over
FY 2012
Actual
Change over
FY 2013
CR
SEC Program
FY 2012
Actual
FY 2013
CR
Goal 1
Enforce
Securities
Laws
Goal 2
Effective
Regula-
tory
Environ.
Goal 3
Facilitate
Access
To Info.
Goal 4
Align &
Manage
Resources
FY 2014
Request $ % $ %
FY 2012 Actual $692,551 $113,896 $189,309 $184,157
FY 2013 CR $782,895 $142,609 $243,139 $248,871
Enforcement $416,815 $459,193 $488,439 $10,618 $5,309 $26,546 $530,912 $114,097 27 $71,719 16
Compliance Inspections
and Examinations 249,248 281,933 330,938 7,117 3,558 14,234 355,847 106,599 43 73,914 26
Corporation Finance 128,517 141,865 2,953 26,545 123,611 7,383 160,492 31,975 25 18,627 13
Trading and Markets 66,331 79,800 18,231 47,977 28,786 960 95,954 29,623 45 16,154 20
Investment Management 47,406 52,154 14,910 25,472 19,880 1,864 62,126 14,720 31 9,972 19
Risk, Strategy, and
Financial Innovation 19,083 33,536 19,515 19,515 2,218 3,105 44,353 25,270 132 10,817 32
General Counsel 40,922 44,284 31,810 8,584 1,515 8,584 50,493 9,571 23 6,209 14
Other Program Offces 44,266 52,823 22,882 16,543 19,982 2,733 62,140 17,874 40 9,317 18
Agency Direction and
Administrative
Support 161,021 265,051 5,758 14,097 64,939 219,109 303,903 142,882 89 38,852 15
Inspector General 6,303 6,875 78 — 78 7,624 7,780 1,477 23 905 13
Total SEC Funding $1,179,912 $1,417,514 $935,514 $176,468 $269,876 $292,142 $1,674,000 $494,088 42% $256,486 18%
Percent Increase over
Prior Year 19% 24% 11% 17%
PAGE 16 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
Summary of Changes
FY 2013
CR
FY 2014
Request
Net
Change
Spending Authority $1,417,514 $1,674,000 +$256,486
Full-time Equivalents 4,223 4,638 +415
Positions 4,504 5,180 +676
Explanation of Changes: Positions FTE Amount
FY 2013 Base Changes
Annualization of staff brought on-board in prior years — 219 +45,660
FY 2014 pay raise, 1.7% effective January 2014 — — +10,019
Merit pay increases for eligible staff — — +31,092
Non-compensation infation — — +9,329
Subtotal, Base Changes — 219 +96,100
Program Increases:
Information Technology Enhancements — — +56,070
Additional contracting needs including Enforcement litigation support,
risk and data analysis, and asset verifcation for exams
— — +17,000
Staff Training — — +9,000
Employee awards to address OIG Audit Report No. 492 — — +3,000
Staff Increases: — — +75,316
Enforcement 131 38
Compliance Inspections and Examinations 325 94
Corporation Finance 25 7
Trading and Markets 25 7
Investment Management 25 7
Risk, Strategy and Financial Innovation 45 13
General Counsel 7 2
Other Program Offces 19 6
Agency Direction & Admin. Support 73 21
Inspector General 1 1
Subtotal, Program Changes 676 196 +160,386
Total Change 676 415 +256,486
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 17
B U D G E T R E Q U E S T T A B L E S
Offsetting Collections and Spending Authority
SOURCE OF OFFSETTING COLLECTIONS
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Securities Transaction Fees under the Securities Exchange Act of 1934 (Section 31) $ 1,288,399 $ 1,321,000 $ 1,674,000
Securities Registration Fees under the Securities Act of 1933 (Section 6(b)), and Merger and
Tender Fees under the Securities Exchange Act of 1934 (Sections 13(e) and 14(g))
1
— — —
Total Offsetting Collections $ 1,288,399 $ 1,321,000 $ 1,674,000
SPENDING AUTHORITY
(DOLLARS IN THOUSANDS)
FY 2012
Actual
FY 2013
CR
FY 2014
Request
Current Year Appropriated Offsetting Collections $ 1,288,399 $ 1,321,000 $ 1,674,000
Available Balances from Prior Years — 96,514 —
Spending Authority from the General Fund, Resulting from Lower-Than-Expected Offsetting
Collections
32,601 — —
Total Authority $ 1,321,000 $ 1,417,514 $ 1,674,000
1
The Offsetting Collections and Spending Authority chart above presents the SEC’s budgetary authority derived from offsetting collections from fees collected on Sec-
tion 31 securities transactions and Section 6(b), 13(e), 14(g) and 24f-2 flings (referred to as “fling fees”) from FY 2004 through 2011. Pursuant to the Dodd-Frank Act
and beginning in FY 2012, fling fee collections are no longer offsetting collections, and are now either deposited into the Reserve Fund or the U.S. Treasury General
Fund. Thus, the FY 2012 column only presents amounts for Section 31 securities transaction fee collections. Beginning in FY 2012, the SEC was required to deposit
into the Reserve Fund up to $50 million a year in Section 6(b) registration fees, while the remainder is deposited into the Treasury as general revenue.
PAGE 18 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
B U D G E T R E Q U E S T T A B L E S
FY 2014
APPROPRIATIONS LANGUAGE
FY 2014 Appropriations Language
For necessary expenses for the Securities and Exchange
Commission, including services as authorized by 5 U.S.C.
3109, the rental of space (to include multiple year leases) in
the District of Columbia and elsewhere, and not to exceed
$3,500 for offcial reception and representation expenses,
[$1,329,000,000] $1,674,000,000, to remain available until
expended; of which not less than [$100,345,000] $75,000,000
shall be used to cover shortfalls in the Commission’s funding of
obligations incurred in past fscal years for ongoing multi-year
real property contracts; of which not less than [$6,795,000]
$7,092,381 shall be for the Offce of Inspector General; of
which not to exceed $50,000 shall be available for a permanent
secretariat for the International Organization of Securities
Commissions; and of which not to exceed $100,000 shall
be available for expenses for consultations and meetings
hosted by the Commission with foreign governmental and
other regulatory offcials, members of their delegations and
staffs to exchange views concerning securities matters, such
expenses to include necessary logistic and administrative
expenses and the expenses of Commission staff and foreign
invitees in attendance including: (1) incidental expenses
such as meals; (2) travel and transportation; and (3) related
lodging or subsistence: Provided, That fees and charges
authorized by section 31 of the Securities Exchange Act
of 1934 (15 U.S.C. 78ee) shall be credited to this account
as offsetting collections: Provided further, That not to
exceed [$1,329,000,000] $1,674,000,000 of such offsetting
collections shall be available until expended for necessary
expenses of this account: Provided further, That the total
amount appropriated under this heading from the general fund
for fscal year 2014 shall be reduced as such offsetting fees
are received so as to result in a fnal total fscal year 2014
appropriation from the general fund estimated at not more
than $0.
PAGE 20 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 4 A P P R O P R I A T I O N S L A N G U A G E
FY 2012 ANNUAL
PERFORMANCE REPORT
FY 2014 ANNUAL
PERFORMANCE PLAN
The SEC focuses its resources on (1) fostering and enforcing
compliance with the Federal securities laws, (2) establishing
an effective regulatory environment, (3) facilitating access to
the information investors need to make informed investment
decisions, and (4) enhancing the agency’s performance
through effective alignment and management of human,
information, and fnancial capital. In FY 2012, total SEC
obligations were $1.18 billion in support of 3,770 total full-
time equivalents (FTE). Of 72 total performance targets, the
agency met or exceeded 34, did not meet 19, and did not
have data to report on 19.
The budget request for FY 2014 totals $1.674 billion, an
increase of about $256 million (18 percent) over the agency’s
FY 2013 Continuing Resolution funding amount. The FY 2014
budget funds 4,638 full-time equivalents (FTE), an increase
of about 415 FTE (10 percent) over the FY 2013 level, and
increases the number of positions by 676 to a total of 5,180.
The additional resources requested for FY 2014 would bolster
the SEC’s efforts to achieve each of its four strategic goals,
and allow the agency to begin overseeing the new markets
and market participants that have been added to the SEC’s
jurisdiction. Resources that directly support fostering and
enforcing compliance with the securities laws would increase
approximately 19 percent from FY 2013 to FY 2014; resources
utilized in establishing an effective regulatory environment
would increase by approximately 24 percent compared to
FY 2013; and resources that support activities that aim to
facilitate access to the information investors need to make
informed investment decisions would receive an estimated
11 percent increase.
The agency is mindful that signifcantly increasing staffng in
the program areas requires a commensurate increase in staff
and funding for support offces. Additionally, refnements to
the tracking of resources devoted to the effective management
of human, information, and fnancial capital has led the
program offces to devote more staff time to these duties.
The requested funding will provide necessary resources for
investments in information technology that will improve the
agency’s technology security; tips, complaints, and referrals
(TCR) system; technology infrastructure; and workfow
processes.
To complement the FY 2014 performance budget, the agency
also presents its FY 2014 budget by program (beginning on
page 63). Each program chapter provides detailed information
on program priorities, initiatives, and workload fgures for the
relevant divisions and offces.
A Reader’s Guide to the SEC’s Performance Information
The following chapters comprise the agency’s FY 2012 Annual
Performance Report (APR) and FY 2014 Annual Performance
Plan (APP), which explains how the SEC uses resources to
achieve each of its four strategic goals.
The following outlines a brief description of each of the major
components of the performance section:
Strategic Goal Summary: Each strategic goal section opens
by reviewing the purpose of the goal, followed by information
identifying the resources allocated toward achieving the goal.
FY 2012 Performance Achievements: A brief summary that
spotlights the year’s performance achievements, including
resource data and an overall discussion of performance.
