Third Report on the Implementation of SEC 

Organizational Reform Recommendations

As Required by Section 967 of the 

Dodd–Frank Wall Street Reform and Consumer Protection Act

This is a report prepared by the staff of the U.S. Securities and Exchange Commission. The 

Commission has expressed no view regarding the analysis, findings, or conclusions contained 

herein.

October 17, 2012
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 2

Explanatory Note

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) 

directed the U.S. Securities and Exchange Commission (SEC) to engage an independent 

consultant to conduct a broad and independent assessment of the SEC’s internal operations, 

structure, funding, and the agency’s relationship with Self-Regulating Organizations (SROs). 

Issued in March 2011, the consultant’s study provided recommendations designed to increase 

the SEC’s efficiency and effectiveness. This document is the third of four agency reports to 

Congress provided pursuant to the requirements of section 967(c) of the Dodd-Frank Act. 

Section 967(c) requires periodic reports on the “implementation of the regulatory and 

administrative recommendations contained in” the consultant’s report required by section 

967(b) of the Dodd-Frank Act. 

The Commission has expressed no view as to whether or how any recommendation contained in 

that consultant’s report should be implemented. Moreover, no Commissioner other than the 

Chairman has had any substantive involvement in the “Mission Advancement Program” (MAP) 

or the activities of the SEC staff and contractors outlined in this report. The Commission has not 

endorsed any assessment, determination, method, analysis, finding, or conclusion contained 

herein. The Commission was not consulted on the decision to hire the consultant advising as to 

the MAP project or the cost and scope thereof.

The MAP is the responsibility of the SEC’s Chief Operating Officer, who reports directly to the 

Chairman. The Commission has not made any determination that this report is accurate or 

complete. The Commission’s vote to provide this report to the Congress does not imply any 

concurrence in or endorsement of any aspect of this report or the activities it describes.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 3

Table of Contents

Explanatory Note ........................................................................................................................... 2

Introduction................................................................................................................................... 4

Workstream Decision Process Complete and ESC Approved.................................................. 7

1. Workstream 2A: Reorganizing the Office of Administrative Services (OAS).................................7

2. Workstream 2A: Reorganizing the Office of Financial Management (OFM)..................................8

3. Workstream 2A: Reorganizing the Office of Human Resources (OHR)........................................10

4. Workstream 2A: Creating the Office of the Chief Data Officer (OCDO)......................................14

5. Workstream 2E: Implementing a Continuous Improvement Program (CIP)..................................15

6. Workstream 3A: Transforming the Office of Information Technology (OIT) and enhancing the 

SEC’s technology capabilities ................................................................................................................20

7. Workstream 3C: Creating a Technology Center of Excellence ......................................................23

8. Workstream 3F: Creating a surge capacity plan .............................................................................24

9. Workstream 3H: Hiring staff for priority positions .......................................................................24

10. Workstream 3G: Developing a capability to monitor and manage market risk..........................25

11. Workstream 2B: Conducting a Regional Organizational Assessment (ROA)............................27

Workstream Decision Process Completed Outside the ESC Governance Process............... 31

12. Workstream 2C: Seeking flexibility from Congress on Dodd-Frank-mandated Offices............31

13. Workstream 3E: Accelerating the roll-out of the SEC’s Evidence-Based Performance 

Management (EBPM) system.................................................................................................................32

14. Workstream 5A: Conducting an outcome-oriented performance measures feasibility study....33

15. Workstream 3H: Hire staff for priority skill positions – administrative skills............................33

Analysis, Design and/or Recommendations in Process ........................................................... 34

16. Workstream 1A/B: Reprioritizing mission activities..................................................................34

17. Workstream 2D: Reviewing the Commission/staff interaction process and delegation of 

authority..................................................................................................................................................36

18. Workstream 3D: Restructure OHR (Workforce Planning).........................................................37

19. Workstream 3G: Enhancing the SEC’s Operational Risk Management capabilities..................38

20. Workstream 4ABC: Strengthen Oversight of Self-Regulatory Organizations (SROs); Centralize 

and Coordinate Self-Regulatory Organization Interactions....................................................................40

Conclusion ................................................................................................................................... 44

Appendix A: Acronym List........................................................................................................ 46
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 4

Introduction

In order to fulfill its mission of protecting investors, maintaining fair, orderly and efficient 

markets, and facilitating capital formation, the SEC currently oversees 11,144 investment 

advisers with about $48 trillion in assets under management, close to 4,500 broker-dealers with 

in excess of 160,000 branch offices, and 9,700 mutual funds and exchange traded funds. The 

agency is responsible for the review of more than 9,100 reporting companies, including tens of 

thousands of disclosure documents filed each year and is tasked with reviewing and monitoring 

initial public offerings and other public capital markets transactions of corporate issuers, public 

asset-backed securities offerings, proxy statements, public mergers and acquisitions, and tender 

offers. The SEC also oversees approximately 450 transfer agents, 16 national securities 

exchanges, 9 nationally recognized statistical ratings organizations (NRSROs), 8 active clearing 

agencies, 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 financial markets where more than 5 

billion shares of common stock are traded each day. During FY2013, the agency also expects to 

continue implementation of its oversight responsibilities with respect to municipal advisors and 

entities registering in connection with the security-based swap regulatory regime. 

The agency regularly evaluates the methods it uses to monitor these markets and market 

participants, implementing changes as necessary that may necessitate the restructuring of its 

major program offices. In recent years, for example, this evaluation has resulted in significant 

changes in the organization and focus of the office primarily responsible for the examination of 

regulated entities and the division primarily responsible for the enforcement of the securities 

laws.

However, the agency had rarely assessed the strength of its own internal support infrastructure—

the critical but less visible processes, procedures, and tools the agency relies upon to ensure basic 

needs, such as hiring staff that possess the skills the agency requires, are met. In March 2011,

the Boston Consulting Group (BCG)1 issued a report mandated by Section 967 of the Dodd-

 1 The BCG report is available online at http://www.sec.gov/news/studies/2011/967study.pdf.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 5

Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) that 

recommended a number of improvement initiatives, primarily focused on the agency’s support 

infrastructure. The BCG report discussed a variety of challenges facing the agency and 

suggested approaches to improve support for its mission, ensure the proper mix of skills in its 

workforce, and improve decision-making. 

To assess and make recommendations regarding the approaches outlined by the BCG report, the 

SEC established the Mission Advancement Program (MAP), which provided a framework for 

systematically evaluating and implementing change throughout the agency. The BCG

approaches were assigned to working groups composed of Division and Office executives and 

staff. Governed by an Executive Steering Committee (ESC) of senior SEC leaders, the working 

groups developed recommendations for review, comment, and preliminary approval by the ESC, 

and final approval by the Chairman prior to full implementation. 

The agency’s efforts are paying dividends. As of September 2012, recommendations and 

implementation plans have been completed for 15 of the 20 initiatives examined, and the 

implementation phase is complete or in process for each. For example, the Continuous 

Improvement Program (CIP) and the Technology Center of Excellence have been fully

operationalized and exemplify the SEC’s increasingly collaborative view of continuous 

improvement and its innovation in technology. For other initiatives, such as the Operational 

Risk Management (ORM) organizational design and the OHR Workforce Planning study, the 

staff has completed much of its analysis, with selected recommendations now ready for ESC 

approval. Figure 1 provides a summary and status of the MAP initiatives.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 6

Figure 1: Summary & Status of MAP Initiatives 

Overall Status Section Workstream 

Workstream 

Decision Process 

Complete and ESC 

Approved

1 2A: Redesign the Office of Administrative Services (OAS) 

2 2A: Redesign the Office of Financial Management (OFM)

3 2A: Redesign the Office of Human Resources (OHR)

4 2A: Stand-up the Office of the Chief Data Officer (OCDO)

5 2E: Implement a Continuous Improvement Program

6 3A: Transform OIT and Enhance Technology Capabilities

7 3C: Create a Technology Center of Excellence

8 3F: Create a surge capacity plan

9 3H: Hire Staff for Priority Positions 

10 3G: Enhance Market Risk Management

11 2B: Conduct a Regional Organizational Assessment

Workstream 

Decision Process 

Completed 

Outside the ESC 

Governance 

Process

12 2C: Seek flexibility from Congress on Dodd-Frank-mandated offices

13 3E: Accelerate roll out of the SEC's EBPM system

14 5A: Conduct an Outcome-Oriented Performance Measures Feasibility 

Study

15 3H: Hire Staff for Priority Positions – Administrative Skills 

Analysis, Design 

and/or 

Recommendations 

in Process

16 1A/B: Mission Activity Prioritization 

17 2D: Review Commission / staff interaction processes and Delegations 

of Authority

18 3D: Restructure OHR (Workforce Planning)

19 3G: Operational Risk Management

20 4ABC: Enhance Self Regulating Organizations (SRO) Oversight

The remaining sections of this report describe the gains in efficiency, effectiveness, cost savings 

and customer focus over the last six months as a result of the SEC’s efforts implementing the 

organizational improvements recommended by the BCG report. As outlined in Figure 1 above, 

the sections are organized by workstream status.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 7

Workstream Decision Process Complete and ESC Approved

The following workstream recommendations are complete, have been approved by the ESC and 

Chairman, and are currently in various stages of implementation. The implementation timeline 

varies based on resources, priorities, complexity, and integration requirements.

1. Workstream 2A: Reorganizing the Office of Administrative Services (OAS)

Prior to the organizational changes described below, OAS was responsible for a wide range of 

functions, from the relatively straightforward (e.g., mail operations) to the complex (e.g., agency 

acquisitions). Beginning in May 2011, a working group conducted a comprehensive analysis of 

OAS. The review focused on the Office’s organizational structure, workforce, and key business 

processes and policies. 

The working group’s assessment resulted in recommendations for a revised organizational 

design, updated processes to improve internal controls, and identified cost savings opportunities. 

The primary recommendation split the OAS organization and created a stand-alone Office of 

Acquisition (OA) designed to improve senior management oversight and help strengthen the 

capacity and workforce of the acquisition function. The new Office of Support Operations 

(OSO) was created to provide enhanced oversight of the remaining OAS functions as well as the 

Offices of FOIA/Records Management and Security. Following the approval of these 

recommendations in February 2012, the working group immediately began implementation. By 

June 2012, the new organizational structures were established.

