Fiscal 2007

Congressional Budget

Request

United States

Securities and Exchange

Commission

February 2006

In Brief
Securities and Exchange Commission 

($ in thousands) 

Fiscal Year 2006 Enacted: 

Appropriated Offsetting Collections, Current Year .............. $863,117.0 

Available Balances, Prior Year ............................. $ 25,000.0 

Total Fiscal Year 2006 Spending Authority .............. $888,117.0 

Fiscal Year 2007 Request: 

Appropriated Offsetting Collections, Current Year .............. $890,846.0 

Deobligated Balances, Prior Years .......................... $ 14,000.0 

Total Fiscal Year 2007 Request. ....................... $904,846.0 

Appropriations Language 

For necessary expenses for the Securities and Exchange Commission, including services as 

authorized by 5 U.S.C. 3 109, the rental of space (to include multiple year leases) in the 

District of Columbia and elsewhere, and not to exceed $3,000 for official reception and 

representation expenses, $904,846,000, to remain available until expended; of which not to 

exceed $13,000 may be used toward funding a permanent secretariat for the International 

Organization of Securities Commissions; and of which not to exceed $100,000 shall be 

available for expenses for consultations and meetings hosted by the Commission with foreign 

governmental and other regulatory officials, members of their delegations, appropriate 

representatives and staff to exchange views concerning developments relating to securities 

matters, development and implementation of cooperation agreements concerning securities 

matters and provision of technical assistance for the development of foreign securities 

markets, such expenses to include necessary logistic and administrative expenses and the 

expenses of Commission staff and foreign invitees in attendance at such consultations and 

meetings including: (1) such incidental expenses as meals taken in the course of such 

attendance; (2) any travel and transportation to or from such meetings; and (3) any other 

related lodging or subsistence: Provided, That fees and charges authorized by sections 6(b) of 

the Securities Exchange Act of 1933 (1 5 U.S.C. 77f(b)), and 13(e), 14(g) and 3 1 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78m(e), 78n(g), and 78ee), shall be credited to 

this account as offsetting collections: Provided further, That not to exceed $890,846,000 of 

such offsetting collections shall be available until expended for necessary expenses of this 

account: Provided further, That $14,000,000 shall be derived from available balances of 

funds previously appropriated to the Securities and Exchange Commission that were obligated 

in previous years and have subsequently been deobligated: Provided further, That the total 

amount appropriated under this heading from the general fund for fiscal year 2007 shall be 

reduced as such offsetting fees are received so as to result in a final total fiscal year 2007 

appropriation from the general fund estimated at not more than $0. 
Position and Cost Data for Fiscal Years 2005 - 2007 

-. 

:nforcement 

Headquarters 

Regions and Districts 

Total 

Iompliance Inspections and Examinations 

Investment Management 

Headquarten 

Regions and Districts 

Subtotal 

Market Regulation 

Headquarters 

Regions and Districts 

Subtotal 

Total 

:orporation Finance 

krket Regulation 

nvestment Management 

kneral Counsel 

Headquarters 

Regions and Districts 

Total 

Nher Program Omces 

Chief Accountant 

Investor Education and Assistance 

International Mairs 

Economic Analysis 

Risk Assessment 

Administrative Law Judges 

Total 

eency Direction and Administmtive Support 

Executive Staff 

Public Affairs 

Secretary 

Executive Director 

Financial Management 

Human Resources 

Administrative Services 

Filing and Information Services 

Information Technology 

Equal Employment Opportunity 

Inspector General 

Total 

'otal FTE and Positions 

Headquarters Total Permanent 

Regional Office Total Permanent 

Temporary 

Staff Salaries 

Personnel Benefits 

Other Personnel Compensation 

tub-total Cost of Salaries 

Nher Expenses 

Benefits for Former Personnel 

Travel and Transportation of Persons 

Tramportation of Things 

Communications and Rental 

Printing and Reproduction 

Other Services 

Supplies and Materials 

Equipment 

Buildmg Alteratiom 

Claims and Indemnities 

tub-total Cost of Other Expenses 

pen- Authority 

FTEs Positions Cost Cost 

FY 2007 Request 

FTEs Positions Cost 
Summary of Changes 

($ in thousands) 

FY 2006 FY 2007 Net 

Enacted Request Change 

Spending Authority.. ................... $888,117.0 $904,846.0 +$16,729.0 

Full-time Equivalents. ................. 3,764 3,685 -79 

Positions. ................................. 3,916 3,916 --I 

Explanation of Changes: 

One-time FY 2006 Adjustments 

Positions 

" 

Building alterations - - - 

Adiustment in Full-time Equivalents J 

--- 

Subtotal. .............................. 

FTE Amount 

FY 2006 Base Changes 

Annualization of FY 2006 pay raise --- -" - +4,750.6 

FY 2007 pay raise --- --- +9,697.8 

Promotions and merit pay increases "-- --- +17,608.5 

Increases in space rent & utilities --- - - - +6,553.8 

Non-compensation inflation --- - - - - +3,215.0 

Subtotal. - - - - - - +$41.825.7 .............................. 

FY 2007 Program Increase 

Information Technology - 

- 

- - - --- +$15?256.7 

Total Change.. ......................... 
Narrative Explanation of Changes 

One-time Adjustments from FY2006 

1. Building; alterations. The decrease of $27.8 million from the FY 2006 level results from 

the SEC's fully extinguishing the build-out costs associated with the completion of the 

SEC's new headquarters building at Station Place, along with its new Boston and New 

York offices. 

2. Adiustment in Full-time Equivalents. This adjustment of $12.6 million reflects the 

annualization of the staffing decreases that will occur in FY 2006 as the SEC returns to its 

historic lapse rate of 6 percent. 

Base Changes for FY2007 

Annualization of FY 2006 pay raise. The requested $4.8 million provides for the 

annualization of the FY 2006 3.1 percent pay raise that became effective in January 2006. 

FY 2007 pag raise. The requested $9.7 million provides funding for a 2.3 percent pay 

raise, effective January 2007. 

Promotions and merit pay increases. The requested $1 7.6 million provides funding for 

merit pay increases and career ladder promotions of eligible staff. This amount includes 

the costs of maintaining the SEC ' s pay- for-performance pay system. 

Increases in space rent and utilities. The requested increase of $6.6 million is necessary 

for mandatory increases associated with the rental of space and utilities. These finds will 

cover full-year rent and utility costs in the new headquarters and regional offices in New 

York and Boston, as well as higher rates for space rent at other SEC facilities. 

Non-compensation inflation. The requested $3.2 million funds an overall increase in nonpersonnel expenses of approximately 1.7 percent. This amount will cover inflation and 

other necessary expenses. 

Program Change 

1. Information Technology. The requested $15.3 million will provide the SEC with the 

funding necessary to continue investing significant resources in technology, for initiatives 

such as integrating interactive data into financial disclosure filings, streamlining the 

disclosure process for filers and investors, and deploying new enforcement case and 

examination management systems. With these funds, the SEC's information technology 

program also will return to the overall hnding level provided in FY 2005. 
SEC Strategic Goals 

Goal I: Enforce Compliance With Federal Securities Laws 

The Commission seeks to detect problems in the securities markets, prevent and deter violations of 

federal securities laws, and alert investors to possible wrongdoing. When violations occur, the SEC 

aims to take prompt action to halt the misconduct, sanction wrongdoers effectively, and, where 

possible, return funds to harmed investors. 

Goal 2: Promote Healthv Capital Markets Throuxh an Effective and Flexible Regulatorv 

En vironm en t 

The savings and investments of every American are dependent upon the maintenance of healthy 

capital markets. The Commission seeks to sustain an effective and flexible regulatory environment 

that will facilitate innovation, competition, and capital formation to ensure that our economy can 

continue to grow and to create jobs for our nation's future. Enhancing the productivity of America is a 

key goal that the SEC works to achieve by increasing investor confidence in the capital markets. 

Goal 3: Foster Informed Investment Decision Making 

An educated investing public ultimately provides the best defense against fraud and costly mistakes. 

The Commission works to promote informed investment decisions through two main approaches: 

reviewing disclosures of companies and mutual funds to ensure that clear, complete, and accurate 

information is available to investors; and implementing a variety of investor education initiatives. 

Goal 4: Maximize the Use of SEC Resources 

The investing public and the securities markets are best served by an efficient, well-managed, and 

proactive SEC. The Commission strives to improve its organizational effectiveness by making sound 

investments in human capital and new technologies, and by enhancing internal controls. 

FY 2007 Request by Strategic Goal 

($ in Millions) 

Goal 4: $65M 

Goal3: $121M 

14% \ - 7% 

Goal2: $65 

7% 

Goal 1 : $636M 
2005 Accomplishments by Strategic Goal 

FY 2005 was a year of tremendous accomplishment for the SEC on many different 

fronts. The agency's major achievements are discussed below, organized by the SEC's four 

goals, as established under the agency's five-year strategic plan. These goals may change as 

the Commission develops a new strategic plan over the next year. 

Goal 1: Enforce Compliance with Federal Securities Laws 

The SEC continued its efforts to improve compliance with the federal securities laws 

through enforcement activities and ongoing inspections of regulated entities. 

Enforcement Proflam: In FY 2005, the SEC initiated 947 investigations, 335 civil 

proceedings, and 294 administrative proceedings covering a wide range of issues, including 

mutual fund and investment adviser fraud, accounting fraud, and failures at self-regulatory 

organizations. The Commission prevailed in the great majority of the enforcement actions 

decided by district courts or administrative law judges, and a total of more than $3 billion in 

disgorgement and penalties was ordered in SEC enforcement cases. Whenever practical, the 

Commission sought to return hnds to harmed investors through the use of disgorgement or 

the "Fair Funds" provision of the Sarbanes-Oxley Act. The Commission also worked with 

foreign authorities to obtain information for use in cross-border enforcement matters and 

responded to foreign regulators' requests for assistance. The following are some of the 

notable enforcement actions taken by the SEC in FY 2005. 