Budgeting for the Future (FY 2014): A brief discussion of how the
SEC plans to use resources requested in FY 2014 to achieve
the strategic goal.
Strategic Objective: This section provides a description of
the SEC’s strategic outcomes that gauges the agency’s
performance within each strategic goal.
Performance Goals and Indicators: Each strategic goal section
includes a presentation of performance measures and
performance indicators by outcome, comparing planned
and actual performance levels for FY 2011. Four years of
historical data is provided for performance measures and
performance indicators where available. A plan for improving
FY 2012 APR and FY 2014 APP Summary
PAGE 22 F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
program performance is included for measures where non-
achievement was signifcant. Not applicable (N/A) in the
performance measures table indicates that performance data
The SEC’s programs require accurate data to properly assess
program performance and to make good management
decisions. Data verifcation and validation is used to evaluate
whether data has been generated according to specifcations,
satisfy acceptance criteria, and are appropriate and consistent
with their intended use. Data verifcation is a systematic
process for evaluating performance and compliance of a set
of data when compared to a set of standards to ascertain
its completeness, correctness, and consistency using the
methods and criteria defned in the project documentation.
Data validation follows the data verifcation process and uses
information from the project documentation to ascertain the
usability of the data in light of its measurement quality objectives
and to ensure that results obtained are scientifcally defensible.
The SEC ensures that the performance data presented in
this report is complete, reliable and accurate based upon the
following assessment steps:
(1) The agency develops performance measures through its
strategic planning process.
is not available. Performance indicators that do not include
targets also are included in this section, providing useful
information for understanding the SEC’s activities.
(2) The SEC’s divisions and offces perform the following
steps to ensure that data used in the calculation of
performance measures is accurate and reliable including
adequately documenting:
• the sources of the underlying data elements, and the
procedures used to gather the data;
• the procedures used to obtain assurance as to the
accuracy and reliability of the data;
• the data defnitions for reference;
• documenting and explaining the measure calculations.
(3) The divisions and offces calculate and report the
performance measures to the Office of Financial
Management, and the measures are approved by division
directors and offce heads. This process ensures that the
data used in the calculation of performance measures
is accurate and reliable and that internal control is
maintained through the approval process.
Verifcation and Validation of Performance Data
F Y 2 0 1 4 C B J , F Y 2 0 1 4 A P P, A N D F Y 2 0 1 2 A P R PAGE 23
F Y 2 0 1 2 A N N U A L P E R F O R M A N C E R E P O R T A N D F Y 2 0 1 4 A N N U A L P E R F O R M A N C E P L A N
Strategic Goal 1: Foster and Enforce Compliance with the Federal Securities Laws
Fostering compliance with Federal securities laws is
interwoven through all of the SEC’s programs and is central
to fulflling the critical mission of the agency. Through
disclosure reviews and examinations of broker-dealers,
investment advisers, self-regulatory organizations (SROs)
and other market participants, the SEC seeks both to detect
violations of the securities laws and rules and to foster strong
compliance and risk management practices within these
frms and organizations. When violations occur, the SEC
aims to take prompt action to halt the misconduct, sanction
wrongdoers effectively, and return funds to harmed investors.
In FY 2012, approximately $692.5 million and 2,188 full-
time equivalents (FTEs) were directed at achieving results
in Goal 1. Of 17 performance targets, the agency met or
exceeded 7, did not meet 7, and did not have data to report
on 3.
In FY 2014, the agency is requesting a total of 2,868 FTE
for Goal 1. The additional resources will allow the SEC to
continue building out the agency’s new responsibility areas,
and begin addressing the disparity between the number
of exam staff and the growing number and complexity of
registered frms. Additionally, the Commission will be able to
take prompt action to halt misconduct, sanction wrongdoers
effectively, and return funds to harmed investors. In all, the
agency plans to devote approximately $935.5 million to
enforcing compliance with the federal securities laws.
Spotlight: FY 2012 Performance Achievements
While investigating and prosecuting violations of Federal
securities laws are integral aspects of the Commission’s
programs, working to detect and prevent violations of the
securities laws are also key to protecting investors and
enhancing market integrity. Efforts designed to promote
investor awareness are the frst line of defense against fraud.
In FY 2012, the SEC issued 24 Investor Alerts and Bulletins,
providing investors with information they need to make wise
investment decisions and limiting opportunities for investor
abuse (Performance Goal 1.1.1).
The SEC seeks to encourage within organizations of all sizes a
strong culture of compliance that fosters ethical behavior and
decision-making. In FY 2012, the SEC expanded its outreach
efforts for promoting compliance, conducting a number
of signifcant industry outreach and educational programs
(Performance Goal 1.1.2). Specifcally, the Compliance
Outreach program continues to offer information and resources
to investment adviser and broker-dealer frms, and the agency
is pleased that the majority of participants (over 84 percent)
found the program to be useful (Performance Goal 1.1.4). In
future years, the agency will track the number of Compliance
Alerts issued, post-examination compliance conferences
hosted, and other educational and training programs offered
to support continued compliance.
Additionally in FY 2012, the SEC improved its surveillance
capabilities by enhancing the methods and technologies
used to analyze data, which helped staff more effectively
prepare for and conduct examinations. While the number of
regulated entities is expected to grow, these efforts as well
as enhanced staff expertise are expected to help the SEC
increase the percentage of registrants examined each year
(Performance Goal 1.2.3).
When violations of the federal securities laws do occur, the
SEC investigates and brings enforcement actions against
regulated persons and entities, as well as other market
participants. The SEC brought 734 enforcement actions in
FY 2012, the second highest number ever fled in a fscal year
(and one less than the record 735 fled the prior year). Of these
actions, 20 percent were fled in investigations designated
as National Priority Cases, representing the Division’s most
important and complex matters (Performance Indicator
(Output) 1.3.4). A detailed discussion of the SEC’s most
signifcant cases can be found in SEC’s Agency Financial
Report (AFR) Appendix B: Major Enforcement Cases.
In addition, the Division obtained orders for $3.1 billion in
penalties and disgorgement (Performance Indicator
(Output) 1.3.6); distributed a total of $815 million to harmed
Performance Summary by Strategic Goal
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investors; continued to utilize the enhanced remedies
available under the Dodd-Frank Act to bar numerous
individual wrongdoers from working in the securities industry;
and obtained other forms of relief that send a strong deterrent
message and protect investors, including asset freezes,
trading suspensions, and penny stock bars. Finally, the
SEC made its frst whistleblower payout to an individual who
provided high-quality, signifcant information that helped stop
a multi-million dollar fraud. Enforcement is receiving many
excellent tips through the Whistleblower Program, resulting
in signifcant savings in investigative resources and time.
Budgeting for the Future (FY 2014)
In FY 2014, the SEC will continue to make improvements
to its National Examination and Enforcement programs.
These improvements include expanding the SEC’s training
programs, hiring staff with new skill sets, streamlining
processes, enhancing information sharing, leveraging the
knowledge of third parties, improving the processing of
the thousands of tips the agency receives annually, and
improving risk assessment techniques. These and other
signifcant efforts contribute to the agency’s objective of
creating an enduring structure for improved protection of
investors and markets.
In FY 2014, the National Examination program will continue
its focus on high-risk entities and activities. Additional staff
will, among other things, improve risk assessment and
surveillance functions and continue to address the disparity
between the number of staff and the size and complexity
of regulated entities. The staff will perform targeted, sweep,
and cause examinations, including examinations over new
or expanded areas of the agency’s jurisdiction. In FY 2014,
the SEC will also continue to promote industry compliance
efforts through the Compliance Outreach program, and will
maintain ongoing efforts to improve its risk assessment and
surveillance methodologies.
Additionally in FY 2014, the Division of Investment
Management (IM) will aim to hire additional examiners to
oversee funds and investment advisers. These examiners
will increase investor protection by supplementing and
coordinating with other examination efforts. They would
also bring skills and specialized experience to examinations
of funds and investment advisers. This specialization is
expected to directly inform, support and improve policies and
rulemakings that address industry practices observed during
exams. The exam function will be part of a larger Risk and
Examination Offce (REO) within IM. REO will be responsible
for conducting rigorous quantitative and qualitative fnancial
analysis of the investment management industry.
The SEC plans to increase its outreach efforts for promoting
compliance by performing approximately 16 industry outreach
and educational program initiatives in FY 2014 (Performance
Goal 1.1.2). Furthermore in FY 2014, the staff expects to
continue devoting a signifcant amount of time and resources
to make compliance outreach as relevant and benefcial as
possible for registered entities. The staff will continue to make
every effort to ensure that this program reaches as many
chief compliance offcers as possible and that it continues
to be extremely useful in helping registered frms with their
compliance efforts (Performance Goal 1.1.4).
The Enforcement program plans to build on signifcant changes
implemented in prior fscal years, and will work to meet
new challenges expected in FY 2014, including challenges
presented by the addition of several new classes of registrants
to the Commission’s jurisdiction (e.g., municipal advisors, new
categories of securities-based swap entities, and hedge fund
and other private fund advisers), which are likely to result in an
increase in the number of referrals to the Enforcement program.
In order to effectively meet these challenges, the Enforcement
program is aggressively adopting new methods, initiatives,
and organizational reforms to ensure the best possible use
of available resources to strengthen investor confdence in
the U.S. fnancial markets and to send a strong message of
deterrence to would-be violators of the securities laws.
To improve the quality and effciency of its investigations,
the SEC has put seasoned investigators on the front lines,
created specialized units focused on specifc programmatic
priorities, enhanced case management systems, and
increased coordination efforts with other offces and divisions
in the agency and other regulators. In FY 2014, the SEC
plans to resolve approximately 92 percent of enforcement
actions (Performance Goal 1.3.1), while also reducing in
FY 2014 the average number months between the opening
of an investigation and the fling of the frst enforcement action
arising out of that investigation (Performance Goal 1.3.6).
