The SEC on March 28, 2022, released a Congressional budget justification document that seeks funding for 400 new positions, 65 of which would be allocated to the Division of Corporation Finance (CorpFin).
The bulk of those new CorpFin hires (58) would go toward the SEC’s Disclosure Review Program “to assist with review of the significant increase of IPO and SPAC filings, provide more robust review of registration statements, and provide prompt and thorough responses to registrants.” The remaining seven positions would support commission rulemakings.
Overall, the SEC is seeking $2.15 billion to support its operations for fiscal 2023, which begins in October. The request comes weeks after Congress passed a long-delayed omnibus appropriations package that funded the SEC at $1.99 billion for the current fiscal year.
SEC Chair Gary Gensler, in an executive summary, cited growth in the capital markets that has not been met by a parallel increase in commission staffing levels.
“At the end of FY 2016, the SEC had 4,650 people on board,” wrote Gensler. “Five years later, that number had decreased by about three percent. The FY 2023 request seeks to close this gap by providing the additional resources needed to bring in new personnel with skills and expertise to address critical needs, including the wave of traditional initial public offerings (IPOs) and an unprecedented surge in non-traditional IPOs by special purpose acquisition companies (SPACs); the growing size and number of private funds, particularly private equity and venture capital funds; the significant growth in crypto-assets; the rise of financial technology and predictive data analytics; and increased regulation of security-based swaps.”
“As more Americans are accessing the capital markets, we need to be sure that the Commission has the resources to protect them,” Gensler added.
SPACs are shell companies that raise money in IPOs, using that capital to acquire a private company and take it public without a traditional IPO. The process of combining into a single publicly traded entity is referred to a “de-SPAC ” transaction.
The budget document cites an increase of IPO activity from 700 in fiscal 2020 to more than 2,000 in fiscal 2021.
“Many of these IPOs involved SPACs, so it is reasonable to expect a high volume of de-SPAC transactions for review in the coming years, and as many as 500 SPACs are currently searching for a target,” the SEC stated in the budget justification document.
The requested 400 new staffers would also provide the Division of Enforcement with 125 new positions; the Division of Examinations with 90 positions; the Division of Trading and Markets (TM) with 20 positions; the Division of Investment Management (IM) with 13 positions; and the Division of Economic and Risk Analysis (DERA) with 25 positions, among other hires.
This article originally appeared in the March 30, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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