Two senior republicans on the House Financial Services Committee on Oct. 25, 2022, urged the panel’s chair to invite SEC Chair Gary Gensler to testify next month, following a recent technical glitch affecting public comments and an inspector general report that relayed internal concerns over the aggressive pace of rulemaking.
“As you know, it has been more than a year since Chair Gensler last testified before the Committee, notwithstanding our repeated requests that he and/or the full Commission appear,” Representatives Patrick McHenry of North Carolina and Bill Huizenga of Michigan wrote in the short letter. “The recently announced technical errors and workforce issues at the SEC, on top of the rushed, sweeping rulemakings, insufficient comment periods, and regulation by enforcement in the digital asset space necessitate the Committee’s attention now more than ever.”
McHenry is the ranking member of the committee, while Huizenga is the top Republican on its Investor Protection, Entrepreneurship and Capital Markets subcommittee. The letter comes nearly two weeks after the two lawmakers, as well as other committee Republicans, demanded more details around the scope of the technological glitch, which prompted the commission to reopen comment on nearly a dozen rulemaking released and one request for comment in Release No. 33-11117, Resubmission of Comments and Reopening of Comment Periods for Certain Rulemaking Releases.
The SEC said some comments filed through its Internet comment form – mostly in August – were not received, while the problem started as far back as June 2021. The SEC believes fewer than 200 comments were affected. (See SEC Provides Extra Time to Comment on 12 Rulemaking Releases Because of Technical Glitches In Receiving Letters in the Oct. 10, 2022, edition of Accounting & Compliance Alert.)
The SEC Office of Inspector General (OIG) on Oct. 13 released a report detailing, among other issues, conversations with managers in the Divisions of Trading and Markets (TM), Investment Management (IM), Corporation Finance (CorpFin), and Economic and Risk Analysis (DERA), “some of whom raised concerns about increased risks and difficulties managing resources and other mission-related work because of the increase in the SEC’s rulemaking activities.”
Some of those managers, according to the report, reported an overall increase in attrition “and difficulties hiring individuals with rulemaking experience.”
“In the interim, managers reported relying on detailees, in some cases with little or no experience in rulemaking,” the OIG report stated. “Others told us that they may have not received as much feedback during the rulemaking process, either as a result of shortened timelines during the drafting process or because of shortened public comment periods. Although no one we met with identified errors that had been made, some believed that the more aggressive agenda—particularly as it relates to high-profile rules that significantly impact external stakeholders—potentially (1) limits the time available for staff research and analysis, and (2) increases litigation risk.”
On attrition, the OIG report stated the SEC “seems to be facing challenges to its retention efforts,” and has seen a significant increase in attrition over the last few years, jumping to 6.4 percent in fiscal 2022 from 3.8 percent in fiscal 2020. That figure represents the highest attrition in a decade.
“Most concerning is the increased attrition in Senior Officer and attorney positions, expected to be about 20.8 percent and about 8.4 percent for FY 2022, respectively,” the report stated.
The OIG report added that the SEC is not alone in facing a crisis retaining critical talent amid the “Great Resignation,” citing figures from the Partnership for Public Service of an average government-wide attrition rate of 6.1 percent in fiscal 2021.
This article originally appeared in the October 28, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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