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Strategic Objective 1.1: The SEC fosters compliance with the federal securities laws.
Goal Leader(s): Director, Offce of Compliance Inspections and Examinations; Director, Offce of Investor Education and Advocacy
PERFORMANCE GOAL 1.1.1
Number of new investor education materials designed specifcally to help investors protect themselves from fraud
Description: Through its Offce of Investor Education and Advocacy (OIEA), and often in conjunction with other organizations, the agency issues
Investor Alerts and other forms of educational material that inform investors about new or emerging types of fraud.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of education materials Prior-year data not available 16 24 24 24 26 26
Target: Met – This goal was developed in FY 2010 during the strategic planning process and prior year data is not available.
Analysis: In FY 2012, the SEC issued 24 new investor alerts and bulletins to meet its goal, focusing on salient topics for individual investors related
to investment products and potential investment scams.
Responsible Division/Offce: Offce of Investor Education and Advocacy
Data Source: www.sec.gov and www.investor.gov
PERFORMANCE GOAL 1.1.2
Number of industry outreach and education programs targeted to areas identifed as raising particular compliance risks
Description: Targeted communication with industry participants on topics shaping the examination program is intended to enhance compliance
practices and prevent violations before they occur. This measure identifes the number of major outreach efforts conducted including the agency’s
national and regional Compliance Outreach events, published Compliance Alerts, and other educational initiatives.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of major outreach efforts Prior-year data not available 6 5 12 13 14 16
Target: Exceeded – This goal was developed in FY 2010 during the strategic planning process and prior year data is not available.
Analysis: The SEC seeks to encourage a strong culture of compliance among organizations, to foster ethical behavior and decision-making.
As part of its efforts to promote compliance within the industry, OCIE conducted one Compliance Outreach event, published fve National Risk
Alerts and also published one public report during FY 2012. Senior staff also conducted an SRO Outreach meeting, represented OCIE at SEC
Speaks and published remarks from four critical speaking engagements during the year. In addition to these efforts, staff from throughout the
program participated in a number of additional outreach efforts, including speaking at numerous industry conferences and related engagements,
which are not refected in the above numbers.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Internal tracking, although the events noted above are referenced in the SEC’s Website
Under the Sarbanes-Oxley Act of 2002, the SEC can use
Fair Funds to redirect penalties collected from securities
law violators to the victims of their wrongdoing. The SEC
is committed to the timely collection and distribution of
penalties and disgorgement funds and has adopted a variety
of new measures for monitoring its progress, as described
further below.
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PERFORMANCE GOAL 1.1.3
Percentage of frms receiving defciency letters that take corrective action in response to all exam fndings
Description: At the conclusion of examinations, the staff communicates identifed defciencies to registrants in the form of a defciency letter.
Registrants are then given a chance to respond to staff fndings and often take action to remedy any problems and potential risks. Most often,
registrants respond that they have corrected the defciencies and implemented measures to prevent recurrence.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 94% 93% 94% 90% 93% 93% 92% 93% 94%
Target: Not Met
Analysis: During examinations in FY 2012, the staff reviewed a variety of books and records and identifed a number of areas where frms appeared
not to be in compliance with Federal securities laws. In response to defciency letters that were sent to frms by the staff, the vast majority of
registrants have asserted that they are taking corrective action in response to the staff’s fndings. In order to achieve this level of performance, the
staff made concerted efforts during the year to improve dialogue and communication with frms, including at the most senior levels. These efforts
have helped to ensure that there is a clear understanding of issues and concerns between the staff and registrants. Overall, this measure continues
to show that registrants are using examination results to improve operations and compliance with federal securities laws. The performance goal
was set at an approximate level and the deviation from that level is minimal. There was no effect on overall program or activity performance.
Plan for Improving Program Performance: OCIE will continue to enhance efforts to promote compliance by more proactive communications with
registrants and their personnel, including chief compliance offcers. These enhanced communication efforts will be aimed at increasing compliance
efforts or remedial actions taken by registrants. Additionally, the program anticipates using additional resources to perform corrective action reviews
at selected frms. Among other things, these reviews will be focused on ensuring that the corrective actions taken by frms are being implemented
in a manner to adequately address previously noted defciencies at those frms.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
PERFORMANCE GOAL 1.1.4
Percentage of attendees at the Compliance Outreach program that rated the program
as “Useful” or “Extremely Useful” in their compliance efforts
Description: The Compliance Outreach program is designed to educate, inform, and alert CCOs and other senior management of pertinent
information, including about effective compliance controls, that may assist them in administering compliance programs within registered frms.
Improving compliance programs will reduce violative activity, resulting in increased protection for investors. At the conclusion of all Compliance
Outreach events, CCOs are given the opportunity to rate the usefulness of the information provided in assisting them in their compliance efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 97% 92% 84% 77% 86% 80% 84% 85% 86%
Target: Exceeded
Analysis: The program formerly known as CCOutreach is now more broadly focused and is known as the Compliance Outreach program. During
FY 2012, the staff devoted signifcant resources to the Compliance Outreach program in order to make it as relevant and benefcial as possible
for registered entities. There was one national seminar during FY 2012, and staff from OCIE and the Division of Investment Management worked
together, utilizing feedback from chief compliance offcers, to ensure that this event covered key topics of interest. Feedback from this seminar
indicated that more than 84 percent of attendees completing evaluations agreed that the program would improve job performance.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Internal tracking
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PERFORMANCE INDICATOR (EFFICIENCY & CUSTOMER SERVICE) 1.1.1
Annual increases or decreases in the number of CCOs attending Compliance Outreach programs
Description: While the raw number of CCOs in the industry may vary depending on factors outside of the SEC’s control, the Commission seeks to
provide educational programs that are highly valued by attendees and their employers. Analyzing changes in participation levels will foster continued
improvement in both program content and outreach efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available N/A N/A N/A
Analysis: This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this performance
indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
Strategic Objective 1.2: The SEC promptly detects violations of the federal securities laws.
Goal Leader(s): Director, Offce of Compliance Inspections and Examinations
PERFORMANCE GOAL 1.2.1
Percentage of cause and special exams (sweeps) conducted as a result of risk assessment processes that includes multi-divisional input
Description: As SEC staff expands its use of risk-based methods and has more data available for risk analysis, staff anticipates that the percentage
volume of exams driven by a more robust risk assessment process will increase.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this
performance indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Analysis: Overall, the SEC focuses its resources on those frms and activities presenting the most risk to investors. Firms with higher risk
characteristics or profles may be identifed at any time based on any number of factors, including input from other offces and divisions within the
Commission. Examinations of high risk frms may be for cause, as part of a risk targeted examination sweep, or simply due to the presence of
certain higher risk characteristics.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
PERFORMANCE GOAL 1.2.2
Percentage of advisers deemed “high risk” examined during the year
Description: To conduct oversight of investment advisers, the staff conducts a risk-based program of examinations. Certain advisers are identifed
as high risk at the beginning of every fscal year, and then inspections are planned on a cyclical basis. The staff’s goal is to inspect high risk advisers
at least once every three years. Meeting this target will depend upon the SEC having suffcient resources to keep pace with growth in the industry
and the need for examiners to check compliance with evolving regulatory requirements.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 33% 33% 22% N/A N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process. The SEC does not have the ability to track this
performance indicator, and it will be under evaluation as part of the agency’s strategic planning process.
Analysis: OCIE does not have FY 2012 information for this measure. Given developments in the program, this measure is no longer tracked and
will not be measured in the future. That being said, it should be noted that the SEC focuses its resources on those frms and activities presenting
the most risk to investors. Firms with higher risk characteristics or profles may be identifed at any time based on any number of factors and will
be examined as quickly as possible.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
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PERFORMANCE GOAL 1.2.3
Percentage of investment advisers, investment companies, and broker-dealers examined during the year
Description: This measure indicates the number of registrants examined by the SEC or an SRO as a percentage of the total number of registrants.
This measure includes all types of examinations: risk priority examinations, cause inspections to follow up on tips and complaints, limited-scope
special inspections to probe emerging risk areas, oversight examinations of broker-dealers to test compliance and the quality of examinations by
the Financial Industry Regulatory Authority (FINRA).
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Investment advisers 13% 14% 10% 9% 8% 9% 8% 10% 14%
Investment companies 20% 23% 29% 10% 13% 13% 12% 14% 16%
Broker-dealers (exams by SEC
and SROs)
54% 57% 54% 44% 58% 55% 49% 50% 51%
Target: Investment Advisers – Not Met; Investment Companies – Not Met; Broker-Dealers – Not Met
Analysis: The staff continued to spend considerable time and effort during the year on improving its risk assessment and surveillance capabilities
to ensure that the program is spending its limited time and resources on those frms presenting the highest risk. As part of these efforts, the staff
spent signifcant resources on collecting and analyzing data about all registrants. The results of these efforts help to ensure that the program is
focusing on the highest risk entities and selecting appropriate candidates for onsite examination. Examinations of these high risk frms often take
signifcant time to complete and are frequently of large and complex entities. For example, the investment advisers examined in FY 2012 represent
more than 20 percent of the overall assets under management of currently registered advisers. In addition to these efforts, examination resources
have been reallocated during the last year to other areas intended to improve the long-term performance of the program, including industry outreach
initiatives and other program improvement efforts.
Plan for Improving Program Performance: During FY 2013 and FY 2014, the staff will continue to implement improved processes and procedures
that have been identifed as part of its ongoing self-improvement process. Over 50 signifcant improvement initiatives in the areas of strategy,
structure, people, processes, and technology have been completed in the last several years or are currently underway. The agency expects that
these improvements, which include further refnements to the exam program’s risk assessment processes, will lead to more effective coverage of
registered entities.