The working group also focused on improving internal controls associated with its leasing 

function. In August 2011, the SEC signed a Memorandum of Understanding with the General 

Services Administration (GSA). Under the agreement, the GSA is responsible for procuring and 

administering all new leases, while the SEC will administer existing leases and negotiate, 

procure, and administer any necessary extensions (after formal review and concurrence by GSA). 

This initiative greatly reduces the operational risk identified with former leasing practices and 

allows OSO to focus on conducting real property capacity planning in support of the SEC 

mission, rather than executing complex leasing transactions. The SEC continues to work with 

GSA on a day-to-day basis to ensure all future real estate transactions are consistent with 

government-wide leasing practices. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 8

The working group recommendations also identified cost savings opportunities. For example, 

the OSO is in the process of transitioning the SEC’s supply management function to a third party 

provider. The utilization of a third party provider is expected to have numerous benefits, 

including better control over the supplies, and cost savings. The transition, expected to occur in 

October 2012, is estimated to result in approximately $250K in savings per year once fully 

operational. The SEC realized further savings as a result of staff reassignments, resignations, 

and early retirements. OSO has been able to reduce the headcount of the staff performing legacy 

OAS functions by more than 10 percent as it transitioned to the new organizational structure. 

2. Workstream 2A: Reorganizing the Office of Financial Management (OFM) 

The BCG report recommended that the SEC conduct an organizational assessment of OFM, 

which administers the financial management and budget functions of the SEC. The Office 

assists in formulating budget and authorization requests, monitors and reports on the utilization 

of agency resources, and develops, oversees, and maintains SEC financial systems. 

The organizational assessment found that while OFM has an effective overall organizational 

design focused on job functions, there were certain areas where changes in the organizational 

structure would yield benefits. For example, it was determined that the number of management 

layers and direct reports for each manager varied, and that addressing those inconsistencies could 

help foster improved operations and communication across OFM. The assessment also

concluded that a few key OFM functions, including Disgorgements (which is responsible for 

returning ill-gotten gains to investors) and Internal Controls, should be elevated organizationally 

to reflect their importance to the agency and its finances. OFM intends to begin deploying a new 

organizational structure by December 2012.

In parallel with the restructuring activities, OFM also has engaged in a number of important 

initiatives to enhance financial controls and improve efficiencies. As a result, in FY2011, the 

Government Accountability Office (GAO) determined that the SEC had no material weaknesses 

in internal controls regarding financial reporting. This is a significant achievement for both 

OFM and the SEC, as it demonstrates tangible progress in reducing operational risk in financial 

management for the agency. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 9

To further strengthen financial operations, the SEC migrated to a new financial management 

system that is hosted, operated, and maintained by the Department of Transportation’s Federal 

Shared Service Provider (FSSP) in May 2012. The SEC migrated to the FSSP system to gain a 

modernized technology infrastructure and associated business function improvements. FSSP 

provides an automated interface between the procurement system and the financial system to 

help tighten controls around the recordation of obligations. FSSP also processes SEC financial 

transactions, allowing OFM to concentrate on monitoring and analyzing the SEC’s financial 

data. In addition, when the new platform reaches its steady state, the FSSP initiative is expected 

to save an estimated $600K per year in contractor and maintenance costs. 

OFM has implemented significant business process and technology improvements in its filing 

fees program which is responsible for fees paid for registrations, mergers, and tender offerings of 

new securities. These changes enhance services to filers, reduce filing fee errors, improve 

internal controls, and improve the productivity of the filing fee review staff. These 

enhancements include: 

• Automating the process by which the staff reviews filings as they are submitted to the 

SEC, as well as the reconciliation between the financial system and the filing fee tracking 

system.

• Improving service to filers by providing new payment options and automated tools for 

filers to request refunds and access their account balance, which is expected to reduce 

estimated filer call volume by over 50 percent.

• Enhancing metrics-based management reporting on filing fee operations, including 

detailed tracking of EDGAR filing review and filer service request processing.

• Charting a course for modernizing the technology that supports the filing fee process, and 

updating operating procedures to improve accuracy and consistency of the filing fee 

review process.

OFM expects these improvements to result in efficiencies totaling approximately $200K 

annually—funds that can be used to implement further initiatives focused on improving service 

and efficiencies in the filing fees area. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 10

Finally, OFM has been working with the Division of Enforcement on initiatives to enhance the 

processes for collection and distribution of disgorgements and penalties resulting from SEC 

cases. Two new offices have been created to handle all distribution and collections functions for 

the Commission as a whole. This structure will allow OFM to focus on its core financial 

management functions, and will alleviate the burden on enforcement attorneys by shifting the

collections and distributions responsibilities to dedicated support staff. The technological tools 

that support this area have also been improved. These improvements freed up Enforcement staff 

time to focus on investigations and cases, enhanced the collections function to deter future fraud, 

returned money to harmed investors more efficiently, and strengthened controls over this 

significant area of the SEC’s finances.

3. Workstream 2A: Reorganizing the Office of Human Resources (OHR)

In response to the BCG report recommendations, a working group conducted an assessment of 

OHR, including a review of the Office’s organizational structure, workforce, internal controls, 

key processes and policies. Among other things, the working group found that: necessary 

policies and procedures were not documented, workload was inconsistent for senior-level 

employees (SK-14 or higher), and service delivery across all services was inconsistent. Based on 

these findings, under the leadership of a new OHR Director, the working group developed a new 

organizational design that establishes more consistent lines of authority and increases 

accountability for providing consistent customer service. The new structure (see Figure 2) gives 

greater prominence to recruiting and hiring functions, and already OHR has seen efficiency gains 

in the hiring process. In FY 2011, OHR advertised 526 vacancy announcements and processed 

32,665 applications. During FY 2012, with the same number of human resources professionals, 

the office advertised 750 vacancy announcements, 38 percent above FY 2011 totals, and 

processed 65,535 applications, which is more than double the volume from the previous year. 

While restructuring is a necessary first step to aligning work and people, OHR will also tackle 

improvements in other areas (i.e., process, technology, and people) in FY2012 and FY2013. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 11

Figure 2: New OHR Organizational Chart

A critical element of the OHR reorganization was the creation of the Business Management 

Group (BMG), which is responsible for managing the business operations of OHR. The BMG is 

composed of the Planning and Administration Branch and the Human Resources Information 

Systems (HRIS) branch. The Planning and Administration Branch is responsible for managing 

the day-to-day operations of OHR, including, but not limited to budget formulation and 

execution, financial management, contracts management, policy oversight and administration, 

business process improvement and internal controls, internal and external communications, 

management of OHR websites, audit remediation, project management, strategic planning and 

reporting, space management, education administration, records management, and OHR 

administration. The HRIS Branch is responsible for providing technology solutions to expand 

the technical capabilities of the HR systems and applications, helping OHR to effectively 

integrate the SEC Offices and Divisions with the HR function. The creation of the BMG is

helping to ensure that OHR has the appropriate resources and strategies to successfully meet the 

agency’s human capital management needs and requirements. 

In FY2012, OHR documented its current business processes by analyzing its functions, 

applications, and currently available technology. This analysis revealed that the Employee-
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 12

Labor Relations, Student Loan Benefit, and Transit Benefits processes could be improved.

Additionally, OHR assessed the IT applications that support these processes and categorized 

them by capability and technology. OHR will use the results of this effort to support the 

development of improved OHR business processes and supporting IT architecture. 

Data on OHR employee skills is being used to identify opportunities to “upgrade the talent 

within the HR function” as recommended in the BCG report. Addressing strategic functions that 

OHR has not previously performed or had performed on a limited basis (i.e., data analytics, 

workforce planning and compensation guidance) will enable OHR to help managers understand 

the dynamics of their current workforce, as well as plan for future workforce needs. OHR has 

begun developing these strategic functions, primarily by performing the following:

• OHR hired a workforce planning specialist and a succession planning specialist who are 

working to develop a new workforce planning function. Once the workforce planning 

function is fully operational, management at all levels will have access to useful models 

of attrition to help them better recruit and hire.

• OHR developed the agency’s first Human Capital Plan, a key strategic document 

outlining people-related priorities that link human resource activities to broader mission 

needs. The Plan identifies five high-level goals and supports each goal with key 

initiatives. Most initiatives in the plan will be implemented by the end of FY2013. This 

will help the SEC better acquire, manage, and engage its workforce. Highlights include 

implementing a new compensation system, revitalizing the agency’s recruiting function, 

improving selection processes, enhancing leadership development programs, enhancing 

technical training, addressing employee satisfaction where needed, and continuing to 

foster a high performance culture.

• OHR launched a study to determine how to revamp the existing compensation system. 

Implementation of some recommendations from the study have already increased the 

agency’s ability to attract and retain talent by offering competitive salaries, set consistent 

pay for new hires, and identified programs to recognize and reward individual 

performance. The implementation of a new compensation system, along with EvidenceBased Performance Management (EBPM) system, will provide a critical foundation for 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 13

implementing pay-for-performance in the future by recognizing and rewarding 

employees based on their performance. 

OHR launched the Human Capital Manager program in early 2012, by hiring dedicated staff to 

service the following Divisions and Offices: Division of Enforcement (ENF), Office of 

Compliance Inspections and Examinations (OCIE) and the Division of Trading and Markets 

(TM). This enhanced customer support has assisted these organizations with their critical hiring 

needs, helping them to meet mission requirements. Additional tools have been developed to 

support SEC management, such as an online portal for managers containing HR-related 

information to help them better manage their human capital.

Further, the Human Capital Management group took the following steps to ensure the program 

was successfully implemented:

• Aligned roles and responsibilities with other OHR functional groups as part of the OHR 

reorganization.

• Established a collaborative with other federal agencies that are using or plan to 

implement a similar HR business partner model, with the goal of sharing best practices 

and lessons learned.

• Provided the new Human Capital Managers with targeted training and development 

activities to increase key skills and competencies.