Actions involving mutual funds and investment advisers: The SEC brought several 

significant fraud cases in the mutual fund and investment adviser area. For example, the 

Commission addressed market timing abuses in cases against (i) Canadian Imperial Holdings 

and CIBC World Markets; (ii) Banc of America Capital Management, BACAP Distributors, 

and Banc of America Securities; and (iii) Columbia Management Advisors and Columbia 

Funds Distributor. In those three cases alone, the SEC ordered disgorgement, prejudgment 

interest, and penalties of $640 million, all of which will be distributed to investors harmed by 

the conduct. 

In another case involving a substantial fraud, the SEC brought an action against two 

Citigroup subsidiaries: Smith Barney Fund Management and Citigroup Global Markets. In 

the proceeding, the Commission found that the respondents misrepresented and omitted 

material facts when recommending to the boards of the mutual funds that the funds change 

from the third-party transfer agent they previously used to an affiliated Citigroup transfer 

agent. The respondents agreed to pay $208 million in disgorgement, prejudgment interest, and 

penalties, which will be returned to investors pursuant to a distribution plan. 

Actions involving accountingffaud, disclosure, and auditing failures: The SEC 

brought a number of cases relating to financial reporting misconduct, including major fraud 

actions against Time Warner and Qwest Communications International. Both cases involved 

inflated or improperly recognized revenue, among other violations. Time Warner agreed to 
pay $300 million in penalties, and Qwest agreed to pay $250 million in penalties, all of which 

will be distributed to harmed investors. The SEC addressed disclosures of executive 

compensation in a case against Tyson Foods and its former CEO, Donald Tyson, alleging that 

the company made misleading disclosures of perquisites and personal benefits provided to 

Donald Tyson. Tyson Foods agreed to pay a $1.5 million penalty, and Donald Tyson agreed 

to pay a $700,000 penalty. 

In significant cases relating to audit failures, the SEC charged Deloitte & Touche in 

connection with its audits of Adelphia Corporation, and KPMG in connection with its audits 

of Xerox. Deloitte's charges stemmed from its failure to detect a massive fraud perpetrated by 

Adelphia and certain members of the Rigas family. Deloitte consented to pay a $25 million 

penalty in the federal court action and $25 million in a separate administrative proceeding. 

The firm also agreed to undertakings designed to address future audits of high-risk clients. 

The entire $50 million will be deposited into a hnd to compensate victims of Adelphia's 

fraud. In the KPMG matter, the SEC charged the firm with permitting Xerox to manipulate its 

accounting practices to overstate equipment revenues by $3 billion and its true earnings by 

approximately $1.5 billion during a four-year period. The SEC also found that KPMG 

violated its obligations to disclose to Xerox illegal acts that came to its attention during the 

Xerox audits. KPMG consented to pay a total of approximately $22.5 million in 

disgorgement, prejudgment interest, and penalties. 

Actions involving self-regulatory organizations: In an action against the New York 

Stock Exchange (NYSE), the Commission found that the NYSE failed to adequately monitor 

and police specialists who engaged in widespread and unlawfhl trading ahead of customer 

orders on the floor of the exchange, harming customers by about $158 million from 1999 

through 2002. The NYSE agreed to various remedial measures, including spending $20 

million to fund audits of its regulatory program every two years through 201 1. The 

Commission also brought an action against the National Stock Exchange (NSX) and its CEO 

for similar failures. The NSX case related to the failure to enforce compliance by dealers with 

certain exchange rules from 1997 through 2003, which resulted in NSX's failure to detect 

hundreds of thousands of transactions in which NSX dealers engaged in unlawful trading 

ahead of customer orders. In another significant action, the Commission issued a report of 

investigation concerning Nasdaq, as overseen by its parent, the National Association of 

Securities Dealers (NASD), in connection with an investigation and inspection of wash trades 

and net capital violations by MarketXT, an NASD member firm. The report finds, among 

other things, that Nasdaq employees observed suspicious trading by MarketXT and did not 

communicate their observations to NASD Regulation. In response to the SEC ' s investigation 

and the inspection from which it stemmed, the NASD and Nasdaq have implemented a 

number of remedial steps, all designed to strengthen the self-regulatory oversight of their 

market. 

Examination Program: The SEC's examination program worked to detect fraud and 

other possible violations of the federal securities laws; foster compliance with these laws; and 

inform the Commission and its staff of compliance issues. The Office of Compliance 

Inspections and Examinations (OCIE) used risk-based techniques to focus resources on those 
activities that could pose the greatest compliance risk to investors and the integrity of the 

markets. In FY 2005, OCIE continued to upgrade its risk assessment techniques, and, given 

the breadth of its oversight responsibilities, substantially enhanced training for examiners. In 

addition, OCIE explored the use of new technologies that may facilitate the review of large 

volumes of data and enhance the examination process. 

Examinations of investment advisers and investment companies: OCIE focused efforts 

on identifying the highest risk firms and activities. Specific examination reviews of 

investment companies and advisers focused on, among other areas: undisclosed arrangements 

between funds and hnd service providers, pricing and valuation practices, accuracy of 

performance claims, compliance with anti-money laundering requirements, and market timing 

and late trading. OCIE also concluded an examination sweep of pension consultants and 

issued a public report outlining conflicts of interest and other concerns. Based on these 

findings, the SEC and the Department of Labor together published guidance for pension plan 

trustees that includes questions they can ask pension consultants to aid them in identifying 

these conflicts of interest. 

In FY 2005, using the risk-based examination protocol, the examination staff found 

significant compliance or operational deficiencies in more than a third of the examinations 

conducted. Most of these examinations led to remedial action and improved compliance 

practices by the firms examined. For example, firms voluntarily reimbursed investors over 

$1 17 million as a result of examinations, indicating that investors were overcharged, or were 

owed money. In addition, 1 1% of examinations of hnds and advisers found indications of 

serious problems that were referred to the Division of Enforcement for further investigation. 

To help strengthen compliance practices and to assist chief compliance officers in performing 

their important responsibilities, OCIE and the Division of Investment Management initiated 

the "CCOutreach Program, " which includes regional and national conferences designed to 

facilitate communications between the SEC staff and the industry about compliance issues, 

practices, and techniques. 

Examinations of broker-dealers: In its FY 2005 examinations of broker-dealers, OCIE 

focused on areas of significant compliance risk, including: misuse of non-public information 

concerning trading activities of institutional investors; execution practices in equities and debt, 

including mark-ups; compliance with net capital and customer reserve obligations; and market 

timing and late trading in mutual fund shares. OCIE initiated special examinations with 

respect to: the suitability of recommendations made to retail investors; broker-dealers 

providing fee-based accounts; revenue-sharing practices; and sales of securities to members of 

the military. OCIE also assisted in implementing the SEC's program for monitoring 

consolidated supervised entities, and it inspected the internal controls and risk management 

practices at large broker-dealers. OCIE continued efforts to coordinate examination oversight 

among regulators. Also in FY 2005, examinations found compliance or operational 

deficiencies in more than 80% of examinations, and about one third of the examinations found 

problems that resulted in a referral to the Division of Enforcement staff or to a self-regulatory 

organization for fbrther investigation. Importantly, most examinations resulted in remedial 

action and improved compliance by the firms examined. 
Examinations of self-regulatory organizations: OCIE conducted risk-based and routine 

inspections of the surveillance, examination, disciplinary, arbitration, customer 

communication, and listing programs of self-regulatory organizations (SROs) . In FY 2005, 

special focus was placed on surveillance for compliance with prohibitions on trading ahead of 

customer orders and "firm quote" obligations. The SEC began to develop procedures to 

review and analyze regulatory data that may allow the staff to monitor SRO regulatory 

activities more effectively and initiate more focused inspections. 

Goal 2: Promote Health-y Capital Markets 

Through an Effective and Flexible Regulatory Environment 

In 2005, the SEC undertook several rulemaking initiatives to address abuses in the 

mutual fund and investment advisory industries, improve disclosure to investors, reform the 

requirements that apply to the securities offering process, and modernize the structure of the 

national securities markets. 

Mutual fund redemption fees: Following significant mutual fund reforms in FY 2004 

relating to late trading and market timing scandals, the SEC in FY 2005 adopted a new 

redemption fee rule, which permits funds to impose a fee of up to 2% on the redemption of 

hnd shares. The rule enhances investor protection by requiring that fund boards consider 

whether they should impose a redemption fee to protect fund shareholders from market timing 

and other possible abuses. The redemption fee is paid to the fund (rather than to fund 

management) for the direct benefit of fund shareholders. 

Point-of-sale disclosure: As part of a continuing effort to strengthen disclosures to 

mutual fbnd investors, the SEC reopened the comment period on proposed rules that would 

require broker-dealers to disclose to their customers the costs and conflicts of interest that 

arise from the distribution of mutual fund shares. The proposal would require disclosure at the 

point of sale and in the confirmation statement. 

Hedge fund adviser registration: In FY 2005, the SEC adopted a new rule requiring 

most hedge fund managers to register as investment advisers. The regulation was prompted 

by significant recent growth in hedge funds, which are estimated to have $1 trillion in assets. 

The SEC identified two other concerns that led to the rule's adoption: a growth in hedge fund 

fraud and increasing exposure of smaller investors, pensioners, and other market participants, 

directly or indirectly, to hedge funds. The rule is designed to provide the protections of the 

Investment Advisers Act of 1940 (Advisers Act) to hedge fund investors and to enhance the 

SEC's ability to oversee the securities markets. 

Investment adviser/broker-dealer rule: The Commission adopted a new rule 

addressing the application of the Advisers Act to broker-dealers that offer fee-based accounts. 

Under the new rule, a broker-dealer is not, by reason of receiving fee-based compensation, 

subject to the Advisers Act if it provides investment advice in fee-based accounts that is solely 

incidental to the brokerage services provided to those accounts and if the broker-dealer makes 
required disclosures. A broker-dealer exercising discretion over customer accounts would be 

subject to the Advisers Act regardless of the form of compensation received (fixed fees or 

commissions). In addition, a broker-dealer would be subject to the Advisers Act if it provides 

investment advice as part of a financial plan and portrays itself to the public or its customers 

as a financial planner. 