Responsible Division/Offcee: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
(IA, IC, and BD SEC data) and SRO Databases (BD SRO Data)
PERFORMANCE GOAL 1.2.4
Percentage of non-sweep and non-cause exams that are concluded within 120 days
Description: The staff conducts examinations each year of investment advisers, investment company complexes, transfer agents, and broker-
dealers. The staff strives to complete its examinations in the most effcient and effective manner. When possible, the staff attempts to conclude its
examinations within 120 days of the end of any feld work completed. However, some examinations require signifcantly more time so that potential
violations are fully reviewed. To ensure that time pressure does not impair quality, the target for this benchmark should not be set too high.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available 48% 53% 55% N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process.
Analysis: While the program strives to complete examinations as quickly and effciently as possible, there is no longer a focus on this specifc
deadline. Rather, the program is primarily concerned with completing examinations within OCIE’s statutory deadline. In this regard, 100 percent
of the staff’s examinations in FY 2012 have been completed within the statutory deadlines outlined in the Dodd-Frank Act.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS)
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PERFORMANCE INDICATOR (CONTEXTUAL) 1.2.1
Percentage of exams that identify defciencies, and the percentage that result in a “signifcant fnding”
Description: Examiners fnd a wide range of defciencies during examinations. Some of the defciencies are more technical in nature, such as failing
to include all information that is required to be in a record. However, other defciencies may cause harm to customers or clients of a frm, have a
high potential to cause harm, or refect recidivist misconduct. The latter defciencies are among those categorized as “signifcant.” This measure
identifes the percentage of exams by registrant category that identifed defciencies, and that resulted in signifcant defciency fndings.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage that identify defciencies Prior-year data not available 72% 82% 80%
Percentage that result in a
“signifcant fnding”
Prior-year data not available 42% 42% 42%
Analysis: In FY 2012, examiners continued to use risk assessment techniques to focus examinations on those areas most likely to reveal signifcant
issues. Overall, the majority of examinations resulted in the identifcation of defciencies, and more than 40 percent revealed signifcant fndings.
While it is diffcult to predict these numbers in future years, they do refect an effective risk-focused approach that is identifying issues in order to
protect investors, prevent fraud and improve compliance.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: Super Tracking and Reporting System (STARS) and Tracking and Reporting Exam National Documentation System (TRENDS)
PERFORMANCE INDICATOR (OUTPUT) 1.2.2
Number of cause exams that result from tips
Description: Analysis of a tip can support the request for a cause exam. This indicator would identify the volume of SEC cause exams that result
from tips collected through outreach efforts.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of cause exams Prior-year data not available N/A N/A N/A
Analysis: The data for this metric was not available for FY 2012; however, it will be tracked in future years. More broadly, the staff conducted
more than 525 cause examinations of investment advisers, broker-dealers, investment company complexes, and transfer agents during FY 2012.
Many of these examinations were conducted due to the receipt of critical tips by the Commission.
Responsible Division/Offce: Offce of Compliance Inspections and Examinations
Data Source: N/A
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Strategic Objective 1.3: The SEC prosecutes violations of federal securities laws and holds violators accountable.
Goal Leader(s): Director, Division of Enforcement; Director, Offce of International Affairs
PERFORMANCE GOAL 1.3.1
Percentage of enforcement actions resolved
Description: This measure assesses the rate at which the SEC’s fled enforcement actions are resolved. Specifcally, the measure identifes, as
to all parties to enforcement actions that were resolved in the fscal year, the percentage against whom the Commission obtained a judgment or
order entered on consent, a default judgment, a judgment of liability on one or more charges, and/or the imposition of monetary or other relief.
The Division is currently assessing the value of this metric, and evaluating how to incorporate qualitative considerations of the results of the Division’s
enforcement actions.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 92% 92% 92% 92% 93% 92% 89% 92% 92%
Target: Not Met
Analysis: The Enforcement Division is in the process of developing a new metric that will focus on qualitative ratings of fled Enforcement actions.
This metric will measure the output of the Division from a qualitative point of view, and will complement existing metrics designed to capture the
level of investigative activity and the number and timeliness of enforcement actions.
Plan for Improving Program Performance: The Division has implemented controls and strategies to resolve actions on a favorable basis, while at the
same time, it will not be reluctant to fle precedent setting or complex matters that are programmatically important, even if success is not assured.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE GOAL 1.3.2
Percentage of frst enforcement actions fled within two years
Description: This measure concerns the pace of investigations that lead to the fling of enforcement actions. Specifcally, this measure captures
the rate at which the frst enforcement actions arising out of an investigation was fled within two years of the opening of the investigation. If the
investigation was preceded by a matter under inquiry, the measure draws on the date of the opening of the matter under inquiry. In conducting
investigations, the Enforcement program continually strives to balance the need for complete, effective and fair investigations with the need to fle
enforcement actions in as timely a manner as possible.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage 54% 62% 70% 67% 61% 64% 63% 65% 65%
Target: Not Met
Analysis: Filing enforcement actions in a timely manner is an important measure of the Division’s effectiveness. Timely actions have an increased
deterrent impact; conversely, unnecessarily delayed periods between conduct and sanctions can weaken deterrent effect and undermine the
public’s faith in the effectiveness of law enforcement. Of course, timeliness of actions will be negatively impacted by cases that are complex and
large, which can take extended periods of time to develop successfully. In the last three years, the Division has focused its efforts on pursuing
such cases. For example, a signifcant priority for the Division has been to investigate and hold accountable frms and individuals who committed
securities law violations linked to the fnancial crisis. Many of these cases involved complex fnancial products, market transactions and conduct that
can be diffcult to detect and take longer to investigate. In addition, the Division is focusing on emerging threats involving new trading technologies
such as high-frequency and algorithmic trading, large volume trading, as well as systemic insider trading and manipulation schemes.
Plan for Improving Program Performance: Recognizing the challenges of bringing complex cases in a timely manner, the Division has streamlined its
processes to enable the staff to bring cases more quickly. In addition, the Division has developed and implemented metrics designed to capture the
nature and level of investigative activity, the number and timeliness of enforcement actions, as well as Division overall effciency and performance.
The Division will continue to utilize these and other tools in evaluating and improving its effciency and timeliness.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE GOAL 1.3.3
Percentage of debts where either a payment has been made or a collection activity has been
initiated within 180 days of the due date of the debt
Description: The SEC can seek a wide range of remedies for failure to comply with the securities laws. These remedies include civil monetary
penalties and disgorgement. When the remedies are imposed by the Commission or the federal district court, payments must be made by a certain
date. This measure identifes the percentage of debts where debtors have made payments or the SEC has initiated a collection activity within 180
days of the due date. Such collection activities include, among other things, demand letters, negotiation of payment plans, enforcing the payment
of the debt through the courts, or other judicial remedies.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage N/A 88% 90% 86% 91% 92% 92% 92% 92%
Target: Met
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. This measure is reported on
an annual basis through combined efforts of the Offce of Information Technology, Offce of Financial Management and Division of Enforcement.
Responsible Division/Offce: Division of Enforcement
Data Source: Case Activity Tracking System, Phoenix, relevant case fles
PERFORMANCE GOAL 1.3.4
Percentage of Fair Fund and disgorgement fund plans that have distributed 80 percent of the available
funds for distribution within twenty four (24) months of the approval of the distribution plan
Description: In addition to other types of relief, the Commission may seek orders requiring parties to disgorge any money obtained through wrongdoing.
The Commission also is empowered to seek civil penalties for violations of the securities laws. Where appropriate, the Commission has sought to
return disgorged funds to harmed investors and, as a result of the Fair Funds provision of the Sarbanes-Oxley Act, to combine amounts paid as
penalties with disgorged funds, or to create a Fair Fund from penalties only, to reduce losses to injured parties in order to maximize funds available
for distribution. This measure identifes the percentage of distribution plans that reached the majority of funds distributed milestone during the
fscal year and within twenty four (24) months of the approval of the distribution plan. The distribution plan includes the timeline and procedures
required to return the funds to injured investors. This refects Commission-wide efforts to implement plans returning money to investors quickly.
Any funds not returned to investors are sent to the U.S. Treasury or the Investor Protection Fund established pursuant to Section 21F(g) of the
Securities Exchange Act of 1934. Neither disgorgement nor penalties are used for the Commission’s own expenses.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available 72% 80% 80% 80%
Target: Exceeded – This measure was developed in FY 2010 during the strategic planning process, and it will be re-considered as part of the
SEC’s Strategic Plan update.
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. FY 2012 reporting refects these
system upgrades and improved data elements for Distribution measures.
Responsible Division/Offce: Division of Enforcement
Data Source: Distributions Management System
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PERFORMANCE GOAL 1.3.5
Total amount distributed within the fscal year, and the number of Fair Funds from which those distributions came
Description: In its enforcement actions, the Commission may seek to return funds to harmed investors through disgorgement of ill-gotten gains or
through the Fair Funds provision of the Sarbanes-Oxley Act. This provision permits the Commission to combine amounts paid as penalties with
disgorged funds, or to create a Fair Fund from penalties only, to reduce losses to injured parties. This refects the Commission’s efforts to return
funds to injured investors. This measure identifes the total amount distributed within the fscal year, and the number of fair funds from which those
distributions came. Due to the variation in reporting timelines established for each individual distribution, reported amounts are based on the
agency’s best available information. Reported amounts do not include those funds distributed through receiverships. Any funds not returned to
investors are sent to the U.S. Treasury or the Investor Protection Fund established pursuant to Section 21F(g) of the Securities Exchange Act of
1934. Neither disgorgement nor penalties are used for the Commission’s own expenses.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Amount distributed (in millions) Prior-year data not available 457 815 TBD TBD
Number of Fair Funds Prior-year data not available 63 31 TBD TBD
Target: Amount Distributed – Exceeded; Number of Fair Funds – Not Met
Analysis: During FY 2011, the collection and distribution of disgorgement and penalties functions were studied for effciency and effectiveness.
