[Photo:  wikihow]

“We’re on one of those hamster tracks. As we are able to do more exams, the number of advisers registering increases.”  -  Jane Jarcho, Deputy Director of SEC’s Examination Program

Mary Jo White considers field visits to registered fund companies, wealth managers and other investment advisors to be the greatest protection the SEC can offer to retail investors.  And to ensure delivery of that objective, the SEC has added scores of examiners and doubled spending over the last 13 years. In fiscal 2016, the SEC spent $315 million on its examination program, in which agency employees show up at a firm’s offices and typically spend weeks digging through its books and interviewing employees.

Yet, more than 33% of the 12,200 or so entities registered with the Commission have never had an on-site examination, according to data provided to The Wall Street Journal in response to public-records requests. As the number of SEC-registered firms grows, the SEC’s attempts to increase coverage have fallen short.

• The proportion of companies it visits each year has fallen from 18% in fiscal 2004 to around 12% or 13% in fiscal 2016.
• The figure hasn’t topped 13% since 2006. 
• As of August, the SEC had never examined about 4,800 of those firms – a number that has climbed by about 5% since early 2015.

Marc Wyatt, director of the SEC’s examination program, said the number of exams of investment advisers increased by a fifth in the year just ended, reaching a 7-year high. The SEC’s program “includes initiatives to specifically address high-risk conduct by investment advisers that have never been examined or are newly registered,” he said.

MARY JO'S PLAN B.   A stopgap proposal by Ms. White would require investment advisers to pay outside auditors to do compliance checks.  Unfortunately, the plan is stalled because Commissioners Michael Piwowar and Kara Stein are worried about the plan’s costs and effectiveness.

It's unlikely that there will be a Plan C.