Market structure and Regulation NMS: In FY 2005, the SEC addressed important 

issues of equity market structure that cleared the way for significant market restructuring. In 

adopting Regulation NMS, the Commission set the terms for competing markets to access and 

interact with each other. It also resolved issues of minimum quoting increments and 

allocations of market data. These rule changes are intended to strengthen competition in the 

national market system for equity securities. Shortly after Regulation NMS was approved, the 

two largest U.S. equity markets-the NYSE and Nasdaq-announced mergers that, if 

consummated, will significantly reshape these markets. Other equity markets have also 

announced restructurings designed to increase their competitiveness. 

Governance and structure of self-regulatory organizations (SROs): The Commission 

published two releases discussing the role and operation of SROs. The first release proposed 

rules setting governance standards for SROs, in order to increase their independence from 

member firms and to ensure their effective regulation if publicly owned. The rules would also 

require greater disclosure by SROs of their finances and structures. The second release 

requested comment on conflicts affecting SROs, and possible alternative self-regulatory 

structures to reduce these conflicts. 

Short sale pilot program and Regulation M amended: The Commission implemented a 

pilot program to examine the impact of removing price restrictions on short sales of securities, 

while at the same time adopting rule changes requiring closeouts of naked short positions. 

The Commission also proposed amendments to Regulation M, which governs securities 

offerings, in order to tighten the regulations governing underwriters' stabilization, aftermarket solicitations, short covering transactions, penalty bids, and other activities. In 

addition, the Commission adopted amendments to update the penny stock rules and proposed 

an interpretive release to clarify the scope of the soft dollar safe harbor under Section 28(e) of 

the Securities Exchange Act of 1934 (1934 Act). 

Consolidated supervised entities: The SEC approved applications from three and 

continued to review applications from two broker-dealers and their holding companies and 

affiliates for group-wide supervision as "consolidated supervised entities." These firms 

submit to this form of regulatory oversight in exchange for the use of an alternative method to 

compute net capital. The SEC's reviews involve detailed assessments of the applicants' 

capacity to manage financial and operational risks, including market, credit, and liquidity risk. 

Credit rating agencies: Finally, the Commission proposed a new rule to define the 

term "nationally recognized statistical rating organization" (NRSRO), in order to clarify the 

recognition criteria and application process. The changes would enhance the agency's ability 
to ensure that such credit rating agencies continue to meet the minimum standards that led to 

NRSRO designation. 

Securities Mering reform: The Commission adopted amendments to the rules under 

the Securities Act of 1933 (Securities Act) that significantly relax restrictions on 

communications by issuers and underwriters around the time of securities offerings. The 

amendments continue the Commission's long-term efforts toward integrating disclosure and 

processes under the Securities Act and the 1934 Act. The greatest flexibility in 

communications is provided to issuers that have a reporting history and are widely followed in 

the marketplace. In addition, the reforms will facilitate rapid market access for well-known 

issuers. 

Asset-backed securities: The Commission adopted comprehensive registration, 

disclosure, and reporting requirements under the Securities Act and the 1934 Act for assetbacked securities, an increasingly significant segment of the fixed-income capital markets. 

Also, the Commission adopted amendments relating to Form S-8 and Form 8-K filings in 

order to deter fraud and abuse by reporting shell companies. 

Interactive data: The Commission established a voluntary program that permits 

registrants to hrnish financial data required in filings under the Exchange Act and the 

Investment Company Act of 1940 in extensible Business Reporting Language (XBRL) 

format, which allows investors and other market participants, as well as the SEC itself, to 

analyze and personalize financial data in ways that are best suited for their purposes. 

SmaN businesses: The SEC established the Advisory Committee on Smaller Public 

Companies to examine the impact of the Sarbanes-Oxley Act and other federal securities laws 

on those companies. The committee will issue a final report by April 2006, in which it will 

present recommendations for the Commission's consideration. 

Internal control overfinancial reporting: After evaluating the substantial costs and 

efforts undertaken by companies to comply with Section 404 of the Sarbanes-Oxley Act and 

other regulatory requirements, the Commission extended by one year the compliance dates for 

certain reporting companies to meet the requirements for internal control over financial 

reporting requirements. The SEC, along with the Public Company Accounting Oversight 

Board, also has continued to monitor the implementation of Section 404 and provide 

interpretive guidance as necessary. 

Acceleratedjilers: After considering the concerns expressed by large companies about 

their ability to file periodic reports under the accelerated filing schedule that would have 

become effective in 2006, the Commission postponed the final stage of the accelerated filing 

requirements. In addition, the Commission proposed rules that would limit the final stage of 

the accelerated filing schedule to only the largest companies and would eliminate for all 

companies the final stage of the accelerated filing schedule for quarterly reports. 
Foreign private issuers: Recognizing that compliance with certain SEC requirements 

could be difficult and burdensome for foreign private issuers that are transitioning to the use 

of International Financial Reporting Standards (IFRS), the Commission provided an 

accommodation for foreign private issuers filing reports with the SEC that include financial 

statements prepared using IFRS for the first time. Finally, with the aim of recognizing the 

potential benefits to investors of enhanced comparability of financial information around the 

world, SEC staff issued a 'roadmap' highlighting the steps needed to eliminate the SEC 

requirement for foreign private issuers to reconcile financial statements prepared under IFRS 

to U.S. Generally Accepted Accounting Principles (GAAP). 

Goal 3: Foster Informed Investment Decision Making 

FY 2005 marked the third anniversary of the Sarbanes-Oxley Act, and as contemplated 

under the Act, the SEC worked diligently to improve the disclosures provided to investors. 

The agency also operated investor education programs and assisted investors who had 

questions about the securities markets or complaints about the treatment they received from 

securities professionals. 

Disclosure Reviews: The Division of Corporation Finance continued to improve its 

disclosure review program. Under the Sarbanes-Oxley Act, the SEC is required to review at 

least once every three years the financial statements of each reporting company and 

investment company issuer. FY 2005 marked the final year of the first three-year cycle, and 

the Division met the requirement through its review of the financial statements of over 6,000 

reporting companies in FY 2005. The Division's Office of Global Security Risk continued its 

systematic review of the disclosures of companies with contacts in countries identified as state 

sponsors of terrorism. These countries are often also known for human rights violations. The 

Division of Investment Management met the requirement to review all financial statements of 

investment company issuers during the three-year cycle, reviewing about 3,990 in FY 2005. 

Investor Education: The SEC works to assist tens of thousands of investors who 

complain each year about the mishandling of their investments by securities professionals. In 

addition, the SEC responds to a wide range of questions from the public on how the securities 

industry works and where to find information about products, issuers, and securities 

professionals. 

During FY 2005, the SEC's Office of Investor Education and Assistance (OIEA) 

opened 7 1,737 new matters resulting from investor complaints and questions, and closed 

7 1,879 pending matters, of which 8 1% were closed within seven days. OIEA issued 

numerous investor alerts and publications in response to new scams and emerging products 

and issues. For example, in the aftermath of Hurricane Katrina, OIEA created a special web 

page to assist investors and regulated entities. The site includes alternate contact information 

for Gulf-area investment advisers; guidance on safely using the Internet to check account 

balances; and advice for investors on avoiding scams, protecting credit, and rebuilding 

banking and other financial records. 
OIEA also led workshops and seminars and worked to enhance public awareness of 

SEC investor resources through outreach to public libraries and participation in public-private 

partnerships. During FY 2005, the staff distributed about 476,000 investor brochures through 

the General Services Administration's Federal Citizen Information Center. The SEC's 

investor education web pages received approximately 8.5 million hits. In addition to carrying 

out its education and assistance functions, OIEA also provided policy guidance on several key 

rulemaking initiatives. For example, OIEA collaborated with the Divisions of Investment 

Management and Market Regulation in using focus groups and in-depth investor interviews to 

test-market and refine disclosure documents. 

Goal 4: Maximize the Use of SEC Resources 

The SEC continued to improve its operational effectiveness in FY 2005 through 

organizational changes and enhancements of its information technology systems. 

Audited Financial Statements: The agency completed its first full financial statement 

audit in 2005, consistent with the Accountability of Tax Dollars Act of 2002. The 

Government Accountability Office (GAO) performed the audit for FY 2004 and delivered an 

unqualified opinion, finding that the SEC's FY 2004 financial statements were "presented 

fairly, in all material respects, in conformity with U.S. generally accepted accounting 

principles." However, GAO did identify three material internal control weaknesses in the 

areas of: recording and reporting disgorgement and penalties; preparing financial statements; 

and information technology security. The agency takes these findings very seriously, 

particularly given its unique role in monitoring the financial reporting controls of public 

companies and regulated entities. The SEC continued working aggressively to address these 

weaknesses and expects to fully resolve them in FY 2006. 

Strengthened Controls Over Budget Planning: The SEC worked aggressively in FY 

2005 to strengthen budget planning for the agency's office facilities. In May 2005, the SEC 

disclosed to Congress that it had identified unbudgeted costs of approximately $48.7 million 

associated with the construction of its new facilities in Washington, D.C. and improvements to 

its new leased facilities in New York and Boston. The Government Accountability Office 

(GAO) conducted a review of these lapses and recommended certain actions to address them. 

The SEC has already adopted a number of these recommendations and plans to implement all 

remaining GAO recommendations during FY 2006. The SEC began to implement an activitybased costing and performance-based budgeting system, based on the recommendations of a 

requirements analysis completed in FY 2005. This system, the Budget and Program 

Performance Analysis System, will be a vital tool for management to strengthen internal 

controls and to provide a detailed picture of the Commission's operations and their 

effectiveness. 