OHR also has developed new policies to ensure clarity and consistency across HR practices. The 

policies will be used by OHR managers to convert complex hiring authorities and civil service 

laws into processes and serve as a resource for employees and managers. These processes will 

reduce inquiries to OHR and enable staff to focus on more pressing issues. OHR continues to 

expand the training function for the SEC through the SEC University. Highlights of the 

expanded training include instructor-led training courses on many topics, including: new 

securities products, risk management, capital market structure, derivatives, liquidity risk 

management, brokerage operations, exchange traded funds, loan loss reserve, Dodd-Frank, 

complex fraud, Ponzi schemes, securities litigation, analytical interviewing, and investigative

testimony. SEC University has also expanded eLearning opportunities, with courses offered
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 14

through several vendors on subjects including securities law, accounting, and financial products, 

services and operations. SEC University has launched several leadership courses, such as 

Leadership Fundamentals, Team Leadership, Foundations of Supervisory Leadership, 

Leadership Essentials, Senior Officer Seminars, and leadership elective courses. Executive 

Coaching and 360 Feedback programs are also provided to managers for measuring and 

developing leadership competencies. 

Through mid-year of FY2012, SEC University provided 313 learning events and recorded 1,919 

e-learning course completions. In support of centralized and expanded training and development 

OHR has implemented a new Learning Management System (LMS) that tracks all the training 

records for SEC employees. The LMS also provides a catalogue of courses, course scheduling, 

course enrollment, automated email reminders to employees for upcoming classes, and a 

platform for launching e-learning courses.

4. Workstream 2A: Creating the Office of the Chief Data Officer (OCDO)

The BCG report identified a need for the SEC Divisions and Offices to better gather, distribute,

and make use of diverse information on markets and institutions. To improve its enterprise data 

management capability, the SEC created the OCDO. While initially conceived as a stand-alone 

office under the oversight of the COO, it became evident as the function matured that aligning 

the work under the Office of Information Technology (OIT) provided a simpler approach to 

establishing and executing enterprise data governance. The focus of the Office will continue to 

be the development of integrated data management capabilities, including necessary policies and

procedures and a prioritization of recommended initiatives, with the goal of improving data 

quality, access, and sharing, and containing costs. 

Over the last six months, the working group conducted an analysis that identified gaps, business 

priorities and challenges across five areas: acquiring, managing, storing, using, and disposing of 

data. Based on the results of the gap analysis, the working group established a process for 

purchasing external data sets, align purchase requests with business objectives, increase 

procurement efficiency, and avoid duplicate purchases. Data item descriptions and license 

agreements are now available on the SEC’s intranet to educate staff regarding currently available 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 15

resources.2 These actions helped to improve the agency staff’s ability to access and use data 

throughout all levels of the organization, reduced intensive labor hours that resulted in time and 

cost savings, and enhanced mission effectiveness. The SEC also recently hired a Chief 

Enterprise Architect and is in the process of hiring additional Data Architects, Data Analysts, and 

Technical Leads, to provide guidance to SEC Divisions and Offices on the agency-wide data 

management priorities and structuring of individual initiatives; establish organizational metrics 

for data governance, quality, and use; and make recommendations on major enterprise data 

initiatives and actions. Collectively, these initiatives will help ensure the success of the data 

management program, and will benefit the SEC as whole. 

In addition, the SEC is in the process of designing an Enterprise Data Warehouse (EDW) to 

combine various streams of currently siloed data and help the public gain easier access to more 

usable market data. The majority of the filings the SEC receives are free text files, which are 

difficult to analyze in aggregate. The EDW will enable investors and other members of the 

public to more easily search, find, and analyze the public filings submitted to the SEC. The 

EDW will also allow EDGAR filing data to link with data the SEC receives from other internal 

and external sources, and thereby construct more complete profiles of the regulated firms. In 

addition, SEC investigators will be able to leverage the EDW to better analyze EDGAR filing 

data, in conjunction with other SEC data, to identify outliers for potential investigations. 

5. Workstream 2E: Implementing a Continuous Improvement Program (CIP)

The SEC’s Continuous Improvement Program (CIP) provides a structure to identify, evaluate 

and, as appropriate, launch initiatives designed to enhance the agency’s efficiency. In FY2012, 

the CIP tracked and catalogued a total of $18.2M in realized savings or cost avoidance. Over the 

last 18 months, the CIP working group has focused on institutionalizing the CIP capability across 

the agency, working collaboratively with the Divisions and Offices and coordinating with the 

OIT and its substantial cost savings/avoidance “Spend to Save” initiative. 

When the CIP working group was established, the focus was on gaining momentum and 

capturing some early wins by identifying “quick hit” savings opportunities. It was always 

 2 Further, our public website identifies and publishes high-value data sets. See 

http://www.sec.gov/open/datasets.shtml.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 16

understood that the CIP, however, had to be much more than “quick hits,” that it needed to 

consist of operating principles and a discipline that promotes a continuous improvement culture. 

As the CIP program has matured, its focus has become two-fold: (1) working with Divisions and 

Offices to support the identification of process improvement initiatives, including best practices; 

and (2) serving as the program that takes an enterprise-wide view in identifying, cataloguing and 

tracking the savings opportunities across the SEC. 

Figure 3 and the discussion that follows highlight a collection of continuous improvement

activities that have or will optimize resource allocation, control or reduce costs, and/or increase

customer service across the agency.

Figure 3. 2012 CIP Savings Opportunities 

Savings Opportunity

Realized 

FY12 

Savings

Software Maintenance and Support Contracts 

Several software and hardware licensing and maintenance contracts have been 

renegotiated.

$2.9M

Infrastructure Support Contract 

Better monitoring of the performance of IT systems has reduced workload required for IT 

support contract.

$2.65M

Reduce Travel Costs Through Increased use of Video Teleconferencing

Increasing teleconference /live meeting capabilities to reduce travel costs. 

$2.15M

Remote Connectivity and Network Costs

Reduction in costs associated with agency remote connectivity. $2.1M

Access Control Savings 

A new electronic access control and surveillance solution has been deployed as a 

standardized integrated system supported by an off-site vendor.

$1.85M

Reduce Security Guard Contract Costs

The security guard services at SEC have been re-evaluated at Station Place (Washington, 

DC) and the Ops Center (Alexandria, VA).

$1.28M

Retired EDGAR Link and XFLD Tagging

Deployed EDGARLink Online and retired client software EDGARLink . The 

EDGARLink client software was retired along with XFDL tagging. 

$1.18M

Webcasting Vendor Replacement

The SEC procured a cloud based solution to deliver videoconferencing and online 

presentation which improved the performance, quality, reliability and reduced costs. 

$896K
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 17

Savings Opportunity

Realized 

FY12 

Savings

IT Operational Metrics

Significant improvements in network, system and application availability/reliability 

achieved through deployment of operational metrics. 

$730K

Server Virtualization 

Replacement of 500 physical servers with virtual servers. $573K

Space Allocation Reduction

Lease extension renegotiations for the Chicago, Denver and Los Angeles Regional 

Offices.

$561K

Data Storage System Upgrade

An investment to upgrade aging data storage systems resulted in savings in maintenance 

costs.

$471K

Data Center Power Configuration 

Power configuration modification in the agency’s Alternate Data Center (ADC). $380K

Compensation Approach for New Hires 

OHR has implemented a pay matrix that helps calibrate Management and the applicant’s 

expectations for market based salary rates.

$365K

Close OPC Health Unit

In Nov 2011, in close collaboration with NTEU and others, the OPC Health Unit was 

closed. 

$124K

OAS Shuttle Reduction 

Eliminated one shuttle route beginning in March 2012. $98K

Reduce BlackBerry Devices

Reduce the number of BlackBerry devices throughout the SEC based on job function, 

grade level, and/or voluntary return of devices.

$70K

Filing Fees Process Improvements 

Implemented business process and technology improvements that will enhance services 

to filers, improve internal controls, and improve productivity of filing fee staff.

$50K 

Eliminate Paper Leave & Earnings Statements

OHR and NTEU partnered to discontinue the default preference for paper-based 

biweekly Leave & Earnings Statements.

$40K

Reduce Print Subscriptions 

Reduce the number of print subscriptions that are available online at no cost. $22K

Reduce Wireless Cards

Reduce the number of unused wireless cards through voluntary return. This initiative was 

re-evaluated and will no longer be captured as a savings opportunity beginning in FY 

2013. These services are predominately for Regional staff and service usage has 

remained consistent – with improved inventory management, cards are more effectively 

tracked and reallocated to meet requirements. 

-
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 18

Savings Opportunity

Realized 

FY12 

Savings

Use of External Suppliers

Outsource office supplies purchases to Paperclips; projected savings based on the 

salaries of three full-time supply technicians when fully implemented. Implementation to 

begin October 2012. 

-

Improve the use of Purchase Cards 

Increase utilization of government purchase cards (GPC) to make payments (obligations) 

and to generate more rebates. In early FY2013, targeted training and guidance will be 

provided for GPC holders to ensure rebates are fully leveraged. 

-

Optimize Double-sided Printing

Reduce paper costs by setting network printer defaults in HQ, OPC, and Regional Offices 

to duplex printing. Limited deployment was conducted within OIT. Currently baselining 

costs and developing a change management plan. Anticipate deploying this initiative in 

early FY 2013. 

-

Optimize Distribution of Bloomberg Terminals

Identify Bloomberg terminals that may be not be utilized, are underutilized, or could be 

shared more effectively.

No 

recognized 

cost savings, 

$119K in cost 

avoidance

Reduce CCH Subscription

Voluntary reduction of hard copy CCH 5- and 8-volume desk sets. New staff defaults to 

on-line version of subscription.

No 

recognized 

cost savings, 

$79K in cost 

avoidance

Total Realized Savings: $18.2M

Many of the initial savings opportunities identified have been monitored over the past several 

months to ensure that savings and efficiencies are appropriately captured. In isolation, some of 

these opportunities identified in the early stages will not generate huge cost savings, but they 

reflect the agency’s commitment to more effectively manage its inventory of equipment and 

exercise due diligence in making sound business decisions to meet agency requirements. For 

example, OIT has more closely managed the deployment of blackberry devices. Year-to-date, 

OIT has turned off a total of 153 underutilized blackberries, which translates into a savings of 

$70K. As new staff are hired and aged assets are refreshed, OIT meets new demand by 

redeploying those devices taken out of circulation before purchasing new devices. OIT has 

improved controls to ensure that these assets are fully utilized. 

As a further example of the expanding momentum for continuous improvement, OIT is 

aggressively working to streamline key business activities, modernize its technology 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 19

infrastructure and operations, and reduce its overall footprint in a manner consistent with the 

continuous improvement principles. See evidence outlined in Section 6 (Transforming the Office 

of Information Technology (OIT) and enhancing the SEC’s technology capabilities), Figure 4. 

