To fully create and leverage a true risk-based, data-driven exam selection process, OIC suggested in a 2017 report that the SEC develop and use staff guidance for assigning final risk ratings before closing exams. As of October, 10, 2018, the SEC has failed to follow the recommendation, the OIG said.

In the area of enforcement, the SEC faces greater challenges than ever before because of a June 2017 Supreme Court decision (Kokesh v. SEC) that imposes a five-year statute of limitations on SEC enforcement actions and its ability to recover funds stolen from investors.

The SEC’s do-directors of enforcement told lawmakers in May that the Enforcement Division has already had to forego  more than $800 million of disgorgement in both litigated and settled actions in the year since the Kokesh decision.

“Although the ultimate impact of Kokesh remains to be seen, it is imperative that Enforcement uncover, investigate and bring cases as quickly as possible,” OIG said.

Unfortunately, the SEC did not meet its own targets for shortening the time between opening cases and bringing enforcement actions, the report states.

“We note that, in FY 2017, the percentage of first enforcement actions filed within two years of the opening of the matter under inquiry or investigation was 52 percent. This did not meet the FY 2017 target of 65 percent and was a decrease from FYs 2012 through 2016, when the percentage ranged from 64 percent to 53 percent.  In addition, in FY 2017, the average number of months between opening a matter under inquiry or investigation and commencing an enforcement action was 24 months, which was the same in the 2 previous years.  This also did not meet the FY 2017 target of 20 months and was an increase from FYs 2012 through 2014 when the average number of months was 21,” the OIG said.

To address the need for added timeliness in investigations, Enforcement has reported adopting measures that include emphasizing expediency in quarterly case reviews, promoting best practices regarding efficiencies in various phases of the investigative process, leveraging data analytics capabilities and conducting training on tools that expedite investigations, OIG reported.

Other challenges the SEC is continues to face, according to OIG, include:

• The growing scope and number of clearing agencies the SEC is charged with examining;

• The registration of hundreds of additional municipal advisor registrants with increasingly complex business lines;