Procurement and Contracting: In FY 2005, the SEC reorganized the procurement and 

contracting function, recruited additional staff for this area, and selected an automated 

procurement application. These steps will improve the timeliness and quality of the SEC's 
acquisition operations and better integrate acquisition planning into the annual budget 

formulation process. 

Staff Recruitment, Retention, and Training: The agency launched a variety of 

initiatives to expand the SEC University (SEC U), the agency's central workforce 

development program. These efforts included increasing the numbers and types of courses 

offered, offering options for attorneys and accountants to obtain continuing education credits, 

administering a comprehensive training needs assessment, and creating a website that details 

the SEC U's human capital development opportunities. The Commission also evaluated and 

significantly improved its orientation program for new employees. 

The SEC continued to use several important human capital programs to retain 

employees with valuable skills. For example, the agency continued its compensation program 

that rewards superior performance through a pay-for-performance system. The SEC also 

offers an expanded benefits package that includes student loan repayment, dental and vision 

benefits, and other programs to attract and retain talented employees. Although attrition rose 

in FY 2005, the SEC was recently ranked among the top five places to work in the federal 

government in a study conducted by the Partnership for Public Service and US. News & 

World Report. 

Information Technolom: The SEC developed requirements for a fundamental redesign 

of the Division of Enforcement's case tracking system. The new system is expected to reduce 

the costs associated with searches and reports, eliminate duplicative and inaccurate data entry, 

and help the agency better track funds ordered through enforcement actions. The agency also 

upgraded the enforcement program's IT forensics capabilities, allowing staff to obtain and 

analyze data much more quickly from equipment subpoenaed or seized in the course of 

investigations. 

The document imaging project, which was initiated in FY 2004 and continued in FY 

2005, is intended to reduce the amount of time that enforcement staff spend searching for 

documents and protecting the information in case of disaster. The SEC made preparations to 

prioritize and scan the remaining backlog of investigation-related documents. In addition, the 

agency expanded imaging services to other offices. 

Finally, the SEC piloted a number of new tools to help staff better identify sources of 

potential risk-whether in disclosure filings, market data, news feeds, evidentiary or 

examination documents, or elsewhere. For example, the staff piloted a set of tools that will 

analyze corporate and mutual fund filing information to identify companies most in need of 

review. 
2007 Request by Strategic Goal 

The SEC's major initiatives for 2007 are highlighted below and are described in further 

detail within the chapters that follow. The agency intends to implement these initiatives by 

reallocating existing resources as necessary. 

This chapter organizes the initiatives for 2007 by the SEC's four goals, as established 

under the agency's 2005-2009 strategic plan. These goals may change as the Commission 

develops a new five-year strategic plan over the next year. 

Goal 1: Enforce Compliance with Federal Securities Laws 

In 2007, the SEC will continue to develop innovative approaches to the enforcement of 

the federal securities laws, through the use of new technologies and enhanced emphasis on 

those entities and activities that pose the greatest threat to investors. These efforts are 

described below for the SEC's enforcement and examination programs. 

Enforcement Program: The Division of Enforcement will continue to pursue violators 

vigorously, through methods such as trading suspensions; asset fieezes; temporary restraining 

orders; coordination with criminal authorities; and focused, expedited investigations. 

Enforcement staff will work to develop increasingly sophisticated approaches for 

detecting violations of law by organizing and gathering data from a wide range of sources. 

The staff expects to receive and handle a combined total of 670,000 investor complaints, tips, 

and forwarded e-mail spams and to open about 1,430 new matters under inquiry (MUIs). 

The Division plans to open and pursue investigations in all core areas of enforcement, 

including market manipulation, insider trading, and offering fraud. Conflicts in the financial 

services sector, as well as serious financial accounting frauds, likely will remain the most 

important program areas. The Commission also expects to detail staff to the Department of 

Justice to support criminal prosecution of securities fraud. The staff plans to open roughly 

960 investigations. 

The SEC will continue to work with foreign authorities to obtain information relating 

to cross-border matters and secure assets that may have been transferred outside of the U.S. 

The Commission will continue to develop international enforcement tools, including 

Memoranda of Understanding and information-sharing agreements to facilitate cross-border 

cooperation. 

The Commission will continue to commit resources to protracted litigation, an essential 

element in maintaining a credible law enforcement program. Litigated financial fraud cases, 

in particular, require extensive resources as they proceed through lengthy discovery, motion 

filings, and trial. In addition, litigation staff will continue to seek emergency relief to freeze 

assets, halt ongoing market manipulations, and alert investors to false or misleading 
disclosures made by issuers. The Division plans to open about 300 administrative proceedings 

and to institute approximately 340 civil proceedings. 

Examination Proaam: The Office of Compliance Inspections and Examinations 

(OCIE) will continue to implement the SEC's risk-based examination program designed to 

detect violations of the federal securities laws and foster strong compliance practices. 

Examiners will continue to conduct routine, cause and special purpose examinations, focusing 

the SEC's resources on those firms and practices that have greatest potential for violative 

conduct that can harm investors. Higher-risk activities include those that create significant 

conflicts of interest where compliance policies and procedures are insufficient to mitigate 

those conflicts. Staff also will continue to provide feedback to registered firms that will result 

in the correction of compliance problems. Results from examinations will continue to be used 

to identify trends and emerging issues that may need to be addressed through enforcement 

actions, Commission rulemaking, or other actions. 

Higher-risk advisers will be examined at least every three years. In each of these 

inspections, the staff will evaluate a firm's compliance program, apply forensic tests designed 

to uncover schemes to defraud investors, and assign the firm a risk rating. In addition, OCIE 

will select a statistically random sample of advisers that have lower risk profiles, and the staff 

will conduct comprehensive, risk-based inspections of as many of these firms and their 

affiliated fund groups as resources will allow. In 2007, OCIE will deploy additional 

monitoring teams to very large advisory firms that have numerous advisory affiliates, as well 

as one or more investment company complexes. In addition, OCIE expects to continue 

working to develop an adviser surveillance program, if approved by the Commission. 

Examiners will review the risk management, compliance, and internal controls of the 

largest broker-dealers and will continue to examine consolidated supervised entity (CSE) 

applicants and existing CSEs. In addition, examinations will continue to concentrate on 

compliance with sales practice and net capital rules. In particular, OCIE will focus on 

brokerage firms' retail sales practices to identify churning, unauthorized trading and 

unsuitable investments, and failure to disclose risks. Exams also will assess broker-dealer 

compliance with anti-money laundering rules, broker-dealer relationships with hedge funds, 

back-office operations, information security, and follow-up on past supervisory deficiencies. 

Staff will implement improvements to the oversight exam and inspection programs intended to 

better assess the quality of the SROs' examination programs and recommend necessary 

improvements. The staff will conduct risk-based and cycle inspections of SRO surveillance, 

disciplinary, examination, arbitration, and listing programs. 

Goal 2: Promote Healthy Capital Markets 

Throunh an Efective and Flexible Renulatow Environment 

The SEC will continue to consider regulatory proposals that will have widespread 

effects on the securities markets, in areas such as investment management regulation, 

securities firm supervision, disclosure, and accounting policy. Some of the major highlights 

are described below. 
Investment Management Realation: The top strategic priority of the Division of 

Investment Management for 2007 will be to revamp the mutual fund disclosure regime. The 

staff intends to make mutual fbnd disclosures more useful to investors and may recommend 

new rules designed to encourage more reader-friendly formats and the better use of new 

technologies, such as interactive data and the Internet. 

Securities Firm and Market Supervision: The Division of Market Regulation expects to 

analyze the short sale pilot and consider whether Regulation SHO should be further amended. 

The Division also may recommend adoption of amendments to the transfer agent rules, antimanipulation rules (Regulation M), rules regarding contingent and best efforts offerings (Rules 

lob-9 and 1 and rules governing research analysts. If these proposals are recommended 

for adoption, the staff will dedicate substantial time to drafting and implementing the 

amendments. 

In 2007, the staff will provide consolidated supervision to at least five internationally 

active securities firms. In addition, the staff will continue to review applications from 

between four and eight additional broker-dealers to compute regulatory capital using an 

alternative, risk-based, approach that aligns the regulatory capital calculation with internal risk 

management practices. The staff also will develop possible rule changes to facilitate portfolio 

margining for customers of broker-dealers and will work to clarify criteria for recognizing 

nationally recognized statistical rating organizations (NRSROs). 

The Division expects to recommend adoption of rules to provide point-of-sale 

disclosure of costs and conflicts of interest in connection with sales of mutual funds and 

related securities. The Division also will consider whether confirmations are the best vehicle 

for providing information to investors, and whether other sources of information would be 

more effective, as well as less costly. In addition, the Division will continue work on rules 

relating to the operations of small business finders, solicitors for broker-dealers, and private 

placement broker-dealers . 

The staff likely will face significant new challenges in overseeing major securities 

markets, including broker-dealer trading systems (ATSs) and the exchanges. Furthermore, the 

Division will monitor the impact of the SEC's actions to modernize the national market 

system and respond to changes in the options markets. Finally, the SEC will continue to 

engage in dialogue with foreign regulators on cross-border issues as necessary. 

Disclosure: The Division of Corporation Finance intends to recommend the adoption 

of the following items, depending on the nature of the public comments received: 

Amendments to the proxy rules to permit companies and other soliciting parties to 

make proxy materials electronically available to their shareholders, provided that 

paper copies are provided to requesting shareholders. 
Amendments that would enhance disclosure regarding executive compensation, the 

independence of a registrant's board of directors, related party transactions between 

executive officers and directors, and related party transactions with a company. 

Revisions to the "best-price" requirements in the tender offer rules to address issues 

raised by recent court decisions regarding the type of consideration to which these 

rules apply. 

Revisions to the current rules to make it easier for foreign issuers to deregister 

securities under the 1934 Act. 

Amendments to the current regulatory system for smaller companies under the 

federal securities laws. 

The Division anticipates devoting additional resources to initiatives to release publicly the 

staffs comment letters and company responses and reduce by more than 3,000 the backlog of 

Freedom of Information Act (FOIA) responses and confidential treatment requests. 