OIT’s “Spend to Save” initiative is focused on opportunities such as refreshing old technology 

and system hardware and modifying power configurations at the SEC’s alternate data center. In 

the aggregate, these initiatives have had a significant impact on the SEC’s cost of operations and 

have enabled the agency to redirect millions of dollars from maintenance of current state 

operations to funding of technological and other business innovations which improve overall 

mission accomplishment. 

The original CIP program included a “quick hit” projected savings of $1.8M associated with 

increased use of video teleconferencing and reduced official travel. While it is difficult to 

measure the actual savings in this area with precision, we know that investments in video 

teleconferencing technology have eliminated travel costs in a variety of contexts. For example, 

the SEC University provides training to thousands of SEC staff using VTC technology. Through 

September 2012, 1,789 SEC staff participated in training with a variety of subject matter experts 

and instructors without the cost of travel and per diem. An added benefit of this innovation is the 

avoidance of lost productivity as staff spend less time traveling. Based on the data available in 

just this one area, the SEC will have avoided an estimated $2.15M in travel costs in FY2012. 

The SEC Library has instituted a more disciplined approach toward managing the constant 

demand for information. For example, since October 2011, the reallocation of low use

Bloomberg terminals/accounts has resulted in total expenses avoided on purchasing new 

subscriptions of $119K. Additional library based savings or costs avoided equal $79K as a result 

of greater discipline in managing subscriptions. 

The CIP is also currently pursuing a number of longer-term opportunities, ranging from 

streamlining employee on-boarding processes to improving corporate filing confidentiality 

request processing. One initiative showing early benefits is the reengineering of the agency’s 

manual employee exit process (i.e., when an employee separates from the SEC). The new 

process is streamlined and strengthens accountability, while reducing the burden on the exiting 

employee. As a result of the effort to modernize the exit process, several early benefits are being 

realized: 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 20

• Indebtedness: the new process automatically alerts OFM as soon as OHR determines a 

debt is due associated with pay and leave; recruitment, retention and relocation 

incentives; training; and/or student loan repayment. This improvement allows OFM to 

proactively manage and collect debts owed to the government.

• Records Management: the new process provided the forum for Records Management

and OIT to collaborate on new policies and procedures necessary to ensure electronic 

records and files under the review of departing employees are appropriately managed. 

• Internal Efficiency: the transparency of the new process facilitates more effective 

control of agency operations including: property and inventory management, 

Contracting Officer Representative (COR) oversight and management of departing 

contractors, succession and staffing plans impacted by departing employees, and office 

space management.

The CIP will build on progress that has been made to date by developing a more formal 

inventory of improvement initiatives across the agency, helping to avoid potential duplication of 

efforts. The CIP will also assist managers who plan to launch initiatives in developing a clear 

scope for those initiatives, ensuring that the initiatives have achievable timelines and the 

resources required for success, resulting in sustainable, long-term savings.

6. Workstream 3A: Transforming the Office of Information Technology (OIT) and 

enhancing the SEC’s technology capabilities 

While the BCG report noted the agency’s “promising” momentum with regard to technological 

sophistication, it also recommended that the SEC devote attention to the development of a 

technology strategy that provides the staff with the technology it requires to perform most 

effectively and improve the effectiveness of the OIT organization.

In recent years, the SEC has invested in modernizing its IT systems, including a centralized 

system for tips and complaints, enforcement and examination management systems, risk analysis 

tools, and financial management systems. To further improve core operations and implement the 

agency’s new responsibilities, the SEC has embarked on a multi-year Technology 

Transformation Plan called “Working Smarter” which will ensure the SEC’s business processes 

are streamlined, integrated, and implemented with the best technology to reduce costs and 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 21

increase efficiencies and effectiveness; deliver better services to both employees and the public; 

and provide greater accountability, transparency, and security. Leveraging modern, reliable, and 

innovative technologies and predictive analytics will transform the way the SEC performs its 

mission.

The Technology Transformation Plan contains vital technology initiatives including:

• Procurement and installation of an Enterprise Data Warehouse (EDW) that will create 

the infrastructure for the SEC to combine currently siloed data, help the public gain 

easier access to more usable market data, and provide advanced search and discovery 

capabilities.

• Standardization of enterprise-wide platforms to ensure data is appropriately linked and 

integrated across the agency.

• Investment in knowledge management tools to improve the way employees find and use 

information they need to perform their work.

• Seamless integration of structured and unstructured data sources.

• Modernization of SEC.gov and the EDGAR filer system to increase, enhance, and 

optimize the quality of data and information received by internal and external users. 

Structural changes to SEC.gov have already resulted in usage increase from an average 

of 14 million hits per day to 37 million hits per day. 

• Data management, cloud computing, and complex, predictive analytical capabilities to 

be used by the Divisions and Offices.

A Technology Roadmap and Architecture Plan has been developed to facilitate the acquisition of 

new technology and deployment of systems, applications, remote access, desktop and mobile 

computing.

Another area where OIT has demonstrated considerable improvements is in the SEC’s IT

security program. OIT has worked to standardize information technology controls and apply 

them more consistently across the agency. In FY2012, the GAO Audit Team cited the 

significant improvement in the management of the agency’s network, systems and IT Security in 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 22

support of SEC financial systems and removed the IT systems material weakness finding. In 

addition, OIT has been working diligently to resolve audit findings and self-identified 

weaknesses annotated in the plan of action and milestone documentation. In 2012, OIT resolved 

60 deficiencies identified by the GAO and OIG, as well as the deficiencies self-identified by 

OIT. OIT continues to actively work with GAO and OIG to resolve deficiencies by providing 

evidence of resolution that will move open findings to closure. 

Finally, OIT continues to identify and realize savings and efficiencies through its “Spend to 

Save” initiatives. These initiatives, such as more robust infrastructure support contracts, 

upgrades to data storage systems, data center power configurations, as well as contracting for

webcasting to more cost effectively deliver videoconferencing and online presentations, are 

yielding FY2012 cost savings of $12.1M to the agency (see Figure 4). 

Figure 4. OIT “Spend to Save” Initiative Summary 

Realized FY2012 OIT Cost Savings

Spend to Save Initiative Total Realized Savings

Data Center Power Configurations (ADC) $380K

OPC Power Configurations $240K

Data Storage System Upgrade $471K

IT Operational Metrics $730K

Infrastructure Support Contract $2,645K

Software Maintenance and Support Contracts $2,900K

Server Virtualization $573K

Remote Connectively and Network Costs $2,100K

Retired EDGAR Link and XFLD Tagging $1,176K

Webcasting Vendor Replacement $896K

Total $12,111K

Reallocation of these savings will enable OIT and the SEC to provide more effective IT 

infrastructure and technologies to the Divisions and Offices.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 23

7. Workstream 3C: Creating a Technology Center of Excellence3

To guide decisions around innovation in technology, the Technology Center of Excellence

working group has evolved into a Steering Committee whose role is to support the 

institutionalization and awareness of the impact of technology on the securities markets (e.g., the 

effect of high frequency trading on market structure), adoption of new technology at the agency 

(e.g., market data analytics) and deployment of advanced technology capabilities that increase 

the SEC’s operational efficiency and effectiveness. The Steering Committee is comprised of 

leaders from various SEC Divisions and Offices, including OIT, as well as prominent technology 

experts from two leading universities in the United States. 

The Technology Center of Excellence has developed a multi-year technology strategy, informed 

by the needs of the Divisions and Offices. For example, the Technology Center of Excellence 

was a driving force behind a recommendation that the SEC procure a market data system that 

collects quote and trade data for use by multiple Divisions and Offices. The Center is also 

collaborating on a Market Data Analytics review of tools currently being utilized across various 

SEC Divisions and Regional offices. The review is identifying new tools in the marketplace that 

could decrease staff time spent conducting investigations and improve oversight capabilities 

through relational analyses across disparate data sources, both public and private. 

Members of the Center of Excellence Steering Committee are regularly briefed on key upcoming 

IT initiatives. This has improved communication between the Divisions, Offices and OIT. The 

briefings enable an effective feedback loop to ensure technology initiatives are closely tied to 

Division and Office needs. The Steering Committee has promoted more frequent 

communication between the Divisions, Offices and OIT to jointly manage the relationships and 

interdependencies between key SEC initiatives, including the EDGAR Modernization, Enterprise 

Data Warehouse, and SEC.gov Modernization.

 3 The “Technology Center of Excellence” refers to BCG recommendation 3c, which proposed implementation of a 

small office, structured as a joint venture between TM, RSFI and OIT, that would catalogue existing and emerging 

technologies and conduct assessments into the impact of these technologies on market behaviors and structures, with 

a strong emphasis on identifying any regulatory implications.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 24

8. Workstream 3F: Creating a surge capacity plan

The BCG report discussed the need for the SEC to develop the ability to quickly scale its 

workforce up and down to ensure it has adequate capacity to flexibly respond to changing 

mandates or market conditions (e.g., a severe market disruption). This working group developed 

a Surge Response Plan (SRP) to provide guidance to the SEC in “an event requiring temporary 

or short-term reprogramming or supplementing resources in order for the SEC to execute its 

regulatory duties” (i.e., a “surge”). To inform the SRP, the working group performed a 

comprehensive analysis of both the causes of, and responses to, surges by analyzing events 

occurring over the past 10 years. Based on the insight gained from that analysis, the group 

identified both the skills required to respond to common types of surges and the structural 

impediments to effective responses. The SRP and capacity development recommendations were 

refined based on feedback from key senior staff from across the SEC and other federal agencies, 

ensuring that best practices were utilized and known needs were addressed. The activities

recommended by the working group will better equip the Divisions and Offices to respond to 

surges and recruit diverse talent with appropriate skill sets when required to quickly scale up the 

workforce. In March of 2012, the SRP was transitioned to the SEC OCOO for implementation. 

9. Workstream 3H: Hiring staff for priority positions

The BCG report recommended that the SEC hire additional staff with high priority skills, 

building both capacity and capabilities across the agency. To address the initial finding, the 

working group completed an analysis of barriers to hiring people from industry4

. It was found

that comparatively low compensation rates and a lengthy and cumbersome hiring process were 

the key constraints to successfully hiring in some of the key skill areas. 

The appeal of providing public service, the benefits of a better work/life balance, and increased 

job security continue to attract experienced people with high priority skills to the organization. 