Based on the fndings of this study, a business process re-engineering effort was launched. The organizations supporting these functions have
been reorganized into the Offce of Collections and the Offce of Distributions within the Division of Enforcement, and the Enforcement Audit and
Data Integrity Branch within the Offce of Financial Management. Disgorgement and penalties processes are currently being streamlined and
documented to ensure transparency, effciency, and more extensive data management and reporting capabilities. FY 2012 reporting refects these
system upgrades and improved data elements for Distribution measures.
Plan for Improving Program Performance: The Commission is authorized to establish Fair Funds to return recovered monies, in the form of disgorgement
and penalties, back to harmed investors. The Commission may establish Fair Funds when suffcient recovered monies are available, and where it
is otherwise deemed appropriate. The Commission is authorized to establish Fair Funds to return recovered monies, in the form of disgorgement
and penalties, back to harmed investors. The Commission may establish Fair Funds when suffcient recovered monies are available, and where
it is otherwise deemed appropriate.
Responsible Division/Offce: Division of Enforcement
Data Source: Distributions Management System
PERFORMANCE GOAL 1.3.6
Average months between opening a matter under inquiry or an investigation and commencing an enforcement action
Description: This measure concerns the pace of investigations that lead to the fling of enforcement actions. Specifcally, this measure captures
average number months between the opening of an investigation and the fling of the frst enforcement action arising out of that investigation. If the
investigation was preceded by a matter under inquiry, the measure draws on the date of opening of the matter inquiry. In conducting investigations,
the enforcement program continually strives to balance the need for complete, effective, and fair investigation with the need to fle enforcement
actions in as timely a manner as possible.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Months Prior-year data not available 22 21 21 20 20
Target: Met
Analysis: Filing enforcement actions in a timely manner is an important measure of the Division’s effectiveness. Timely actions have an increased
deterrent impact; conversely, unnecessarily delayed periods between conduct and sanctions can weaken deterrent effect and undermine the
public’s faith in the effectiveness of law enforcement. Of course, timeliness of actions will be negatively impacted by cases that are complex and
large, which can take extended time to develop successfully. In the last two years, the Division has focused its efforts on pursuing such cases.
For example, a signifcant priority for the Division has been to investigate and hold accountable frms and individuals who committed securities law
violations linked to the fnancial crisis. Many of these cases involved complex fnancial products, market transactions and conduct that can be
diffcult to detect and take longer to investigate. In addition, the Division is focusing on emerging threats involving new trading technologies such
as high-frequency and algorithmic trading, large volume trading, as well as systemic insider trading and manipulation schemes. Recognizing the
challenges of bringing complex cases in a timely manner, the Division has streamlined its processes to enable the staff to bring cases more quickly.
In addition, the Division has developed and implemented metrics designed to capture the nature and level of investigative activity, the number and
timeliness of enforcement actions, as well as Division overall effciency and performance. The Division will continue to utilize these and other tools
in evaluating and improving its effciency and timeliness.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (CONTEXTUAL) 1.3.1
Percentage of fled enforcement actions refecting characteristics that present enhanced risk to investors and markets,
as measured by the nature of the investigation, conduct, parties and impact
Description: This measure assesses the quality of the cases fled by the Enforcement Division. The measure focuses on cases fled by the SEC
that involve factors refecting enhanced risk to investors and markets. Such cases may involve: (i) those identifed through risk analytics and cross-
disciplinary initiatives to reveal diffcult-to-detect or early stage misconduct, thus minimizing investor loss and preventing the spread of unlawful
conduct and practices; (ii) particularly egregious or widespread misconduct and investor harm; (iii) vulnerable victims; (iv) high degree of scienter;
(v) involvement of individuals occupying substantial positions of authority, or having fduciary obligations or other special responsibilities to investors;
(vi) involvement of recidivists; (vii) high amount of investor loss prevented; (viii) misconduct that is diffcult to detect due to the complexity of products,
transactions, and practices; (ix) use of innovative investigative or analytical techniques; (x) effective coordination with other law enforcement partners;
and/or (xi) whether the matter involves markets, transactions or practices identifed as an enforcement priority, or that advances the programmatic
priorities of other SEC Divisions or Offces.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available N/A
Analysis: The Division is currently unable to report on this indicator. This metric, which is new this fscal year, captures the Division’s qualitative
ratings of fled enforcement actions. To date, the Division has defned the criteria by which it will qualitatively rate enforcement actions and
implemented a preliminary process to make those ratings. Beginning in May 2012, the Division initiated a pilot program in which qualitative ratings
were assigned to enforcement actions fled by two regional offces and one Home Offce SO group. The Division is planning on expanding the pilot
to include additional regional and home offce SO groups. The pilot has allowed the Division to analyze, revise, and improve the processes that
were implemented as part of the qualitative metrics initiative. The Division is presently assessing and devising processes that would allow for full
implementation of the initiative to all enforcement groups.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (OUTPUT) 1.3.2
Number of investigations or inquiries originating from a tip or complaint
Description: Analysis of a tip or complaint can result in the need for further enforcement investigation. The indicator identifes the volume of SEC
investigations that result from tips and complaints received by the SEC.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of investigations Prior-year data not available 303 349 296
Analysis: The results of this indicator are based on investigations opened during the fscal year that were generated from a tip or complaint.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (OUTPUT) 1.3.3
SEC investigations in which requests for access to information were granted by the SEC to other authorities,
such as SROs or other state, federal, and foreign enforcement authorities
Description: The SEC works closely with other regulators and authorities. This measure identifes the number of investigations in which the SEC
granted one or more authorities access to information concerning an investigation during the fscal year. This may include requests for access to
SEC investigative fles concerning investigations that the SEC continues to pursue, as well as those in which the SEC has completed its investigation.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of investigations Prior-year data not available 492 586 515
Analysis: In circumstances where an authority may have an interest in information obtained by the SEC, the SEC may grant the authority access to
that information, pursuant to Section 24(c) of the Securities Exchange Act and Rule 24c-1. Results are based on investigations in which requests
for access to information were granted to authorities during the fscal year.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (OUTPUT) 1.3.4
Percent of enforcement actions fled that arose out of national priority investigations
Description: The Division of Enforcement conducts many enforcement actions each year that can be characterized as high impact and of national
priority. High impact or national priority investigations include those investigations which are signifcant for one or more of the following reasons – the
matter: (i) presents an opportunity to send a particularly strong and effective message of deterrence, including with respect to markets, products
and transactions that are newly developing, or that are long established but which by their nature present limited opportunities to detect wrongdoing
and thus to deter misconduct; (ii) involves particularly egregious or extensive misconduct; (iii) involves potentially widespread and extensive harm to
investors; (iv) involves misconduct by persons occupying positions of substantial authority or responsibility, or who owe fduciary or other enhanced
duties and obligations to a broad group of investors or others; (v) involves potential wrongdoing as prohibited under newly-enacted legislation
or regulatory rules; (vi) concerns potential misconduct that occurred in connection with products, markets, transactions or practices that pose
particularly signifcant risks for investors or a systemically important sector of the market; (vii) involves a substantial number of potential victims and/
or particularly vulnerable victims; (viii) involves products, markets, transactions or practices that the Enforcement Division has identifed as priority
areas (i.e., conduct relating to the fnancial crisis; fraud in connection with mortgage-related securities; fnancial fraud involving public companies
whose stock is widely held; misconduct by investment advisers; and matters involving priorities established by particular regional offces or the
specialized units); and/or (ix) provides an opportunity to pursue priority interests shared by other law enforcement agencies on a coordinated basis.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available 10% 20%
Analysis: A matter can be deemed high impact for a variety of reasons, as outlined above. The best proxy for the cases with the highest impact
are the Division’s national priority investigations. The Enforcement program has focused efforts and resources on such investigations and cases,
and as a result has signifcantly increased the proportion of all enforcement actions in these areas.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
PERFORMANCE INDICATOR (CONTEXTUAL) 1.3.5
Criminal actions related to conduct under investigation by the SEC
Description: In some instances, conduct may involve both civil and criminal violations and may be investigated by both the SEC and the criminal
authorities. This measure identifes the number of criminal actions that are related to conduct under investigation by the SEC.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of criminal investigations Prior-year data not available 139 134 126
Analysis: This indicator identifes the number of actions fled by criminal authorities that bear some relation to conduct under investigation by the
SEC. To determine the number of criminal investigations related to SEC investigations, a query is run in the SEC’s Case Management System (the
HUB). This query counts the number of SEC matters in which a related criminal action was initiated.
Responsible Division/Offce: Division of Enforcement
Data Source: HUB case management and tracking system for the Division of Enforcement
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PERFORMANCE INDICATOR (OUTPUT) 1.3.6
Disgorgement and penalties ordered and the amounts collected
Description: In addition to other types of relief, the SEC may seek orders requiring parties to disgorge any money obtained through wrongdoing.
The SEC is also empowered to seek civil penalties for violations of the securities laws. In some cases, the SEC will seek to obtain large monetary
sanctions even in instances where the prospects of collecting on a judgment are slight. The rationale for seeking monetary relief in these circumstances
is that such relief, even when likely uncollectible, might become collectible in the future based on the defendant’s changed circumstances, and
also because such relief can serve to deter others from violating the securities laws. Where appropriate, the SEC has sought to return disgorged
funds to harmed investors. Funds not returned to investors are sent to the Treasury or the Investor Protection Fund established pursuant to Section
21F(g) of the Securities Exchange Act of 1934. This indicator lists disgorgement and penalties ordered as a result of SEC cases and the amounts
collected in those actions. This indicator could increase or decrease based on various factors.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Ordered amounts (in millions) 1,601 1,030 2,442 2,846 2,806 3,104
Collected amounts (in millions) 979 521 1,694 1,775 1,281 1,048
Analysis: Collected amounts include payments through the end of the year being reported. Amounts are recognized in the fscal year during which
the debts were ordered rather than the fscal year in which they were paid.