Accounting Policy: The Office of the Chief Accountant (OCA) will continue 

overseeing the development of accounting standards, particularly initiatives by the Financial 

Accounting Standards Board (FASB) to simplify and codify accounting standards and 

accounting for financial instruments. The Office also will continue to monitor the FASB's 

efforts to move toward a more principles-based approach to setting accounting standards, as 

well as any new standards that result from the SEC staff study on off-balance sheet 

arrangements. 

The SEC also intends to implement further the 'roadmap' published by SEC staff in 2005, 

which highlights the steps needed to eliminate the need for the requirement that foreign private 

issuers reconcile financial statements prepared under International Financial Reporting Standards 

(IFRS) to U.S. Generally Accepted Accounting Principles (GAAP). The SEC staff will analyze 

the implications of foreign private issuers' IFRS fmancial statements and reconciliations, which 

many foreign private issuers will begin to file with the SEC in mid-2006. The SEC staff also 

will begin working to identify any changes to its rules that would be necessary to allow the 

elimination of the IFRS reconciliation requirements. 

The staff will continue to oversee the activities of the Public Company Accounting 

Oversight Board (PCAOB), including inspecting audit firms and promulgating and 

interpreting auditing standards and auditor independence requirements. The PCAOB is 

scheduled to conduct quality reviews of approximately 400 audit firms during the period, 33% 

more than in 2006. 

Goal 3: Foster Informed Investment Decision Makin2 

The Commission works to achieve this objective through two main efforts: reviewing 

the disclosure of securities market participants to make them more complete, accurate, and 
timely and educating and assisting investors who have questions or concerns related to the 

securities markets. In 2007, the SEC expects to perform the activities listed below. 

Disclosure Reviews: The Division of Corporation Finance expects to review the 

disclosures of about 5,540 reporting issuers, equal to about 44% of all reporting companies. 

This large volume of disclosure reviews will serve to deter fraud in public securities 

transactions, help ensure that investors receive material information about emerging and novel 

issues, and satisfy the review requirement of the Sarbanes-Oxley Act. In addition, the 

Division expects to review the filings of 900 new issuers. Because of uncertain market and 

economic conditions, the Division does not project any growth in the level of transactional 

filings. Transactional filings above projected levels could result in a reduced number of reviews 

of reporting companies for the year. 

The Division of Investment Management expects to review the disclosures of one-third 

of investment companies, to meet the requirements of the Sarbanes-Oxley Act. In addition, 

the staff will continue to review the disclosures of most new mutual funds and closed-end 

funds, all new insurance contracts, and most portfolios of new unit investment trusts (UITs). 

The staff also will examine proxy statements, as well as post-effective amendments that 

contain material changes in disclosure. 

Investor Education: In 2007, the Office of Investor Education and Assistance (OIEA) 

expects to receive about 76,000 new investor complaints, questions, and other contacts, 

resulting in about 7 1,000 unique new matters. The staff likewise will close about 7 1,000 open 

matters and will increase the percentage of matters closed within seven days to 83%. 

OIEA also carries out the SEC's investor education program, which includes producing 

and distributing educational materials, collaborating with state and federal agencies, fostering 

public-private partnerships, and participating in educational events. OIEA also provides 

policy guidance to the SEC's program offices and consults with other SEC staff on proposed 

rulemakings and their possible effects on individual investors. The staff anticipates that the 

SEC's investor education web pages will receive about 8.5 million hits. 

Goal 4: Maximize the Use of SEC Resources 

In 2007, the SEC will complete a revised and updated five-year strategic plan and will 

continue to concentrate on ensuring that taxpayer dollars are used to maximum effect to fblfill 

the agency's mission. Below are listed some examples of the efforts to be undertaken in 2007 

to enhance the SEC's operational effectiveness. 

Audited Financial Statements: The Office of Financial Management (OFM) will 

coordinate the agency's preparation of quarterly and annual audited financial statements, 

along with other external and internal financial reports. OFM also will continue implementing 

changes to management systems to ensure compliance with all applicable federal accounting 

standards and complete the compilation of accounting and financial management policies and 

procedures. 
Strenahened Controls Over Budget Planning: The SEC will complete the 

implementation of the Budget and Program Performance Analysis System (BPPAS), a vital 

tool for enhancing offices' ability to manage their own budgets, strengthening internal 

controls, streamlining the budget process, and providing a detailed picture of Commission 

operations and their effectiveness. Separately, a fourth program area will undergo an 

evaluation by the Office of Management and Budget (OMB) using the Performance 

Assessment Rating Tool (PART). 

Staff Recruitment, Retention, and Training: The Office of Human Resources (OHR) 

anticipates continuing to implement an integrated set of human capital systems, including 

systems for performance management, selection, leadership and knowledge management 

(SEC University), and succession planning. Separately, the SEC University will complete the 

implementation of its new strategic plan, which will chart a course for the management and 

dissemination of knowledge throughout the agency, in partnership with the SEC's divisions 

and offices. 

Information Technologv: The Office of Information Technology (OIT) supports the 

agency's use of technology to enhance agency-wide mission performance. One of OIT's 

priorities for 2007 will be to transition to a new performance-based contract for the SEC's 

Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Also, the SEC will 

begin implementation of a multi-year project to consolidate and simplify EDGAR forms, to 

streamline the disclosure process for filers and investors. 

OIT also will implement the initial phase of an upgrade to the Division of 

Enforcement's case tracking system, including the development of a new financial 

management module. The system will improve the SEC's ability to track and account for 

penalties and disgorgements, as well as to manage its large portfolio of investigations and 

cases. The SEC also will roll out a similar tool for managing examinations conducted by 

OCIE. In addition, OIT will initiate a project to consolidate the various applications and 

business processes associated with the tracking of complaints, tips, and referrals. 

Finally, the SEC's information technology security program will focus on 

implementing the requirements of Homeland Security Presidential Directive 12 (HSPD- 12) 

and managing emergent security issues. HSPD- 12 implementation will include the 

distribution of new personal identity cards to staff, as well as the centralization of the process 

for managing access to information systems and sensitive data. 
Description of Selected Fees 

($ in millions) 

Source of Fees 

Registration of securities under the Securities 

Act of 1933 (Section 6(b)) 

2005 2006 2007 

Actual Estimate Estimate 

Securities transactions under the Securities 

Exchange Act of 1934 (Section 3 1) 1,070 1,43 5 88 1 

ActuaVTarget Offsetting Collections Amounts $1.665 $2.124 $1.095 

Explanation of Fee Collections 

The SEC is authorized to levy and collect certain fees under Section 6(b) of the 

Securities Act of 1933 and Sections 13(e), 14(g) and 3 1 under the Securities Exchange Act of 

1934. Within the ~ederal Budget, these fees are classified as offsetting collections. 

SEC fee rates are established periodically as required by the "Investor and Capital 

Markets Fee Relief Act" (P.L. 107-123) ("Fee Relief Act"), in accordance with methodologies 

developed in conjunction with the Congressional Budget Office and the Office of 

Management and Budget. Specifically, Section 3 1 and Section 6(b) fee rates are adjusted 

periodically so that the total collections for each fee equal target amounts established in the 

"Fee ~elief ~ct."' In the event that the Commission does not have a regular appropriation at 

the start of its fiscal year, each fee rate is required to remain at its prior year's rate until the 

regular appropriation is enacted. The Commission will publish the fee rates for fiscal 2007 in 

the Federal Register no later than April 30,2006. 

Fiscal 2005 

In 2005, the SEC collected $57 1 million in Section 6(b) registration fees. This amount 

was approximately equal to the $570 million target collection amount established the "Fee 

Relief Act." From October 1 through December 12,2004, the Section 6(b) fee rate was 

$126.70 per million, due to the Commission's operating under a continuing resolution. From 

' The "Fee Relief Act" does not contain a target offsetting collections amount for fees collected 

pursuant to Sections 13(e) and 14(g) of the Securities Exchange Act of 1934. The rates for these fees 

are changed on an annual basis so as to keep them at the same uniform rate applicable to Section 6(b) 

registration fees. This harmonization of rates is designed to remove any ambiguity with respect to the 

fees applicable when a registration of new securities is made in connection with the repurchase of 

stock or as part of a merger. The SEC collected approximately $23.9 million in Section 3 1 (e) and 

14(g) fees in 2005. 
December 13,2004 through September 30,2005, the end of the Commission's fiscal year, the 

fee rate was $1 17.70 per million. 

The Commission also collected $1.07 billion in Section 3 1 transaction fees, 

approximately 12 percent below the transaction fee target collection amount of $1.22 billion. 

From October 1 through December 12,2004 the Section 3 1 transaction fee was set at $23 -40 

per million, because the Commission was operating under a continuing resolution. From 

December 13 through March 3 1,2005 the fee rate was $32.90 per million, the rate previously 

announced by the Commission for 2005. The 'Tee Relief Act" annually requires the 

Commission to determine whether a mid-year adjustment of the Section 3 1 fee rate is required 

based on whether actual and projected collections for the year as of March 1,2005 are 

estimated to be within ten percent of the target collections amount for the entire year. Based 

on the Commission's calculation, the SEC was required to perform an upward mid-year 

adjustment of the Section 3 1 fee rate from $32.90 per million to $41.80 per million, effective 

April 1,2005. This fee rate remained in effect through the end of the fiscal year. 

Fiscal 2006 

The Commission began 2006 under a continuing resolution that funded agency 

operations from October 1 through November 27,2005. During this period, the fees paid 

under Section 6(b) of the Securities Act of 1933 remained at the prior year's rate of $1 17.70 

per million. In addition, transaction fees paid under Section 3 1 of the Securities Exchange Act 

of 1934 remained at the prior year's rate of $4 1.80 per million. 

Five days after enactment of the Commission's regular appropriation, the fee rate under 

Section 6(b) of the Securities Act of 1933 was decreased from $1 17.70 per million to $107.00 

per million. Thirty days after enactment of the Commission's regular appropriation, the 

Section 3 1 fee rate was decreased from $41.80 per million to $30.70 per million. 