OHR is in the process of implementing a new SEC on-boarding program that addresses the 

unique needs of new employees (e.g., industry experts) while ensuring a consistent, quality onboarding experience for all new staff in the headquarters and Regional Offices. OHR has hired a 

 4 For the purposes of the analysis, people from industry are considered those who have experience in non-legal areas 

of capital markets including portfolio management, risk management, trading, and service providers to the industry.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 25

dedicated Human Capital Manager to implement and administer the on-boarding program, 

including policies, procedures, and communication media. The agency has already shown 

improvement in its ability to hire staff with high priority skills, including hiring individuals in 

CorpFin, OCIE, and ENF with experience in structured finance, financial instrument valuation, 

quantitative algorithms, automated high-frequency trading, and municipal derivative products. 

10. Workstream 3G: Developing a capability to monitor and manage market risk 

The BCG Report generally states that the SEC should increase its “risk-IQ” by increasing 

personnel and technological resources dedicated to risk analyses within the Division of Risk, 

Strategy, and Financial Innovation, and by embedding additional resources and capabilities 

within other Divisions and Offices. Activities now complete, or underway, in various Divisions 

and Offices from across the agency are consistent with this recommendation. 

Activities within the Division of Risk, Strategy, and Financial Innovation (RSFI)

• RSFI established the Office of Quantitative Research (OQR), whose responsibility is to 

develop custom analytics intended to inform monitoring programs across the SEC. 

• OQR staff developed a model used by the Division of Enforcement’s Asset 

Management Unit. For that project, OQR, together with OCIE, developed an 

analytical model that uses performance data to identify hedge fund advisers worthy of 

further review by either OCIE or the Asset Management Unit. In addition, OQR staff 

provides ongoing analytical support to and performs ad hoc research at the request of 

OCIE and ENF. This hedge fund initiative has been demonstrably successful,

resulting in, for example, 4 recent cases (Michael Balboa, ThinkStrategy, Patrick 

Rooney and LeadDog)

5

. The analytical tools have provided useful insights to OCIE 

staff during the examinations process.

• OQR staff is developing an Accounting Quality Model (AQM) that can assist staff 

tasked with reviewing financial information in detecting anomalies. The AQM team 

will use both commercially available data as well as structured data provided in 

 5 See http://www.sec.gov/news/press/2011/2011-252.htm.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 26

EDGAR filings to create a deep and rich database across a range of variables 

including operating results, capital formation, performance relative to peers and 

significant events. The model considers both correlations and anomalies within the 

data based on a series of “rules” and develops a risk profile associated with each filer. 

Examiners and reviewers can use the risk profile to prioritize staffing and conduct in 

depth assessments of financial disclosure. For example, the Division of Enforcement 

expects to use the model to support a risk based approach in allocation of

investigative resources. 

RSFI has augmented the Office of Risk Assessment staff with industry professionals who 

reach out to market participants and work across the SEC to integrate industry perspectives 

and intelligence into projects and initiatives.

Activities within other Divisions and Offices

• ENF created specialized units such as the Market Abuse Unit and the Asset Management 

Unit, and has hired numerous specialists with industry and other specialized experience to 

staff them. Among other initiatives, the Market Abuse staff has created a system to better 

analyze data from the Electronic Blue Sheets system to the fullest extent possible. The staff 

is also working on a tool that combines bluesheet data with other data sources (such as data 

on auditor engagements, company boards, and law firm and investment bank involvement in 

merger negotiations) and automates analyses that identify these patterns and relationships. 

Finally, the Market Abuse Unit is staffing an Analysis & Detection Center with industry 

specialists experienced in analyzing large sets of market and trade data. Five specialists have 

already been hired and two more are expected to be hired by fall 2012.

• OCIE has established specialized teams dedicated to reviewing data that it receives from 

various registrants. In particular, the Quantitative Analytics Unit and the Office of Risk 

Analysis and Surveillance are staffed to analyze the data that OCIE currently receives from 

various registrants, and we anticipate that those Offices, as well as other OCIE teams, will 

analyze the data from the consolidated audit trail.

• The Division of Trading and Markets (TM) has increased the number of quantitative riskprofessionals who support monitoring risks at regulated entities. For example, the Office of 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 27

Quantitative Risk Analysis is staffed by Ph.D. economists and other analytical professionals 

with expert knowledge of the models and methodologies used to measure risk at the largest

broker-dealers. Additional quantitative staff has been added to TM’s Office of Clearance and 

Settlement to augment the quantitative analysis of risk practices and models used by clearing 

agencies. The Division’s newly established Office of Analytics and Research is hiring 

market experts dedicated to the ongoing analysis and monitoring of the equity and equity 

options markets. In support of this new program, the SEC completed the acquisition of a 

highly-advanced market data analysis system in June of 2012, which quantitative risk and 

research staff from across the entire agency will use in the analysis of trades and quotes 

disseminated by public equity and equity option exchanges.

11. Workstream 2B: Conducting a Regional Organizational Assessment (ROA)

In response to a BCG recommendation stating that the SEC should make fundamental decisions 

about its design, operations and regional model, a ROA working group was established. The 

ROA working group consisted of four subcommittees focusing on: (1) further enhancing the 

Enforcement program, (2) increasing the efficiency and effectiveness of OCIE’s Exam Program, 

(3) developing a location strategy for the SEC, and (4) improving regional operational support 

functions. 

Enforcement Subcommittee

To continue building on progress to date, an Enforcement Subcommittee was established to 

identify additional opportunities to further enhance the effectiveness and efficiency of 

Enforcement functions. In November 2011, the subcommittee completed an analysis of six 

focus areas: 1) resource allocation; 2) staffing, structure and reporting lines; 3) reducing 

administrative burdens and identifying opportunities to streamline processes; 4) addressing 

technology challenges and improving the use of technology; 5) identifying opportunities to 

improve collaboration and communications with other Divisions and Offices within the 

Commission; and 6) recognizing and incentivizing excellence in performance by Enforcement 

personnel. The analysis included identification of current challenges, preliminary 

recommendations to improve the program’s processes and operations, and potential risks and 

issues for consideration. For example, the analysis showed that while distribution of monies to 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 28

harmed investors is an important function of the Division, this function was not an effective use 

of investigative staff resources. Accordingly, during the 3rd quarter of FY2012, the Office of 

Distributions brought administrative proceedings and new district court distributions into a

centralized model reducing risk to the agency by implementing a consistent and well 

documented process for handling new distribution plans. The centralization project also is 

significantly reducing demands currently placed on investigative attorneys after a judgment has 

been entered and when those resources could be addressing incoming leads and investigations. 

Based on the subcommittee’s recommendations, the Enforcement program in August 2012 

established an internal Advisory Committee focused on the continuous improvement of the 

Enforcement program. Members of the Advisory Committee will serve as co-chairs of four 

subcommittees focused on evaluating and improving specific aspects of Division operations: 

priorities, structure, technology and human capital. The Advisory Committee, together with 

senior leadership across the Division, will be responsible for studying and making 

recommendations for improvements to the Enforcement program and for implementing approved 

recommendations.

National Exam Program (NEP) Subcommittee

The NEP subcommittee was established to increase the effectiveness and efficiency of the Exam 

Program and to define a clear reporting structure for its national program. The subcommittee 

chose three primary focus areas: 1) resource allocation, 2) risk assessment process, and 3) 

clarification of roles and responsibilities between the Home Office and the Regions. In support 

of each focus areas, the subcommittee has completed an analysis, including identification of

current challenges and risks, and a set of options to improve NEP processes, operations, and 

reporting structures. 

NEP Focus Area 1- Resource Allocation

• During FY2012, the NEP implemented a process to allocate new hiring authority and 

vacancies to the programs and offices with the greatest needs, from a risk-based 

perspective. For example, in FY2012, this process resulted in allocations of additional 

staff to the examinations of clearing agencies, exchanges/self-regulatory organizations 

(SROs), and investment advisers, as well as the exam areas of broker/dealer large firm 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 29

monitoring, and quantitative analysis—all of which were identified as having particularly 

acute resource needs. In the area of training, the NEP initiated work with SEC University 

to revamp the NEP training program, both in terms of technical content and delivery 

mechanisms. 

NEP Focus Area 2 - Risk Assessment Process

• To address the risk assessment process, the NEP developed a shared, national risk 

framework that establishes a common terminology and process for identifying and 

communicating risk and identifying which registrants should be examined. The NEP also 

worked to enhance communication related to risk themes, exam outcomes and emerging 

risks and trends across the NEP. 

NEP Focus Area 3 - Clarification of Roles and Responsibilities

The NEP implemented several organizational and process changes to clarify roles and 

responsibilities for its major programs. The NEP Leadership Team will continue to 

review and clarify as necessary the roles of the Home and Regional Office through its 

governance process. 

Location Subcommittee

The Location Subcommittee evaluated the appropriateness of retaining the SEC’s current 

regional structure. The subcommittee undertook an analysis with the following goals for the 

SEC’s location strategy: 1) optimize the agency’s efficiency, productivity, and mission of

investor protection; 2) support the agency’s emphasis on specialization, staffing flexibility, and 

consistent nationwide programs; and 3) advance a location approach that takes into account the 

costs and benefits of each Regional Office and the regional structure as a whole.

The subcommittee undertook a qualitative and quantitative assessment of alternative location 

approaches. The subcommittee’s considerations included locating more staff in Regional Offices

and potentially opening offices in new locations (“decentralization”), consolidating staff in fewer 

Regional Offices or in the Headquarters Office (“consolidation”), and strategically growing
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 30

Offices and programs based on evolving needs and priorities (“strategic growth”)6, and identified 

the potential benefits and disadvantages of each alternative. The subcommittee also analyzed 

more than 50 data elements, including statistics and trends on exams, referrals, investigations, 

and cases; workforce data; real estate data; and, registrant, regulator and investor data. A

preliminary cost/benefit analysis of the key alternatives was undertaken, using these data 

elements and criteria related to how the alternatives support program missions and strategies, 

operations, financial benefits, the public and employees. The analysis did not reveal significant 

benefits to be achieved by changing the location strategy at this time. In the absence of a clear 

direction given the data, the subcommittee recommended the agency continue its current targeted 

strategic growth path, recognizing the need to reassess the strategy periodically as the dynamics 

of the SEC mission, resources and workforce change over time.