Responsible Division/Offce: Division of Enforcement
Data Source: Phoenix Report – “Total Amounts of Disgorgement, ITSA, Remedies Act Penalties and Undertakings Ordered and Paid”
PERFORMANCE INDICATOR (OUTPUT) 1.3.7
Requests from foreign authorities for SEC assistance and SEC requests for assistance from foreign authorities
Description: Each year, the SEC makes hundreds of requests for enforcement assistance to foreign regulators, while responding to hundreds of
such requests from other nations. To facilitate this type of assistance, and encourage other countries to enact laws necessary to allow regulators to
cooperate with their foreign counterparts, the SEC has entered into bilateral information sharing arrangements, as well as the Multilateral Memorandum
of Understanding, an information-sharing arrangement negotiated through the International Organization of Securities Commissions (IOSCO).
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Number of requests from foreign
authorities
454 414 408 457 492 450
Number of SEC requests 556 594 774 605 772 718
Analysis: In FY 2012, the SEC experienced a decline in the number of requests to and from foreign authorities as compared to the previous fscal
year. Nonetheless, the SEC’s FY 2012 requests to foreign authorities were generally more complex than in FY 2011 and often asked for information
for litigation purposes including requests for dispositions. Likewise, FY 2012 requests from foreign authorities were more complicated and often
asked for the SEC’s assistance to obtain witnesses in the United States.
Responsible Division/Offce: Offce of International Affairs
Data Source: International Program Oversight Database and Business Objects reports
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Strategic Goal 2: Establish an Effective Regulatory Environment
The Commission believes that its rules and regulations
should be drafted to enable market participants to clearly
understand their obligations under the Federal securities
laws and to conduct their activities in compliance with law.
Just as the securities laws require that disclosures be clear
and precise, the Commission aims to promulgate rules that
are clearly written, easily understood, and tailored toward
specifc ends. In addition, the agency recognizes that
regular reviews of Commission regulations and its rulemaking
processes are necessary to confrm that intended results are
being achieved.
In FY 2012, approximately $113.9 million and 387 full-time
equivalents (FTEs) were directed at achieving results in Goal 2.
Of 16 performance targets, the agency met or exceeded 9,
did not meet 3, and did not have data to report on 4. During
FY 2014, the SEC plans to pursue a vigorous investor-focused
rulemaking agenda that will help protect investors and ensure
that markets operate fairly. Under the recently enacted Dodd-
Frank Act the agency will continue to implement a more effective
regulatory structure. In FY 2014, the agency is requesting a
total of $176.5 million and 507 FTEs toward achieving results
in establishing an effective regulatory environment.
Spotlight: FY 2012 Performance Achievements
In FY 2012, the SEC continued to pursue a robust, investor-
focused rulemaking agenda. Propelled in part by the
demands of the Dodd-Frank Act and the recognition that
investor protection regulation needs to refect the reality of
today’s modern technology-driven global market structure,
the Commission acted, and continues to act, aggressively
on a number of fronts. The Commission’s rulemaking has
been supported by detailed economic analysis provided by
the Division of Risk, Strategy, and Financial Innovation (RSFI).
RSFI has provided guidance that provides a road map for
the rulemaking divisions and offces, listing concepts that
the analysis should cover and helping ensure that economic
analysis is integrated throughout the entire rule development
and rule writing process.
The SEC devotes a large share of resources responding to
no-action letters, and interpretive and other requests from
regulated entities, public companies, and other outside
parties. The agency is committed to speeding the response
to such requests. In FY 2012, the Divisions of Trading and
Markets (TM), Corporation Finance (CF), and Investment
Management (IM) met or exceeded their response rate
targets for Performance Goal 2.3.1. In particular, IM
processed 100 percent of initial comments on no-action
letters, interpretive requests and exemptive applications
within a fscal year, and CF continued to surpass its targets
to complete initial comments on no-action letters, interpretive
requests and shareholder proposals. TM also continued to
exceed its target for no-action letters, exemptive applications,
and written interpretive requests.
In addition to rulemaking initiatives in FY 2012, the SEC
worked effciently to review SRO rule proposals and closed
75 percent of the flings within 45 days (Performance Goal
2.3.3). Although the SEC did not meet the standard of
reviewing 80 percent of rule flings within 45 days, it did meet
all of the Dodd-Frank statutory timeframes 99 percent of the
time for all rule flings.
TM continued to perform inspections of the automated
trading and clearance processes of markets and clearing
organizations. In FY 2012, 98 percent of transaction dollars
was settled on time (Performance Goal 2.2.1), down slightly
from prior years. Staff from TM maintain regular supervisory
contacts with personnel at relevant clearing agencies to ensure
operational and other issues that may arise are promptly
identifed and addressed. TM expanded its resources devoted
to clearance and settlement matters over the past year to
prepare for the increased focus on this area contemplated by
the Dodd-Frank Act.
The SEC also monitors the industry’s efforts to provide
stable trading platforms. The agency continued to assess
the resiliency of market systems in FY 2012, reporting that
market outages were corrected well above targeted time-
frames (Performance Goal 2.2.3).
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Budgeting for the Future (FY 2014)
In FY 2014, SEC staff will work towards completion of
Dodd-Frank Act rulemaking, flling regulatory gaps that
were highlighted by the fnancial crisis and that posed
risks for both individual and institutional investors. Staff will
also focus on further implementation of the Jumpstart Our
Business Startups (JOBS) Act, designed by Congress to give
entrepreneurs greater access to early-stage capital.
Investor protection, market stability, and capital formation
remain central to the SEC’s rulemaking agenda. TM will work
to develop measures to improve the design, deployment,
integrity, and operation of automated systems controlled by
exchanges, other market centers, and market participants.
TM will also, in coordination with other divisions and offces,
work to improve its ability to quickly review and analyze equity
and equity options market data.
The Dodd-Frank Act rulemaking process – informed by
an unprecedented level of communication between the
Commission and market participants of every type – continues
to progress. The result will be a system that is more transparent,
stable and responsive to investors. In FY 2013 and FY 2014,
the SEC expects to continue to implement the comprehensive
regulatory framework for over-the-counter derivatives, and
work to fnalize rules regarding improvements to the regulation
of credit rating agencies, as well as the removal of certain
credit rating references in Commission rules.
Strategic Objective 2.1: The SEC establishes and maintains a regulatory environment that promotes high quality disclosure,
fnancial reporting, and governance, and that prevents abusive practices by registrants, fnancial intermediaries, and
other market participants.
Goal Leader(s): Director, Offce of Investor Education and Advocacy; Director, Offce of International Affairs; Director, Division of
Risk, Strategy, and Financial Innovation
PERFORMANCE GOAL 2.1.1
Survey on quality of disclosure
Description: Under this metric, the SEC plans to conduct surveys of individual investors to elicit feedback on the quality of disclosures and the
Commission’s disclosure requirements. The SEC would track whether the percentage of respondents answering positively improves over time.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage of positive response Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: This performance measure identifes the usability of specifc disclosure documents for the individual investor. Reportable results are not
currently available, and OIEA is exploring options for providing data for this metric.
Responsible Division/Offce: Offce of Investor Education and Advocacy
Data Source: N/A
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PERFORMANCE GOAL 2.1.2
Number of consultations; joint events, reports, or initiatives; and joint examinations and other mutual
supervisory efforts with SROs and other federal, state, and non-U.S. regulators
Description: This metric gauges how much the SEC is coordinating with other fnancial regulatory agencies within a given fscal year. Also, as
securities markets around the world become increasingly integrated and globalized, it is essential that the SEC work frequently and effectively with
its partner regulators both in the U.S. and abroad.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: The SEC will continue to coordinate efforts and consult with other fnancial regulatory agencies in future years when possible. The staff will
leverage existing relationships and look to build additional alliances in order to ensure that regulation for registered entities is as effective as possible.
Responsible Division/Offce: Several SEC Offces
Data Source: N/A
PERFORMANCE GOAL 2.1.3
Number of non-U.S. regulators trained
Description: This metric shows the reach of the SEC’s technical assistance programs for regulators around the world. The SEC conducts these
training sessions to assist countries in developing and maintaining robust protections for investors and promote cross-border enforcement and
supervisory assistance.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Number of non-U.S. regulators Prior-year data not available 1,997 1,765 1,785 1,355 1,370 1,385
Target: Not Met – This measure was developed in FY 2010 during the strategic planning process and prior-year data is not available.
Analysis: The number of foreign regulators trained may vary from year to year and is impacted by the realignment of priorities due to resource
limitations.
Plan for Improving Program Performance: OIA will conduct a variety of international technical assistance training programs in FY 2014. The training will
include three annual institutes at SEC headquarters, including the Institute for Securities Market Development, the Institute for Securities Enforcement,
and the Institute for Compliance, Examination and Inspection of Market Participants. OIA also will offer regional and bilateral training programs in
Asia, Africa, Eastern Europe, the Middle East and Latin America, which will promote cross-border supervisory and enforcement assistance and
implementing laws and regulations that refect high regulatory standards.