As required by the "Fee Relief Act," the Commission will make a determination of 

whether a mid-year adjustment of the Section 3 1 fee rate is necessary no later than March 1, 

2006. This determination, which will be published in the Federal Register, is based on 

whether the Commission's actual and estimated collections for 2006 fall within ten percent of 

the target collections amount for 2006. If a mid-year Section 3 1 fee rate is required, it will 

become effective on April 1,2006 and remain effective through the remainder of the fiscal 

year. 

Fiscal 2007 

The target collections amount for Section 6(b) registration fees in 2007 is $2 14 million, 

while the target amount for Section 3 1 transaction fees is $881 million. Taken together, we 

anticipate these two fees will generate $1,095 billion. The Commission will publish the fee 

rates for fiscal 2007 in the Federal Register by no later than April 30,2006. 
Division of Enforcement 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

FTEs: Headquarters 446 433 419 

Regions and Districts 786 783 768 

Total 1,232 1,216 1,187 

Cost: Salaries and Benefits ($000) $195,435.5 $200,832.3 $206,834.4 

Non-Personnel Expenses ($000) $120,844.3 $12 1.2 16.1 $121.308.1 

Total Direct Costs ($000) $316,279.8 $322,048.4 $328,142.5 

2007 Request: Applicability of SEC Strategic Goals 

The Commission's Division of Enforcement prosecutes violations of the federal securities 

laws and works closely with the Department of Justice and U.S. Attorneys offices to coordinate 

and assist in criminal prosecutions. 

Enforce 

Compliance 

With Federal 

Securities Laws 

4 

Intelligence Analysis: The staff expects to receive and handle a combined total of 

670,000 investor complaints, tips, and forwarded e-mail spams, and to open about 1,430 matters 

under inquiry (MUIS). 

Goal 1 Goal 4 

Investigations: The Division will continue to maintain a presence in all core areas of 

enforcement, including market manipulation, insider trading, and offering fiaud. Conflicts in the 

financial services sector, as well as serious financial accounting frauds, likely will remain the 

most important program areas. The Division will continue to focus on important investigations 

and to effectively support all litigation. The Commission also expects to detail staff to the 

Department of Justice to support criminal prosecution of securities fiaud. The Division plans to 

open 960 investigations. 

Promote Healthy 

Capital Markets 

Proceedings: The Commission will continue to commit resources to protracted litigation, 

an essential element in maintaining a credible law enforcement program, and to seek emergency 

relief to freeze assets, halt ongoing market manipulations, and alert investors to false or 

misleading disclosures made by issuers. The increasing complexity of the Commission's 

enforcement actions, the initiation of emergency and subpoena enforcement actions, and the 

Commission's efforts to obtain significant sanctions against defendants where appropriate all 

will consume Division resources. The Division plans to open about 300 administrative 

proceedings and to institute approximately 340 civil proceedings. 

Goal 2 Goal 3 

Foster Informed 

Investment Decision 

Making 

Maximize the 

Use of SEC 

Resources 
Office of Compliance Inspections and Examinations 

Executive Summary 

FTEs: IC/IA Program 

Headquarters 

Regions and Districts 

Subtotal 

BDISRO Program 

Headquarters 

Regions and Districts 

Subtotal 

Total 

Cost: Salaries and Benefits ($000) 

Non-Personnel Expenses ($000) 

2005 2006 2007 

Actual Estimate Request 

I Total Direct Costs ($000) , 

2007 Request: Applicability of SEC Strategic Goals 

The Office of Compliance Inspections and Examinations (OCIE) conducts an 

examination program to detect violations of federal securities laws and evaluate internal 

compliance controls. About 9,000 investment advisers, 1,000 fund complexes, over 6,900 

broker-dealers, 1 1 self-regulatory organizations (SROs), 7 clearing agencies, and over 400 

transfer agents are subject to SEC routine, cause, and special purpose exams. These 

inspections are conducted by staff in the agency's regional, district, and headquarters offices. 

OCIE's risk-based program is designed to focus the SEC's resources on those firms and 

practices that have greatest potential for securities law violations that can harm investors. 

Enforce 

Compliance 

With Federal 

Securities Laws 

J 

ICBA Examinations: The staff will continue to inspect higher-risk firms once every 

three years and lower-risk firms on a random basis. In addition, OCIE anticipates deploying 

additional monitoring teams to very large advisory firms and continuing to implement an 

adviser surveillance program if approved by the Commission. 

Goal 1 Goal 4 

BDISRO Examinations: Staff will continue to review the largest, most complex 

brokerage firms and other financial institutions through risk management, compliance, and 

internal controls inspections. In particular, OCIE will focus on brokerage firms' conflicts of 

interests; their compliance with anti-money laundering rules; broker-dealers' relationships 

Promote Healthy 

Capital Markets 

with hedge funds; broker-dealers' follow-up on past supervisory deficiencies; and sales 

practice violations such as churning, unauthorized trading, unsuitable investments, and failure 

Goal 2 

to disclose risks. 

Goal 3 

Foster Informed 

Investment 

Decision Making 

Maximize the 

Use of SEC 

Resources 
Division of Corporation Finance 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

I FTEs: Headquarters 495 478 463 

Cost: Salaries and Benefits ($000) $74,429.0 $72,985.7 $74,583.3 

Non-Personnel Exp. ($000) $46-47 1.1 $27,140.9 $26,735.7 

Total Direct Costs ($000) $120,900.1 $100,126.6 $101,319.0 

2007 Request: Applicability of SEC Strategic Goals 

The Division of Corporation Finance establishes disclosure requirements and monitors 

disclosure to provide investors with information necessary to make investment decisions and to 

. help prevent fraud and misrepresentation in securities transactions. Continuing investor interest 

regarding the quality of financial reporting and corporate governance and significant changes in 

disclosure and other requirements applicable to reporting companies have contributed to a 

changing regulatory environment affecting the securities markets. 

Ensure 

Compliance 

with Federal 

Securities Laws 

J 

Review of Filings: - The Division expects to complete 5,540 reviews of reporting 

issuers. This 44% reporting company review level will help deter fraud in public securities 

transactions, help ensure that investors receive material information about emerging and novel 

issues, and satisfy the review requirement of the Sarbanes-Oxley Act. 

Goal 1 Goal 4 

Rulemaking and Interpretive Advice: Depending on the nature of public comments on 

previously proposed projects, the Division intends to recommend that the Commission adopt 

rules to enhance disclosure regarding executive compensation, the independence of a 

registrant's board of directors, and related party transactions; allow electronic distribution of 

proxy materials to shareholders; make it easier for foreign issuers to deregister securities under 

the 1934 Act; amend the current regulatory system for smaller companies; and revise the 

"best-price" requirements in the tender offer rules. 

Promote Healthy 

Capital Markets 

J 

Goal 2 Goal 3 

Foster Informed 

Investment 

Decision Making 

J 

Maximize the 

Use of SEC 

Resources 
Division of Market Regulation 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

I FTEs: Headquarters 171 165 160 

Cost: Salaries and Benefits ($000) $26,882.0 $29,097.1 $29,833.3 

Non-Personnel Expenses ($000) $22.160.7 $20,664.4 $19,932.8 

Total Direct Costs ($000) $49,042.7 $49,761.5 $49,766.1 

2007 Request: Applicability of SEC Strategic Goals 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

Maximize the 

Use of SEC 

Resources 

The Division of Market Regulation's mission is to maintain fair, honest, and 1 

Goal 2 

Promote Healthy 

Capital Markets 

securities markets. This is accomplished primarily by supervising and regulating the major 

market participants - 14 registered exchanges, 2 national securities associations, brokerdealers, clearing agencies, transfer agents, the Municipal Securities Rulemaking Board, and 

securities information processors. As envisioned by the Securities Exchange Act of 1934 

(1934 Act), the Commission relies on the self-regulation of the securities industry as the 

primary method of ensuring fair dealing and investor protection, but directly regulates market 

participants where Commission rulemaking is more effective than self-regulation. 

Goal 3 

Foster Informed 

Investment 

Decision Making 

Securities Firm Supervision: The staff expects to recommend the adoption of rules 

requiring point-of-sale disclosure of mutual fund costs and conflicts of interest; consider 

whether to recommend additional amendments to the short sale rule; review self-regulatory 

organization (SRO) rules governing initial public offerings (IPOs), underwriter compensation, 

fairness opinions, and research analysts; and continue addressing issues relating to foreign and 

domestic transfer agents. In addition, the staff will provide consolidated supervision to at least 

five internationally active securities firms, review additional applications for consolidated 

supervision, and continue work to clarify the current nationally recognized statistical rating 

organization (NRSRO) recognition criteria. 

Market Supervision: Staff will monitor the impact of action taken to respond to 

changes in the options markets, and will review an increasing number of proposed SRO rule 

changes. The staff also will likely face significant new challenges regarding the regulation and 

supervision of the major securities markets. 
Division of Investment Management 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

I FTEs: Headquarters 180 165 160 

Cost: Salaries and Benefits ($000) $30,189.6 $3 1,703.3 $32,5 19.0 

Non-Personnel Expenses ($000) $2 1,302.6 $23,359.0 $21,017.4 

Total Direct Costs ($000) $51,492.2 $55,062.3 $53,536.4 

2007 Request: Applicability of SEC Strategic Goals 

The Division of Investment Management regulates investment companies and 

investment advisers under two companion statutes, the Investment Company Act of 1940 

(Investment Company Act) and the Investment Advisers Act of 1940 (Investment Advisers 

Act). The program also will administer the Public Utility Holding Company Act of 193 5 

(PUHCA) until the Act is phased out in February 2006, pursuant to the Energy Policy Act of 

2005. The Division seeks to protect investors from fraud, mismanagement, self-dealing, and 

inadequate disclosures by investment companies and investment advisers, without imposing 

unnecessary burdens on regulated entities. 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

The Division's top strategic priority for 2007 will be to revamp the mutual fund 

disclosure regime. The staff intends to make mutual funds' disclosures more useful to 

investors. The staff also will explore data tagging of mutual fund disclosures to make the data 

more interactive. The staff may recommend new rules designed to encourage more readerfriendly formats and the better use of new technologies, such as the Internet. 