Regional Operations Subcommittee

The Regional Operations subcommittee evaluated the SEC’s regional operating model to 

improve how the SEC manages and supports operational functions (i.e., human capital, financial 

management, information technology, facilities, and security) in its Regional Offices. Its 

assessment considered the optimal alignment of responsibilities among Regional Offices, the 

Enforcement and Exam national programs, and support functions, as well as the clarification of 

the roles and responsibilities of the Assistant Regional Director of Operations (ARDO) position. 

To support its analysis, the subcommittee completed a study of the standard business practices of 

seven other federal government departments/agencies: the Federal Deposit Insurance 

Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Federal Bureau of 

Investigations (FBI), National Credit Union Association (NCUA), Environmental Protection 

Agency (EPA), Commodity Futures Trading Commission (CFTC), and the Executive Office of 

the United States Attorney (EOUSA). In January 2012, the subcommittee finalized its Current 

State Report, which included an assessment of current regional operations across the SEC’s 

Regional Offices and the effectiveness of 10 operational functions, including more than 200 

 6 One example of the agency’s implementation of its strategic growth methodology is the manner in which the 

Examinations and Enforcement programs are executing new external hire authority. Historically, new hires were 

spread across the offices in a pro rata manner. Under the strategic growth approach, the programs are able to 

allocate the positions by identified need.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 31

discrete activities. The report identified existing reporting relationships for each function, issues 

and/or gaps in roles and responsibilities, opportunities for improvements, and pending 

organizational changes that could impact regional operations. 

The subcommittee worked with OCOO, ENF and OCIE senior leadership to clarify roles and 

responsibilities between Regional Offices, Home Office, and the OCOO. As a result, the 

subcommittee developed a responsibilities matrix that defined specific roles and responsibilities 

for 10 operational support functions. Once finalized, a transition and implementation plan will 

be developed and executed under the leadership of the ENF and OCIE Managing Executives, 

and in coordination with the OCOO.

Workstream Decision Process Completed Outside the ESC Governance Process

The following workstream decisions were approved outside of the ESC process. Some of these 

initiatives were already in progress at the time of the BCG study. For example, the SEC had 

designed and begun the implementation and roll-out of the Evidence-Based Performance 

Management (EBPM) system prior to the BCG study. For the Outcome Oriented Performance 

Measures workstream, the SEC had already begun working with the Divisions and Offices to 

develop those measures. Finally, the administrative skills component of the hire staff for priority 

positions workstream received approval through the Human Capital Advisory Committee 

(HCAC).

12. Workstream 2C: Seeking flexibility from Congress on Dodd-Frank-mandated Offices 

The Dodd-Frank Act required the SEC to create four new Offices that report directly to the 

Chairman: the Office of Credit Ratings, the Office of the Investor Advocate, the Office of 

Minority and Women Inclusion, and the Office of Municipal Securities. As described in the 

BCG study, the creation of these Offices and their direct reporting line to the Office of the 

Chairman was primarily intended to increase the visibility of the functions that they contain, 

enhancing the degree of focus and resources accorded to them. The BCG study recommended 

the SEC seek the flexibility from Congress to design its organization structure in a manner 

consistent with the activities required to be performed by the Dodd-Frank-mandated Offices, 

while avoiding unnecessary duplication. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 32

Although the BCG recommendation was communicated to Congress, Congress has not indicated 

an intention to change the statute to enable the recommended structural flexibility. To date, the 

SEC has established the Offices of Minority and Women Inclusion, Credit Ratings, and

Municipal Securities, with newly hired directors on-board in all three Offices. The process for 

hiring the Investor Advocate is also well underway. 

13. Workstream 3E: Accelerating the roll-out of the SEC’s Evidence-Based Performance 

Management (EBPM) system

The SEC implemented an EBPM system for all non-supervisory staff in fall 2011. The system 

seeks to improve the agency’s previous performance management process by moving from a 

pass/fail rating scale to a five-point rating scale that allows for a stronger differentiation among 

levels of performance. OHR has delivered mandatory, multiple-hour training sessions to SEC 

managers, supervisors, and senior officers, as well as voluntary, two-hour training sessions to all 

employees. OHR has also made available on the agency’s intranet a variety of online resources, 

such as training modules, sample Performance Work Plans, and frequently asked questions. The 

EBPM process also has been automated, which improved its operation, management, report 

generation, and security. The system is linked directly to OHR’s Learning Management System 

to enable OHR to identify common areas of employee development, and to create and deploy the 

appropriate training. 

The system will become fully operational for non-bargaining unit staff in October 2012 in time 

to improve the close out of the FY2012 ratings and the initiation of the FY2013 cycle. The 

implementation of EBPM, along with pending new compensation structure changes, will provide 

a critical foundation for implementing pay-for-performance in the future by recognizing and 

rewarding employees based on their performance. 

In the spring 2012, OHR conducted another third-party evaluation of the system—per an 

agreement with the NTEU—and refined the EBPM based on the report’s recommendations and 

lessons learned from the 2011 performance assessment cycle. Key recommendations were to: 1) 

review and refine performance objectives, 2) provide additional training on system components 

and process, 3) provide additional training for managers to improve their ability to provide useful 

feedback throughout the cycle, 4) encourage collaboration between employees and their 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 33

managers to enhance communication, and 5) enhance the efficiency of the rating close-out 

period. The agency is in the process of adopting all these recommendations. 

14. Workstream 5A: Conducting an outcome-oriented performance measures feasibility study 

In order to assess the feasibility of developing outcome-oriented performance metrics to measure 

SEC progress in achieving the agency’s mission, and to update the existing SEC Strategic Plan, a 

Strategic Plan Addendum working group was established. Group members, including Division 

Directors, Office Heads, Managing Executives, and other representatives from the major 

Divisions and Offices, were tasked with documenting the agency’s strategic priorities and 

program initiatives. 

The effort culminated with the publication of performance measures and indicators for the 

Division of Enforcement. In addition, the SEC updated performance measures and indicators 

across the agency for internal management reporting and tracking. These updated performance 

measures and indicators more accurately reflect progress in meeting program objectives, are 

more easily reportable, and help identify ways to improve the efficiency and effectiveness of 

SEC programs. Through the Strategic Plan Addendum review process, the SEC also improved 

the way agency performance data is monitored, captured, and reported. By February 2014, as it 

prepares to update the strategic plan as required by the GPRA Modernization Act, the SEC will 

have undergone a comprehensive assessment of its performance measures.

15. Workstream 3H: Hire staff for priority skill positions – administrative skills

As part of the Hire Staff for Priority Skills Positions workstream, the working group conducted a 

critical review to identify ways to improve the administrative support services of the SEC. The 

working group undertook an extensive analysis of the necessary skill areas and existing 

expectations for administrative staff. Using this analysis, the SEC established an Administrative 

Staff Executive Committee that is working with selected Divisions and Offices to develop and 

implement specific action plans tailored to the needs of each group. Composed of leadership 

from both the support and mission facing Offices and Divisions, this committee will promote

accountability and efficiency across the SEC focused on addressing administrative skill 

deficiencies and implementing programs to improve these critical skill areas. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 34

Analysis, Design and/or Recommendations in Process

The following workstreams are at various stages of their analysis and/or recommendations.

16. Workstream 1A/B: Reprioritizing mission activities 

The BCG report recommended that the SEC undertake an agency-wide process to evaluate and 

reprioritize its mission critical activities and realign resources accordingly. This working group 

has been identifying activities that can be scaled back, stopped or delegated, as well as highpriority activities that should be scaled up. As part of this workstream, all Divisions and Offices 

inventoried and reviewed their activities. The workstream then selected certain activities to 

incorporate into this assessment process. The working group has identified a set of 8 activities

(outlined in Figure 5) where reprioritization is likely to have the greatest impact and therefore 

warrant further study to determine the appropriate scope for potential changes. As a next step, 

the working group anticipates conducting impact assessments to evaluate the levels of risk or 

opportunity the potential changes represent, together with anticipated resource requirements or 

savings, and projected impact for internal and external stakeholders. 

Figure 5: Potential Reprioritizing Mission Activities List 

Division/ 

Office Lead

 Activity Activity Description

Corporation 

Finance 

(CorpFin)

Screening and review of repeat issuer 

Securities Act registration statements 

and of Rule 424(b) filings

CorpFin would reassess the focus of its 

reviews of repeat issuer filings by studying 

the idea of (1) scaling back the screening 

and review of repeat issuer registration 

statements and (2) developing a program to 

screen and review Rule 424(b) filings for 

repeat issuer offerings.

Review of annual reports and other 

Exchange Act filings 

CorpFin would evaluate seeking a change in 

the Sarbanes-Oxley Act (SOX) mandate for 

the review of annual reports of all issuers 

once every three years, and would study the 

possibility of smaller companies being 

reviewed less frequently than once every 

three years and more of the largest 

companies being subject to continuous 

review.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 35

Division/ 

Office Lead

 Activity Activity Description

ENF

Process involving seeking approval of 

Enforcement Recommendations

ENF would work with other divisions and 

offices to assess the action memo process. 

The assessment would entail analyzing the 

current process to understand and quantify 

the resources presently expended to draft, 

edit, and finalize an action memo, and to 

consider alternative approaches to ensure 

appropriate and timely input by divisions 

and offices in the investigative process. The 

ultimate objective of the assessment would 

be to reduce the amount of agency-wide 

resources expended on an action memo 

while maintaining, or even improving, the 

impact of the crucial role that other 

divisions and offices play in the 

Enforcement process. 

Microcap/Penny Stock/Market 

Manipulation investigations and 

Delinquent Filings 

ENF would continue efforts to study the 

current approach to Microcap/Penny 

Stock/Market Manipulation investigations, 

and the statutory and regulatory framework, 

to determine how best to implement 

improvements and consider what additional 

frameworks might improve our ability to 

combat fraud in this market in the most 

resource-efficient way. Additionally, ENF 

would evaluate potential frameworks for 

increasing the number of deregistration 

actions, including possible legislative 

solutions. 

Investment 

Management

(IM)

Review and process “routine” 

exemptive applications under the 

Investment Company Act 

IM would study the extent to which 

adoption of exemptive rules codifying 

routine exemptive applications would allow 

for decreasing the staff resources spent on 

standard application reviews. 