Responsible Division/Offce: Offce of International Affairs
Data Source: International Program Oversight Database and Business Objects reports
PERFORMANCE INDICATOR (CONTEXTUAL) 2.1.1
Average cost of capital in U.S. relative to the rest of the world
Description: Countries’ cost of capital can vary according to their protections for investors, the strength of their disclosure regimes, and the presence
of fair, orderly, and effcient markets, among other factors. Therefore, although this metric is affected by other economic factors, it can provide some
indication of the quality of securities regulation in a given country.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average cost of capital Prior-year data not available 10.99% 10.67% 8.96%
Analysis: The cost of capital as estimated by the World CAPM model estimates that the cost of capital in the United States declined from the
2011 level of 10.67 percent to 8.96 percent in 2012, which results in the United States having a relative ranking of number 7 out of 43 countries
included in the study.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Morningstar International Cost of Capital Report (Annual)
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Strategic Objective 2.2: The U.S. capital markets operate in a fair, effcient, transparent, and competitive manner,
fostering capital formation and useful innovation.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Risk, Strategy, and Financial Innovation
PERFORMANCE GOAL 2.2.1
Percentage of transaction dollars settled on time each year
Description: This metric measures the effciency of the U.S. clearance and settlement system for equity securities.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage N/A 99% 99% 99% 99% 99% 98% 98% 98%
Target: Not Met
Analysis: The U.S. clearance and settlement system for equity securities continues to perform at a high rate of timely settlement. Staff from the
Division of Trading and Markets maintains regular supervisory contacts with personnel at relevant clearing agencies to ensure operational and other
issues that may arise are promptly identifed and addressed.
Plan for Improving Program Performance: The Division of Trading and Markets has expanded its resources devoted to clearance and settlement
matters over the past year to prepare for the increased focus on the area contemplated by the Dodd-Frank Act.
Responsible Division/Offce: Division of Trading and Markets
Data Source: National Securities Clearing Corporation
PERFORMANCE GOAL 2.2.2
Average institutional transaction costs for exchange listed stocks on a monthly basis
Description: This performance metric captures the actual cost of trading in large (institutional size) transactions.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Average transaction costs Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: This metric is subjective to a multitude of assumptions that are intrinsic to each institutional frm and as such, institutional transaction
costs vary from frm to frm and trade by trade.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: N/A
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PERFORMANCE GOAL 2.2.3
Percentage of market outages at SROs and electronic communications networks (ECNs) that are corrected within targeted timeframes
Description: Market outages refect problems in the systems underlying the securities markets that could have an adverse effect on the markets’
ability to function as required. The SEC assesses the reliability and resiliency of these systems to minimize the number and duration of outages.
This metric gauges how quickly outages are resolved, so that market activity can resume.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Within 2 hours 81% 84% 87% 74% 88% 60% 71% 60% 60%
Within 4 hours 91% 96% 98% 85% 94% 75% 89% 75% 75%
Within 24 hours 100% 100% 98% 100% 100% 96% 100% 96% 96%
Target: Within 2 hours – Exceeded; Within 4 hours – Exceeded; Within 24 hours – Exceeded
Analysis: The SROs have implemented enhancements to their systems incident handling procedures, and have placed greater emphasis on
100 percent uptime during the trading day hours of operation. The SEC has continued to work with critical SROs on improving their continuity
of operations, availability of critical production systems, and recovery time objectives. SROs also have shown greater system availability and the
ability to open even during disaster events, such as hurricanes, earthquakes and power outages.
Responsible Division/Offce: Division of Trading and Markets
Data Source: ECN outage data is derived from SROs
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.1
Average quoted spread for exchange listed stocks on a monthly basis
Description: This indicator gauges the hypothetical cost of trading in small amounts at the quoted markets, based solely on published quotations.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average quoted spread Prior-year data not available 1.70 cents 2.52 cents 1.76 cents 1.84 cents
Analysis: The average quoted spread for FY 2012 is 1.84 cents, indicating that the market is exhibiting normal conditions and suffered no large
abnormal quoted spreads.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.2
Average effective spread for exchange listed stocks on a monthly basis
Description: This indicator captures the cost of trading in small amounts based on actual trade prices and the quotes at the times of those trades.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average effective spread Prior-year data not available 2.19 cents 2.65 cents 1.72 cents 1.68 cents
Analysis: The average effective spread for FY 2012 is 1.68 cents, which remains considerably lower than that seen in prior years. This is indicative
of market and marketable limit orders receiving price improvement.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
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PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.3
Speed of execution
Description: This indicator gauges how quickly transactions are executed in the U.S. securities markets.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Speed of execution Prior-year data not available 1.59 seconds 1.77 seconds 1.02 seconds 0.9 seconds
Analysis: The speed of execution for FY 2012 is 0.9 seconds, continuing a trend of faster execution speeds on retail orders.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.4
Average quoted size of exchange listed stocks on a monthly basis
Description: This indicator measures the amount of liquidity visible to the market at the displayed quotes.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average quoted size Prior-year data not available 606 shares 687 shares 606 shares 588 shares
Analysis: Average quoted size of exchange listed stocks on a monthly basis has decreased in FY 2012, commensurate with a decrease in the
average quoted spread for exchange listed stocks compared to the prior year.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Thompson Transaction Analytics
PERFORMANCE INDICATOR (CONTEXTUAL) 2.2.5
Average daily volatility of exchange listed stocks on a monthly basis
Description: This statistic gauges short term price changes, which are an indicator of the risk of holding stock.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Average daily volatility in the
S&P 500
Prior-year data
not available
1.60% 2.69% 1.18% 1.26% 1.08%
Analysis: The average daily volatility for exchange listed stocks was 1.08 percent for FY 2012. Market volatility is impacted by myriad factors so it
is diffcult to ascertain with certainty why changes (particularly small changes) in volatility occur.
Responsible Division/Offce: Division of Risk, Strategy, and Financial Innovation
Data Source: Bloomberg
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Strategic Objective 2.3: The SEC adopts and administers rules and regulations that enable market participants to
understand clearly their obligation under the securities laws.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Investment Management; Director, Division of
Corporation Finance
PERFORMANCE GOAL 2.3.1
Length of time to respond to written requests for no-action letters (NAL), exemptive applications, and written interpretive requests
Description: The SEC staff responds to requests for guidance from individuals and companies about specifc provisions of the federal securities
laws. These queries can ask for proper interpretations of the securities laws or regulations, or for assurances that no enforcement action will be
taken in certain circumstances. The staff also reviews applications for exemptions from the securities laws. Written responses to such requests for
guidance, when provided, generally are publicly available, as are applications and related notices and orders, when issued. This measure gauges
whether the Divisions of Trading and Markets, Investment Management, and Corporation Finance are issuing initial comments on these requests
on a timely basis.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Trading and Markets: No-action letters, exemptive applications, and written interpretive requests (combined fgure)
Percentage 91% 63% 70% 91% 98.5% 85% 89% 85% 85%
Target: Exceeded
Analysis: For FY 2012, the Division of Trading and Markets exceeded expectations for timely responses to written requests. The Division responded
to written inquiries within the required timeframes 89 percent of the time. Responses to these inquiries generally promote an effective regulatory
environment by clarifying ambiguity, which permit private entities to more effciently use their compliance resources.
Responsible Division/Offce: Division of Trading and Markets
Data Source: TM Offce of Chief Counsel Electronic Log
Investment Management
No-action letters and interpretive
requests
91% 98% 100% 100% 100% 90% 100% 90% 90%
Exemptive applications N/A 81% 95% 100% 100% 80% 100% 80% 80%
Target: No-action letters – Exceeded; Exemptive applications – Exceeded
Analysis: For the fourth year in a row, IM processed 100 percent of initial comments on no-action letters within three weeks, surpassing its target
of 90 percent within three weeks. IM has been able to achieve this level of success because providing initial comments within the targeted time
frame has been a continuing priority. Given prior data and trends, the target of 90 percent within three weeks is reasonable and appropriate. For
the fourth year in a row, IM exceeded its target for initial comments on exemptive applications. The Division considered but decided against raising
its target percentage because the ability to meet the target is dependent on factors that could change materially during any fscal year, such as the
total number of applications fled, concentration of flings at any particular time period (surges), and the types and complexity of the applications fled.
Responsible Division/Offce: Division of Investment Management
Data Source: OCC Letter Log, OICR and OIP Applications Tracking Systems (Access), Excel spreadsheet
Corporation Finance
No-action letters and interpretive
requests
66% 66% 85% 97% 97% 90% 98% 90% 90%
Shareholder proposals 100% 100% 100% 100% 100% 100% 100% 100% 100%
Target: No-action letters – Exceeded; Shareholder proposals – Met
Analysis: CF surpassed its FY 2012 target by completing 98 percent of initial comments on no-action letters within 30 days. CF continues to
achieve its target of issuing comments on 100 percent of proposals before the company’s proxy fling date.
Responsible Division/Offce: Division of Corporation Finance
Data Source: Division No-Action Letter database and Division Shareholder Proposal database
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PERFORMANCE GOAL 2.3.2
Survey on whether SEC rules and regulations are clearly understandable
Description: The SEC aims to promote a regulatory environment in which market participants clearly understand their obligations. Through this
metric, the SEC intends to survey market participants to determine whether they believe the Commission’s regulatory requirements are clear.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Percentage Prior-year data not available N/A N/A N/A TBD TBD
Target: N/A – This measure was developed in FY 2010 during the strategic planning process, and it is being re-considered as part of the SEC’s
Strategic Plan update.
Analysis: There are no methods or procedures in place to capture data for this measure. TM will review the measure and determine a timeframe
for establishing a methodology during FY 2013.