The Division will review the disclosures, including financial statements, of one-third of 

investment company portfolios as required by the Sarbanes-Oxley Act. The staff also will 

review most new portfolios of open-end and closed-end funds, all new insurance contracts, 

most portfolios of new unit investment trusts (UITs), proxy statements, and post-effective 

amendments that reflect material changes in disclosure or fund operations. 

Goal 2 

Promote Healthy 

Capital Markets 

The Division will complete about 325 requests for exemptive relief submitted by 

industry participants, approximately the same level as in 2006. 

Goal 3 

Foster Informed 

Investment 

Decision Making 

Goal 4 

Maximize the 

Use of SEC 

Resources 
Office of the General Counsel 

Executive Summary 

FTEs : Headquarters 

Regions and Districts 

Total 

2005 

Actual 

Cost: Salaries and Benefits ($000) $22,086.7 

Non-Personnel Expenses ($000) $3,242.8 

Total Direct Costs ($000) $25,329.5 

2006 

Estimate 

121 

- 12 

133 

$22,939.5 

$3,427.6 

$26,367.1 

2007 

Request 

120 

- 12 

132 

$24,037.5 

$3,692.7 

$27,730.2 

2007 Reauest: Amlicabili v of SEC Strategic Goals 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

Goal 3 IW Goal 2 

Promote Healthy 

Capital Markets 

The Office of the General Counsel (OGC): 

Foster Informed 

Investment 

Decision Making 

Serves as counsel to the Commission on all initiatives by the Chairman and the 

agency's divisions and offices; 

Defends the Commission in federal district courts; 

Represents the Commission in all appellate matters and amicus curiae filings; 

Advises the Commission and prepares opinions on adjudications; 

Counsels the Commission and its staff on ethics matters; 

Represents the Commission in administrative, real estate, labor law, and similar 

legal matters; and 

Oversees the Commission's Bankruptcy Program 

Maximize the 

Use of SEC 

Resources 

In 2007, OGC expects to continue managing the agency's appellate litigation, including 

appeals related to complex enforcement and other legal matters. An estimated 365 litigation 

cases will be opened and 390 closed. OGC expects to receive and review appeals to the 

Commission from registered accounting firms as a result of Public Company Accounting 

Oversight Board (PCAOB) actions and assist in the prosecution of violations of attorney 

ethics rules under the Sarbanes-Oxley Act of 2002. An estimated 70 adjudicatory matters will 

be completed, about the same as in 2006, and many of these matters will resolve novel legal 

questions under the major statutes administered by the Commission. In addition, OGC 

anticipates reviewing about 175 and commenting on roughly 120 disclosure statements of 

publicly held debtors, and the Office expects to handle an estimated 3,400 ethics-related 

inquiries and 195 procurement matters. 
Other Program Offices 

Actual Estimate Request 

FTEs: Headquarters 

Office of Chief Accountant 56 54 5 1 

Office of Inv. Educ. and Assistance 36 37 37 

Office of International Affairs 25 27 27 

Office of Economic Analysis 24 25 23 

Office of Risk Assessment 5 8 8 

Office of Administrative Law Judges - 11 - 12 - 12 

Total 157 163 158 

Cost: Salaries and Benefits ($000) $25,920.9 $27,619.8 $28,227.1 

Non-Personnel Exp. ($000) $4,324.4 $7,780.1 $7,043.7 

Total Direct Costs ($000) $30,245.3 $35,399.9 $35,270.8 

This section of the SEC's request includes chapters that describe the responsibilities, 

functions, and activities of the agency's smaller program offices. The offices covered by this 

section include: 

Office of Chief Accountant: establishes and enforces accounting and auditing policy to 

enhance the transparency and relevancy of financial reporting, and for improving the 

professional performance of public company auditors in order to ensure that financial 

statements used for investment decisions are presented fairly and have credibility. 

Office of Investor Education and Assistance: serves individual investors who complain 

to the SEC about investment fraud or the mishandling of their investments by securities 

professionals. 

Office of International Affairs: promotes investor protection in the global capital 

markets by advancing international regulatory and enforcement cooperation, promoting the 

adoption of converged high regulatory standards worldwide, and facilitating technical 

assistance programs to strengthen the regulatory infrastructure in emerging market countries. 

Office of Economic Analysis: serves as the chief advisor to the Commission and its 

staff on all economic issues associated with the SEC's regulatory activities. 

Office of Risk Assessment: helps the SEC anticipate, identify, and manage risk. 

Office of Administrative Law Judges: conducts hearings and rules on allegations of 

securities law violations. 
Office of Chief Accountant 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

Goal 1 

Enforce 

Compliance 

with Federal 

Securities Laws 

Goal 2 

r 2007 Request: Applicability of SEC Strategic Goals I 

Goal 3 

r J 

Goal 4 1 

Promote Healthy 

Capital Markets 

Maximize the 

Use of SEC 

Resources 

J 

Foster Informed 

Investment 

Decision Making 

- 

The Chief Accountant's Office (OCA) is responsible for establishing, interpreting, and 

enforcing accounting and auditing policy to enhance the transparency and relevancy of 

financial reporting, and for improving the professional performance of public company 

auditors in order to ensure that financial statements used for investment decisions are 

J 

presented fairly and have credibility. Concerns about the adequacy of accounting standards 

and the quality of independent audits led to major SEC and congressional actions, including 

passage of the Sarbanes-Oxley Act. Such concerns also resulted in increased private sector 

activity in accounting standard setting by the Financial Accounting Standards Board (FASB) 

and auditor oversight and regulation by the Public Company Accounting Oversight Board 

(PCAOB), both conducted under SEC oversight. 

J 

In 2007, OCA will continue its oversight of accounting standard setting activities, 

including a major FASB project on simplification and codification of accounting standards. 

OCA also will monitor the FASB's implementation of recommendations directed at moving 

toward a more principles-based approach to setting accounting standards. 

OCA, working with the Division of Corporation Finance, intends to continue its review 

of foreign registrant filings under the International Financial Reporting Standards (IFRS) to 

assist the Commission in determining whether the reconciliation to U.S. accounting standards 

that currently accompanies these financial statements remains necessary. OCA also will 

continue to assess the benefits of using tagged data under the extensible Business Reporting 

Language (XBRL) initiative and continue oversight of the PCAOB, which is expected to 

conduct quality reviews of approximately 400 firms, 33% more than in 2006. 
Office of Investor Education and Assistance 

Executive Summary 

I FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

2007 Request: Applicability of SEC Strategic Goals 

The Office of Investor Education and Assistance (OIEA) serves as the SEC's primary 

point of contact for investors who complain about the possible mishandling of their 

investments by securities professionals or ask about how the securities industry works and 

where to find information about products, issuers, and industry participants. OIEA also 

carries out the Commission's investor education program by, among other things, producing 

and distributing educational materials, participating in educational events, and consulting with 

other SEC divisions and offices on proposed rulemakings. 

Enforce 

Compliance 

With Federal 

Securities Laws 

Investor Assistance: OIEA staff anticipates receiving approximately 76,000 new 

investor complaints, questions, and other contacts, resulting in about 7 1,000 new matters. 

(Each new matter can involve several investor contacts.) The staff likewise will close 7 1,000 

matters and will increase the percentage of matters closed within seven days to 83%. 

Goal 1 

Investor Education: OIEA staff also will continue to carry out the agency's investor 

education programs and provide policy guidance to the SEC's program offices. The staff 

anticipates distributing approximately 350,000 investor brochures. In addition, the SEC's 

investor education web pages will receive approximately 8.5 million hits. 

Goal 2 Goal 3 

Promote Healthy 

Capital Markets 

Goal 4 

Foster Informed 

Investment 

Decision Making 

J 

Maximize the 

Use of SEC 

Resources 
Office of International Affairs 

Executive Summary 

FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

I 2007 Request: Applicabili 

Goal 2 

Promote Healthy 

Capital Markets 

r of SEC Strategic Goals 

Goal 3 Goal 4 

Foster Informed Maximize the 

Investment Use of SEC 

Decision Making . Resources 

I 

To protect U.S. investors, the SEC works with foreign regulators to improve crossborder enforcement cooperation, advance global transparency and disclosure, supervise 

globally-active U.S. firms, and promote high regulatory standards around the world. The 

Office of International Affairs (OIA) works to achieve these objectives by negotiating and 

implementing information-sharing arrangements for enforcement cooperation, formulating 

regulatory policy for cross-border securities activities, and providing technical assistance to 

emerging markets. 

In 2007, OIA will: 

Assist the Division of Enforcement with international cases, and participate in 

initiatives related to the regulation of globally active financial market participants; 

Make approximately 480 requests to foreign authorities for enforcement assistance, 

and handle approximately 340 requests from foreign authorities for enforcement 

assistance; 

Participate in about 180 international policy directives to promote high regulatory 

standards and strengthen the global marketplace; and 

Respond to approximately 240 technical assistance requests from foreign 

authorities. 

Globalization has resulted in an increase in SEC cases with international elements, and 

has heightened the complexity of SEC cases. 
Office of Economic Analysis 

Executive Summary 

FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

Goal 2 

Promote Healthy 

Capital Markets 

r of SEC Strategic Goals I 

Goal 3 IGoa14 

The Office of Economic Analysis (OEA) is the chief adviser to the Commission and its 

staff on all economic and empirical issues associated with the SEC's regulatory activities. 

OEA produces high quality analyses that address the economic issues associated with the 

regulation of our financial markets and conveys that knowledge clearly and responsibly to 

those making policy decisions. In 2007, OEA will support the following top priorities. 