OCIE Section 31 exams

A joint OCIE, OFM, RSFI, and OCA 

working group is assessing whether to 

recommend that the Commission undertake 

a rulemaking requiring each SRO to: (1) 

establish and maintain a Section 31 

compliance plan; (2) establish controls and 

procedures for ensuring accurate and 

complete reporting of covered sales 

volume(s) & payment of Section 31 fees; 

and (3) perform annual internal audits of 

related controls and procedures.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 36

Division/ 

Office Lead

 Activity Activity Description

RSFI

Review, develop and implement general 

models and identify metrics used for 

risk assessment 

The impact assessment will study whether 

and how RSFI could further expand risk 

assessment programs and applications. It 

should address RSFI’s capacity for building 

and supporting tools used across by staff in 

other SEC offices and divisions. 

Trading and 

Markets

(TM)

Administer the market supervision 

program to (i) perform oversight of 

markets for listed equity securities and 

standardized options, (ii) implement 

rules and policies related to market 

structure, (iii) analyze and coordinate 

responses to market events, and (iv) 

administer new market data analysis 

program and prepare related studies

TM would evaluate the resources required 

to better oversee the equity and options 

markets and address significant market 

structure issues and developments.

A number of these recommendations would likely require action by the full Commission to be 

implemented. In addition to these assessments, Divisions and Offices have already undertaken 

initiatives in many other areas during the course of this review to improve the effectiveness and 

timeliness of their activities and to make more effective use of SEC resources.

17. Workstream 2D: Reviewing the Commission/staff interaction process and delegation of 

authority 

BCG recommended that the SEC review decision-making processes used by the Commission 

and agency staff to provide clarity on delegated authority, increase transparency for the 

Commission in areas where authority is delegated, and increase efficiency in Commission/staff 

interactions in areas where authority is retained by the Commission.

In response, a working group met with Commissioners’ Offices and senior staff from the 

Divisions and Offices to discuss alternative ways to address the three components of the 

recommendation. Based on these discussions, a review of existing delegations of authority, and 

an analysis of the current processes developed in light of these delegations, the working group 

did the following:
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 37

• To enhance clarity on delegated authority, the working group developed a proposed 

process for periodic review of existing delegations to determine whether they should be 

eliminated or modified, or if new delegations should be granted.

• To increase transparency for the Commission in areas where authority is delegated, the 

working group developed a process by which each person with delegated authority would 

notify Commissioner Counsels in advance of potentially significant exercises of 

delegated authority. An analogous process is already in place in the Division of Trading 

and Markets for SRO rule filings that involve potentially novel, high-profile, or 

controversial issues. In addition, where not already being done, each person with 

delegated authority would be responsible for maintaining a log of each exercise of 

delegated authority.

• To provide context, the working group prepared a comprehensive list of current 

delegations of authority.

The working group has continued to socialize the draft recommendations for periodic review of 

existing delegations and advance notice of significant exercises of delegated authority with 

Commissioners and staff. However, due to limited bandwidth and the time required to address 

other SEC priorities, the working group put on hold further efforts to implement the draft 

recommendations. As priorities shift, the SEC could reevaluate the timing and focus on this 

matter.

18. Workstream 3D: Restructure OHR (Workforce Planning)

In order to provide the agency with a better understanding of the gap between division or office 

workload and the workforce available to fulfill it, OHR has undertaken in-depth analysis of the 

SEC’s workforce. Components of this analysis, discussed below, will assist in the development 

of a new workforce planning function to mitigate workforce risks and enhance the SEC’s day to 

day management of human capital, improve its understanding and mitigation of human capital 

risks, making the agency more responsive to a changing environment and more productive in 

protecting investors.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 38

In 2011, OHR prepared a workforce profile of the SEC’s personnel and organizational structure 

that provided a snapshot of the current workforce composition (i.e., number and type of mission 

critical occupations, education, tenure, supervisory status), and historical and current workforce 

trends (e.g., attrition and separation rates, retirement eligibility, and on-boarding and new hire 

levels) to better understand future workload risks. The analysis identified a number of 

workforce-related risks, including high attrition and loss of institutional knowledge due to 

retirement. It included profiles at the individual Office level, providing data that enables detailed 

analysis. With this data, managers have been given a clear picture of their current workforce, 

and can compare it to expected future needs, enabling them to adapt to changing trends in a 

timely manner. The SEC used the workforce profile to inform its 2012 position allocations and 

recruitment efforts at the Division and Office level and to enable more effective coordination 

with OHR, develop the FY2012 Human Capital Strategic Plan, and respond to workforce 

inquiries. In addition, the workforce profile will serve as a key element in formalizing a process 

for workforce decision-making. Formalization of the process will take place in 2013, when the 

new Workforce Planning function becomes operational.

OHR also assessed total workload of support offices and an assessment of the remaining offices 

will begin in 2013. Using findings from this assessment, the Divisions and Offices will be better 

positioned to anticipate and plan for changes to the work, match resources to meet workforce 

needs, and justify additions or reallocation of resources.

19. Workstream 3G: Enhancing the SEC’s Operational Risk Management capabilities

The Operational Risk Management (ORM) Program Office’s mission is to enhance the agency’s 

ability to proactively identify, correct, and mitigate operational risk. Since its inception in the 

spring of 2011, the Office has worked to cultivate an environment which minimizes operational 

risk, while providing a process to mitigate and effectively manage identified risks and ensure that 

corrective actions are established and executed. 

A new ORM manager was hired in August 2012 and is anticipated that additional ORM staff will 

be brought on board during FY2013. Despite the absence of a Director during much of the past 

year, the activities of the ORM Program Office continued to evolve. Key accomplishments of 

the ORM Program Office include the following:
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 39

• In FY 2011, risk assessments were completed for core processes in several SEC 

Divisions and Offices including: OFM, OHR, OAS, RSFI, and OCIE. In addition, in FY 

2011, the SEC deployed a Governance Risk and Compliance (GRC) tool to capture, 

monitor, and report risk information gathered from the self-assessments. This first 

generation GRC tool cataloged information about risks (e.g., a risk description, impact, 

likelihood, and overall risk rating), controls (e.g., the control objective, description, 

frequency, method, type, and owner), deficiencies, and corrective action plans. In total, 

the GRC captured over 400 operational risks and 600 related controls during FY 2011. 

Building on experience, every SEC Division and Office participated in the risk 

assessment process in FY2012. Based on feedback gathered after the FY 2011 risk 

assessment process, several improvements and refinements were made to the GRC tool in 

FY 2012. These enhancements not only made the GRC a more user-friendly resource 

and they improved the quality of risk and control data across the agency. 

• Divisions and Offices have dedicated points of contact for operational risk management 

activities. These individuals (i.e., Managing Executives, Business Managers, and others) 

meet to discuss risks and internal controls in the context of the SEC’s management 

assurance process. These meetings are conducted in conjunction with centrally-managed 

risk management and management assurance trainings, as well as technical assistance 

activities, in order to establish a consistent SEC-wide approach to assessing and 

managing operational risk. 

The SEC also assesses its risk management program through the annual entity-level control 

assessment, which evaluates the effectiveness of the controls that operate across the organization, 

including those related to risk management. This assessment, which is supported by OCOO staff 

and contractors, evaluates each SEC Division and Office to validate that the necessary 

assurances are in place to achieve organizational missions, goals, and objectives effectively. 

With a new manager on board, the ORM program will continue to build strong operational risk 

capabilities across the SEC. 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 40

20. Workstream 4ABC: Strengthen Oversight of Self-Regulatory Organizations (SROs); 

Centralize and Coordinate Self-Regulatory Organization Interactions

Given that the SEC’s relationship with SROs has both supervisory and co-regulatory aspects, a 

cornerstone recommendation of the BCG study was that the SEC strengthen its relationship, 

coordination and collaboration with SROs. BCG recommended that the SEC (1) strengthen 

oversight, and (2) centralize and coordinate an approach to SRO interactions. 

Strengthening SRO Oversight

As previously reported, in 2011 OCIE conducted in-depth risk assessments of each national 

securities exchange and FINRA to establish a baseline for strengthening OCIE’s exam plan and 

its risk-targeted exams. These assessments create a current “snapshot” of each exchange, 

including a high-level understanding of the exchange’s business lines, regulatory programs, and 

compliance controls and risk profiles. OCIE staff used the results of the assessments to 

determine where it should focus its scarce SRO resources in 2012 and to inform oversight 

initiatives. Based on the results of the 2011 assessments, OCIE is now in the process of 

conducting a number of risk-based exams of various SROs.

An SRO working group comprised of OCIE and TM staff is conducting a systematic evaluation 

of the current SRO regulatory structure and oversight. The working group formed two task task 

forces, both of which have taken into consideration the SRO assessment results from 2011: 

• Task Force 1: Reviews and analyzes the disclosures that SROs make, both to the public 

and the SEC, regarding regulatory operations.

• Task Force 2: Reviews and analyzes the feasibility of using more defined metrics and 

standards to assist the SEC’s oversight of SROs. 

Enhancing Oversight of FINRA

OCIE staff is finalizing a review of FINRA, focused on the substantive issues relating to national 

securities associations set forth in Dodd-Frank Section 964, including: governance, funding, 

exams and examiners, executive compensation, arbitration services, advertising review 

programs, cooperation with and assistance to the states, policies regarding the employment of 

former employees by registered entities, the effectiveness of rules, the transparency of 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 41

governance and activities, and other issues that may have an impact on the effectiveness of 

FINRA performing its mission and dealing fairly with investors and members. OCIE staff has 

completed an interim report and briefed the Commission on its review of FINRA. OCIE is 

completing the final report, which will include a risk-based framework for identifying potential 

areas for examination at FINRA in the future.

Increasing Communication and Outreach

The working group developed an SRO Communications Plan in response to concerns expressed 

to BCG by the SROs regarding communication with SEC staff. Building on the SRO 

Communications Plan, which included targeted and tactical communications such as the SRO 

Outreach Conference (January 2012), and periodic meetings with each SRO and internal SEC 

staff regarding SROs, the SEC continues to enhance its engagement with the SROs. The SRO 

Communications Plan also creates a designated point of contact (POC) in both OCIE and TM for 

each SRO. The POCs serve as a resource to help facilitate communications, including meetings, 

between the SRO and the SEC staff. Regular meetings between SEC and SRO staff aid OCIE 

and TM in identifying risks at the various SROs and developing a better understanding of 

business decisions made by the SROs. OCIE and TM staff have begun planning for the 2013 

SRO Outreach Conference, and will collaborate with the SROs to inform the agenda and format 

of the conference.