Responsible Division/Offce: Division of Trading and Markets
Data Source: N/A
PERFORMANCE GOAL 2.3.3
Time to complete SEC review of SRO rules that are subject to SEC approval
Description: The SEC reviews SRO rule proposals for consistency with the Exchange Act standards of investor protection, fair and orderly operation
of the markets and market structure, as well as other statutory requirements. This metric gauges how long it takes the SEC to approve a fling after
publication of notice of the proposal for comment.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Within 35 days Prior-year data not available 73% 0% 0% 0% 0% 0%
Within 45 days Prior-year data not available 99% 82% 80% 75% 70% 70%
Target: Within 35 days – Met; Within 45 days – Not Met
Analysis: During FY 2012, the SEC approved or disapproved 308 SRO rule changes fled pursuant to Section 19(b)(2) of the Exchange Act, which
represents a 40 percent increase over the prior fscal year. Although the SEC did not meet the 45-day standard for reviewing rule flings, it did
meet all of the Dodd-Frank statutory timeframes 99 percent of the time. One fling was covered by the pre-Dodd-Frank standard of 35 days from
the date of publication of notice in the Federal Register and fnal approval, but did not meet the measure. While the time to act on flings covered
by the pre-Dodd-Frank standard can be extended by the SEC or the SRO, we expect the remaining 20 flings still covered by the 35 day standard
to be either withdrawn or acted upon, given the complex and/or novel issues presented, but not within the 35 day timeframe.
Plan for Improving Program Performance: The enactment of the Dodd-Frank Act in July 2010 required the SEC to approve or disapprove within
certain statutory timeframes from the date of publication of a rule change. The staff must publish a rule fling for comment within 15 days from
when it is received, or otherwise the publication date reverts to the day the SRO publishes the fling on their website, (i.e., within two days of fling
with the SEC). Once a rule fling is published for comment, the SEC must complete a review within 45 days, or such longer period time as noted
in the statute. As a result, the SEC believes that the compliance with these Congressionally-mandated times should serve as the appropriate
data points going forward. Of the 307 SRO rule changes subject to the Dodd-Frank standards, 100 percent of the flings were published within
15 days of fling. 229 flings were subsequently approved or disapproved within 45 days of publication of notice in the Federal Register. The
remaining 79 flings were approved or disapproved within the other statutory benchmarks 99 percent of the time (i.e., within 90 days, within 180
days, within 240 days). Therefore, despite the 40 percent increase in rule flings over the previous fscal year, the SEC met the statutory standards
set by Dodd-Frank 99 percent of the time, and expects to be able to meet the statutory times frames going forward.
Responsible Division/Offce: Division of Trading and Markets
Data Source: SRO Rule Tracking System (SRTS). Information was extracted from the SRTS data tables into an Excel fle. The information was
then analyzed to determine the applicable population of flings. Simple formulas were used to calculate the time from fling after publication of
notice to approval of fling.
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PERFORMANCE INDICATOR (PROCESS) 2.3.1
Percentage of SRO rule flings that are submitted for immediate effectiveness
Description: This metric gauges the proportion of SRO rule proposals that can be submitted for immediate effectiveness, without Commission approval.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Actual
Percentage Prior-year data not available 69% 77% 72%
Analysis: This indicator gauges the percentage of rule flings submitted by SROs for immediate effectiveness. Rule proposals can be submitted
for immediate effectiveness for certain types of flings, including non-controversial changes, rules relating to fee flings, or so called “copy-cat” rule
flings related to proposed rule changes other than trading rules. Rule proposals not submitted for immediate effectiveness require Commission
review and approval or disapproval.
Responsible Division/Offce: Division of Trading and Markets
Data Source: SRO Rule Tracking System (SRTS)
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Strategic Goal 3: Facilitate Access to the Information Investors Need to Make Informed
Investment Decisions
The SEC promotes informed investment decisions through
two main approaches. The frst is to require that investors
have accurate, adequate, and timely public access to
disclosure materials that are easily understood and analyzed.
The second is to implement a variety of investor education
initiatives aimed at giving investors a better understanding of
the operations of the nation’s securities markets.
In FY 2012, the agency dedicated approximately $189.4
million and 701 FTEs toward achieving results in Goal 3. Of
18 performance targets, the agency met or exceeded 11, did
not meet 1, and did not have data to report on 6. The agency
is requesting in FY 2014 a total of $269.9 million and 783 FTEs
towards achieving results in Strategic Goal 3.
Spotlight: FY 2012 Performance Achievements
The Federal securities laws require that corporations, investment
companies, and other entities provide investors with timely
and meaningful information about, among other things, their
operations and fnances. Because an educated and informed
investor ultimately provides the best defense against fraud and
costly mistakes, these laws place great emphasis on providing
the investing public with meaningful information.
In FY 2012, as part of their disclosure programs, the Divisions
of Corporation Finance (CF) and Investment Management (IM)
continued to meet the requirements of the Sarbanes-Oxley
Act (Performance Goal 3.1.1). This volume of disclosure
review helped deter fraud and assured that investors had
access to relevant information about emerging issues.
Additionally, CF continued to issue initial comments on 1933
and 1934 Act registration statements and other transactional
flings within its target goal of 30 days of fling (Performance
Goal 3.1.2).
Investors who have access to complete and accurate
information are also more likely to invest wisely. In FY 2012,
the SEC continued to focus on educating investors about
products commonly marketed to them and provided
educational programs and materials to help investors
detect and avoid potential scams. The Offce of Investor
Education and Advocacy (OIEA) reached approximately 16
million investors through various communication methods
(Performance Goal 3.2.1), and partnered with other
Federal and state agencies, fnancial industry associations,
consumer groups, and educational organizations to produce
11 education campaigns (Performance Goal 3.2.2).
In FY 2012, the SEC tackled both practical investor protection
concerns and more broader, policy-oriented examinations
of the capital markets. The agency issued a comprehensive
report on municipal securities that discusses potential
legislative changes that could help improve disclosures
to investors, including authorizing the SEC to set baseline
disclosure standards and require municipal issuers to have
audited fnancial statements, as well as suggestions for
changes in business practices and regulations. Additionally,
OIEA completed a Dodd-Frank Act mandated study of
fnancial literacy among investors, drawing on numerous
sources, including online survey research, focus group
research, public comments to the Commission, and a Library
of Congress review of studies of fnancial literacy among U.S.
retail investors. The study identifed investor perceptions
and preferences regarding information available to them and
examined pre-investment disclosures; the fees, objectives,
performance, strategy and risks of funds; and the professional
background, disciplinary history, and conficts of interest of a
fnancial professional.
Budgeting for the Future (FY 2014)
An educated investing public ultimately provides the best
defense against fraud and costly mistakes. The Federal
securities laws place great emphasis on assuring that
corporations, investments companies, and other entities
provide investors with timely, clear, complete and accurate
fnancial and non-fnancial information, allowing investors to
make wise investment decisions. As part of its disclosure
program, CF and IM will continue in FY 2014 to meet the
requirements of the Sarbanes-Oxley Act (Performance Goal
3.1.1). Additionally, agency staff are expected to sustain
the rate from the number of days to issue initial comments
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on Securities Act flings (Performance Goal 3.1.2), and
exceed timeliness targets for reviewing investment company
disclosures (Performance Goal 3.1.3). Also, in FY 2014,
CF will continue to improve the quality of information provided
to investors by focusing on disclosure by companies of the
information most material to investment decision-making.
OIEA responds to investment-related complaints and questions
from tens of thousands of investors each year. In FY 2014, staff
is expected to close approximately 50 percent of complaints
and inquiries within seven days and about 90 percent within
30 days (Goal 3, Measure 10). The seven-day target has been
adjusted to refect new workload demands. In FY 2014, OIEA
will continue to refne internal processes and promote staff
training to resolve matters.
The SEC developed Performance Goals 3.1.4, 3.1.5, and
3.1.6 to monitor the availability of and access to securities
industry information so that investors are armed with timely
and meaningful information. The agency intended to use these
measures to explore whether its disclosure requirements,
review criteria, approach to comments, and professional and
technology resources are utilized to provide maximum beneft
to investors. These measures will be reviewed during the SEC’s
strategic planning process for FY 2014.
Strategic Objective 3.1: Investors have access to high-quality disclosure materials that are useful to investment
decision making.
Goal Leader(s): Director, Division of Trading and Markets; Director, Division of Investment Management; Director, Division of
Corporation Finance; Director, Offce of Investor Education and Advocacy
PERFORMANCE GOAL 3.1.1
Percentage of public companies and investment companies with disclosures reviewed each year
Description: The Sarbanes-Oxley Act requires that the SEC review the disclosures of all companies and investment company portfolios reporting
under the Exchange Act at least once every three years. These reviews help improve the information available to investors and may uncover
possible violations of the securities laws.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Division of Corporation Finance
Corporations 36% 39% 40% 44% 48% 33% 48% 33% 33%
Target: Exceeded
Analysis: The SEC exceeded its planned level of review of companies in FY 2012. This review level is expected to deter fraud in public securities
transactions and should help investors receive accurate material information about the companies they invest in.
Responsible Division/Offce: Division of Corporation Finance
Data Source: Electronic, Data Gathering, Analysis, and Retrieval (EDGAR)/Filing Activity Tracking System
Division of Investment Management
Investment Company Portfolios 38% 36% 35% 35% 33% 33% 36% 33% 33%
Target: Exceeded
Analysis: Consistent with Section 408 of the Sarbanes Oxley-Act of 2002, IM strives to review disclosures made by certain public issuers, including
issuers’ fnancial statements, no less frequently than once every three years. IM has continued to meet or exceed this statutory goal.
Responsible Division/Offce: Division of Investment Management
Data Source: Microsoft Offce Suite Tools
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PERFORMANCE GOAL 3.1.2
Time to issue initial comments on Securities Act flings
Description: The target of 30 days or less has become a de facto industry standard for the maximum time to receive initial comments.
Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
FY 2012
Plan
FY 2012
Actual
FY 2013
Estimate
FY 2014
Estimate
Days 25.5
days
25.2
days
25.3
days
24.1
days
24.4
days