Strengthening and Clarifying Processes for Self-Regulatory Organization Rule Proposals 

Under Section 19 of the Securities Exchange Act of 1934 (“Exchange Act”), SROs are required 

to file their proposed rule changes with the Commission. TM reviews proposed rule changes 

submitted by SROs for compliance with the Exchange Act. Once a proposed rule change is 

filed, the Commission is required to publish notice of the proposal for public comment. A 

proposed rule change may not take effect unless it is approved by the Commission or is 

otherwise permitted to become effective. The rule filing requirement provides an opportunity for 

Commission review, informed by public input, of SROs’ proposed rule changes.

In 2008, the agency strengthened and clarified the SRO rule filing process to increase the number 

of proposals that are filed for immediate effectiveness and the speed by which the SEC publishes 

notice of an SRO’s proposals. The percentage of proposed rule changes filed for immediate 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 42

effectiveness under Section 19(b)(3)(A) increased from approximately 56 percent in FY2008 to 

approximately 77 percent in FY2011. Recently, Congress amended Section 19 of the DoddFrank Act to establish new deadlines by which the agency must publish and act upon proposed 

rule changes submitted by SROs. A representation of the statutory deadlines that are applicable 

to the SRO proposed rule changes submitted in the statute are outlined in Figure 6.

Figure 6: SRO Proposed Rule Changes under Section 19 of the Securities Exchange Act

The BCG report contained a number of recommendations to further strengthen and clarify the 

SRO rule filing process. In response to the BCG report, TM staff has examined the SRO rule 

filing process and identified four areas of focus: 1) the provision of additional guidance to SROs 

on the rule filing process, 2) enhancement of the SEC’s process of reviewing SRO proposed rule 

changes, 3) assessment and enhancement of the skills and tools available to TM staff who review 

SRO proposed rule changes, and 4) assessment of whether further statutory changes to the rule 

filing process contained in Section 19 may be appropriate.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 43

SRO Rule Filing Guidance

In response to the BCG report, TM focused on three specific recommendations: 1) clarify and 

publish clearer standards for when and under what circumstances an SRO must file a rule 

change, 2) instill greater transparency by communicating to the SROs the status of specific steps 

in the review of a given rule and publishing a more detailed process map, and 3) create and 

publish templates that can be used by SROs for common rule filings. 

At the inaugural SRO Outreach Conference in January 2012, TM staff focused on directly 

addressing each of the three recommendations. Specifically, TM staff presented and distributed 

rule filing guidance and materials that were directly responsive to BCG’s recommendations. The 

materials included detailed process maps outlining the lifecycle of a rule filing and the specific 

staff responsibilities in review of rule filing, a written summary of the standards for when an 

SRO must file a rule change, and an explanation of the various provisions contained in the Form 

19b-4 template for rule filings. After the Outreach Conference, TM staff made the materials 

electronically available to all SROs via the secure web-based electronic form filing system. This 

system is used by SROs to submit the rule filings to SEC staff, and will ensure the information 

shared at the conference remains continually available and easily accessible to SRO staff. With 

the completion of the 2012 SRO Outreach Conference and its effort to make rule filing materials 

accessible to the SROs, this recommendation has been addressed. 

Rule Review Process Enhancement

The second initiative focused on assessing the internal processes followed by the SEC in its 

review of SRO proposed rule changes. Given the limited resource capacity in light of competing 

project and mission requirements, the staff has not been able to undertake a comprehensive 

analysis of potential improvements to the internal SRO rule review process. Nevertheless, TM 

has continued to consider ways to enhance the agency’s process. For example, TM has analyzed 

and is planning enhancements to the electronic form filing system for SRO rule changes, 

including ways to capture and reflect in the system more information on filings. TM staff is 

considering how to conduct the post-Dodd-Frank SRO rule change review process in a manner 

that allows it to progress efficiently, while providing opportunities for input from relevant 

parties. The circulation to Commissioners’ Offices and key senior staff of a written Dashboard 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 44

of Noteworthy SRO Rule changes has assisted the staff in informing and engaging the 

Commission on important proposals early in the review process. 

Staff Skills and Tools

TM staff, in partnership with SEC University, is currently conducting a training needs 

assessment to inform the development of a training program to enhance skill diversity and the 

tools available to TM staff. The assessment includes both focus groups and a survey that is 

intended to provide all staff members the opportunity to give feedback regarding the Division’s 

training needs and input into the ultimate scope and design of the Division’s training initiative. 

After the training needs of the Division have been assessed and a training program has been 

developed, the Division will consider the development of appropriate metrics to assess staff 

performance.

Statutory Authority

Finally, the BCG report recommended that the SEC determine if recommendations should be 

made for Congress to amend the Exchange Act so that some rules may be self-certified by the 

SROs, or to allow the SEC to discontinue its review of certain types of filings. The Dodd-Frank 

Act substantially revised the Exchange Act provisions applicable to SRO proposed rule changes. 

In response, the SEC has revised the way it reviews and processes proposed rule changes 

submitted by SROs. In July 2012, following the two-year anniversary of the Dodd-Frank 

statutory changes to the SRO rule filing process, TM staff began a project to study and the new 

Exchange Act provisions and explore possible further enhancements for the process. The project 

team will assess whether any aspects of the process might benefit from further statutory changes. 

Conclusion

The BCG report recommendations provided the SEC with an opportunity to assess and 

implement improvements to the agency’s core internal infrastructure: redesigning organizations, 

enhancing risk management capabilities and internal controls, strengthening the agency’s 

understanding of its workforce strengths, improving processes to improve customer service,

managing resources, and building valuable capabilities. Over the past 18-months, the SEC has 

made significant strides in responding to all of the recommendations. All major Divisions and 
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 45

Offices have undertaken process improvement initiatives to improve the effectiveness and 

timeliness of their activities and to make more effective use of resources; RSFI is collaborating

with OCIE, ENF, TM on new market risk management tools and capabilities to embed a stronger 

“risk IQ” within the SEC; ENF, OCIE and OCOO are working to clarify roles and 

responsibilities between Regional Offices, Home Office and the OCOO, to better align and more 

effectively utilize resources. The SEC has also benefited from the early impact of initiatives 

such as the CIP; the OIT re-design, implementation, and “Spend to Save” initiative, and the 

sweeping organizational and process changes occurring in OHR, OAS, and OFM. 

Going forward, the SEC is in the process of transitioning from MAP as a stand-alone program to 

applying the principles of continuous improvement, collaboration and coordination in executing 

its mission across all of its Divisions and Offices. In the initial analysis and recommendations 

phase of MAP, additional subject matter and functional expertise was required from outside 

consultants, and significant demands were put on staff time. Since then, in order to balance the 

MAP activities with additional work dictated by the Dodd-Frank Act, and the agency’s many 

other ongoing obligations, the SEC has prioritized its efforts toward implementing those 

initiatives yielding the greatest potential for more immediate operational impact activities. 

Further, the activities are now being executed primarily by SEC staff, with program management 

support as required, resulting in a reduction in related agency expenditures by more than 90%.

The SEC recognizes that successful implementation of many of the recommendations require a 

multi-year and sustained effort. As it continues to implement the recommendations, the SEC 

remains committed to an open and transparent process.
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 46

Appendix A: Acronym List 

Term Acronym 

Assistant Regional Director of Operations ARDO

Boston Consulting Group BCG

Business Management Group BMG

Capital Planning and Investment Control Process CPIC

CBOE Holdings Inc. CBOE

Commerce Clearing House CCH

Commodities Futures Trading Commission CFTC

Continuing Legal Education units CLEs

Continuing Professional Education units CPEs

Continuous Improvement Program CIP

Contracting Officer Representative COR 

Corporation Finance CorpFin

Federal Shared Service Provider FSSP

Division of Enforcement ENF

Division of Investment Management IM

Division of Risk, Strategy & Financial Innovation RSFI

Division of Trading and Markets TM

Enterprise Data Warehouse EDW

Environmental Protection Agency EPA

Equal Employment Opportunity EEO

Evidence-Based Performance Management EBPM

Exam Feedback System EFS

Executive Office of the United States Attorney EOUSA

Executive Steering Committee ESC

Expected Service Hiring Authority ESHA

Federal Bureau of Investigations FBI

Federal Deposit Insurance Corporation FDIC

Financial Industry Regulatory Authority FINRA

General Accounting Office GAO

General Services Administration GSA

Governance Risk and Compliance GRC

Government Accountability Office GAO

Government Purchase Cards GPC

Human Resources Information Systems HRIS

Inter-market Surveillance Group ISG

Jumpstart Our Business Startups Act JOBS Act
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 47

Term Acronym 

Learning Management System LMS

Mission Advancement Program MAP

Municipal Securities Rulemaking Board MSRB

National Credit Union Association NCUA

National Exam Program NEP

National Treasury Employees Union NTEU

Nationally Recognized Statistical Ratings Organization NRSRO

NYSE Euronext NYX

Office of Acquisition OA 

Office of Administrative Services OAS

Office of Analytics and Research OAR

Office of Compliance Inspections and Examinations OCIE

Office of Financial Management OFM

Office of Human Resources OHR

Office of Information Technology OIT

Office of Inspector General OIG

Office of International Affairs OIA

Office of Quantitative Research OQR

Office of Risk Analysis and Surveillance RAS

Office of Support Operations OSO

Office of the Chief Accountant OCA

Office of the Chief Data Officer OCDO

Office of the Chief Operating Officer OCOO

Office of the Comptroller of the Currency OCC

Office of the General Counsel OGC

Operational Risk Management ORM

Over-The-Counter OTC

Plan of Action and Milestone POA&M

Point of Contact POC

Public Building Service PBS

Public Company Accounting Oversight Board PCAOB

Regional Organizational Assessment ROA

Request for Proposal RFP

Sarbanes-Oxley Act SOX

Securities Investor Protection Corporation SIPC

Self-Regulatory Organization SRO

Senior Technology Officer STO

Specialized Working Group SWG
THIRD REPORT ON THE IMPLEMENTATION OF SEC ORGANIZATIONAL REFORM RECOMMENDATIONS

PAGE 48

Term Acronym 

Surge Response Plan SRP

Tips, Complaints and Referrals TCRs

Securities and Exchange Commission SEC

Workforce Planning WFP