Foster Informed 

Investment 

Decision Making 

Support of Rulemakinq: OEA expects rulemaking initiatives to continue at the same 

pace as in 2006 and will review about 55 SEC and self-regulatory organization (SRO) rules 

and conduct 45 regulatory flexibility analyses. The staff also will produce 190 memoranda 

and reports and provide economic advice on 1,000 regulatory and enforcement issues. 

Maximize the 

Use of SEC 

Resources 

Enforcement and Inspection: OEA will continue to provide analytical support to the 

Division of Enforcement (ENF) in several areas, including structuring distribution plans that 

have been set up as a result of certain settlement actions. The staff also will provide analytical 

support to the Office of Compliance Inspections and Examinations (OCIE) with their 

investment adviser sweeps, thereby supporting the maximization of the use of Commission 

resources. 

Risk Management: OEA will support the agency's efforts in the area of risk 

management by providing empirical analyses and related expertise to the Office of Risk 

Assessment (ORA). 

Data: OEA will continue to work with staff across the agency in identifying and 

implementing risk assessment measures, including data filed by investment advisers and the 

use of XBRL technology that will tag financial data as it is reported and allow for more 

effective validation of the information. 
Office of Risk Assessment 

Executive Summary 

FTEs : Headquarters 

2005 2006 2007 

Actual Estimate Request 

5 8 8 

2007 Request: Applicabili r of SEC Strategic Goals I V 

Goal 3 

Foster Informed 

Investment 

Decision Making 

Goal 1 

Enforce 

Compliance 

with Federal 

Securities Laws 

J 

Maximize the 

Use of SEC 

Resources 

Goal 2 

Promote Healthy 

Capital Markets 

J 

The Office of Risk Assessment (ORA) is responsible for coordinating the 

Commission's risk management program. Created in 2004, ORA was formed to help the 

Commission anticipate, identify, and manage risks, focusing on early identification of new or 

resurgent forms of fraud and illegal or questionable activities. ORA focuses on risk issues 

across the corporate and financial sector, including issues relevant to corporate disclosure, 

market operation, sales practices, new product innovation, corporate governance and many 

other activities.ORA's responsibilities can be grouped into three general categories: 

Analyzing data on new industry trends and risks from a variety of sources, such as 

professional and academic journals, domestic and foreign agencies, and industry and 

financial experts. 

Developing and maintaining the overall process for risk assessment throughout the 

agency. 

Serving as a resource of technical expertise for each division and office in their risk 

assessment efforts. 

In 2007, the Office intends to strengthen coordination with the various offices and 

divisions and promote the dissemination of articles and written materials throughout the 

agency for consideration by staff and commissioners. ORA expects to continue ongoing 

efforts to strengthen the agency's internal infrastructure in order to enable it to respond to 

risks and carry out its mission, including issues relating to the agency's emergency 

preparedness. 
Office of the Administrative Law Judges 

Executive Summary 

2005 2006 2007 

Actual Estimate Request 

I FTEs: Headquarters 11 12 l2 1 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

Goal 2 

Promote Healthy 

Capital Markets 

7 of SEC Strategic Goals 

Goal 3 

Foster Informed 

Investment 

Decision Making 

Goal 4 

Maximize the 

Use of SEC 

Resources 

Pursuant to the Administrative Procedure Act and the federal securities laws, 

administrative law judges preside at evidentiary hearings where the Commission has 

determined that public hearings are appropriate, in the public interest, and compatible with the 

protection of investors. The hearings are conducted in a manner similar to non-jury trials in 

the federal district courts. 

In 2007, the administrative law judges plan to dispose of about 85 proceedings, issuing 

3 5 initial decisions. The number of proceedings pending will be around 19. 

Amendments to the Rules of Practice, effective July 17,2003, were aimed at improving 

the timeliness of administrative proceedings. All orders instituting proceedings (OIP) now 

specify that the initial decision shall be filed with the Commission's Secretary either 120,210, 

or 300 days from the date the OIP is served on the respondent. To accomplish this objective, 

the rules require submission of a signed settlement offer to the Commission by the respondent 

within 15 business days from when a stay is granted based on the parties' representation that 

they have reached an agreement in principle to settle, and submission of the signed offer of 

settlement and accompanying recommendation by the Commission staff within the next 20 

business days. The amended rules announced a Commission policy strongly disfavoring 

requests for extensions, postponements, and adjournments. On April 1 9,2004, the 

Commission amended the Rules of Practice mher to provide that the time limits are tolled 

where a stay is granted at the request of a government official because of a pending criminal 

action arising out of the same or similar facts. 
Agency Direction and Administrative Support 

FTEs: Headquarters 

Agency Direction 

Executive Staff 

Office of Public Affairs 

Office of the Secretary 

Office of the Executive Director 

Office of Financial Management 

Office of Human Resources 

Office of Administrative Services 

Office of Filings and Info. Svcs. 

Office of Information Technology 

Office of Equal Emp. Opportunity 

Office of the Inspector General 

Total 

Cost: Salaries and Benefits ($000) 

Non-Personnel Exp. ($000) 

Total Direct Costs ($000) 

2005 

Actual 

37 

7 

25 

8 

42 

71 

8 1 

107 

118 

10 

- 10 

516 

$58,146.5 

$25,37 1.7 

$83,5 18.2 

2006 

Estimate 

36 

6 

24 

7 

46 

71 

84 

100 

121 

9 

- 10 

514 

$63,809.0 

$23,808.9 

$87.61 7.9 

2007 

Request 

36 

7 

23 

7 

48 

71 

83 

98 

118 

9 

- 10 

510 

$67,273.1 

$26,429.4 

$93,702.5 

This section of the 2007 request details the SEC's agency-wide executive activities, 

operations, and administrative fimctions and covers the following areas: 

&ency Direction: includes the Chairman's and Commissioners' offices, Office of 

Legislative Affairs (OLA), Office of Public Affairs (OPA), and Offce of the Secretary. The 

Chairman and Commissioners develop overall agency policy. OLA works with members of 

Congress and their staff to implement the SEC's legislative policy goals. OPA coordinates 

relations with the media, the general public, SEC staff, and foreign visitors. The Office of the 

Secretary schedules Commission meetings, prepares and maintains records of Commission 

actions, and reviews documents submitted to the Commission. 

Office of the Executive Director: develops and executes agency management policies. 

The Office works closely with the Chairman's Office to formulate budget policy, oversee the 

allocation and utilization of agency resources, promote management controls and financial 

integrity, manage the administrative support offices, and oversee the agency's information 

technology capital planning process. 

Office of Information Technolow: manages the Commission's Information Technology 

program including application development, user support, IT program management, capital 

planning, security, and enterprise architecture. 

Office of Equal Employment Opportunity ensures that employees and applicants for 

employment have equal opportunity in employment. 

Office of the Inspector General: conducts internal audits of Commission operations and 

internal investigations into allegations of misconduct by staff or contractors. 
Agency Direction 

Executive Summary 

2005 

Actual 

FTEs: 

Executive Staff 28 

Office of the Secretary 25 

Office of Legislative Affairs 6 

Office of Public Affairs 7 

Chairrnan' s Correspondence Unit - 3 

Total 69 

2006 2007 

Estimate Request 

Goal I 

Enforce 

Compliance 

With Federal 

Securities Laws 

Goal 2 

Promote Healthy 

Capital Markets 

r of SEC Strategic Goals 

Goal 3 I Goal 4 

Foster Informed Maximize the 

Investment Use of SEC 

Decision Making Resources 

Agency Direction is comprised of the Chairman and Commissioners and their staff, as 

well as the Office of the Secretary, the Office of Legislative Affairs (OLA), and the Office of 

Public Affairs (OPA). The Chairman's and Commissioners' offices develop overall agency 

policy and address the wide array of legal, financial, managerial, legislative, and economic issues 

encountered in the administration of the federal securities laws. The Ofice of the Secretary 

schedules Commission meetings, prepares and maintains records of Commission actions, and 

reviews documents submitted to the Commission for action. OLA works with members of 

Congress and their staff to implement the SEC's legislative policy goals, while OPA coordinates 

relations with the media, the general public, SEC staff, and foreign visitors. 

In 2007, the Commission anticipates holding about 65 meetings and considering about 

700 calendar items and 550 seriatim actions, including enforcement actions, rule proposals, and 

other items related to the administration of the federal securities laws. These actions will 

implement the Commission's mission to protect investors, sustain an effective and flexible 

regulatory environment, and facilitate capital formation. 

OLA and OPA expect that their workload will remain stable relative to 2006. OLA will 

coordinate the preparations for about 14 Congressional hearings and handle approximately 7,000 

telephone and e-mail inquiries from Congressional staff. OPA expects to receive about 45,000 

media inquiries and draft and distribute about 170 news releases. 
Office of the Executive Director 

Executive Summary 

2005 2006 

Actual Estimate 

FTEs: Headquarters 

Office of the Executive Director 8 7 

Office of Financial Management 42 46 

Office of Administrative Services 8 1 84 

Office of Human Resources 7 1 71 

Office of Filings and Info. Services 107 100 

Total 309 308 

2007 

Request 

7 

48 

83 

71 

- 98 

307 

Goal 1 

Enforce 

Compliance 

With Federal 

Securities Laws 

Goal 2 

Promote Healthy 

Capital Markets 

of SEC Strategic Goals 

Goal 3 1 Goal 4 

The Office of the Executive Director (OED) oversees the Office of Financial 

Foster Informed 

Investment 

Decision Making 

Management (OFM), the Office of Administrative Services (OAS), the Office of Human 

Resources (OHR), and the Office of Filings and Information Services (OFIS). 

Maximize the 

Use of SEC 

Resources 

Financial Management: OFM staff will prepare the SEC's quarterly and annual audited 

financial statements, and continue to enhance management systems and processes to comply 

with current federal accounting and financial reporting requirements. OFM also will fully 

implement a performance-based budgeting/activity-based costing solution designed to 

enhance budget formulation, better monitor operating costs and achieve cost efficiency. 

Administrative Services: With several major lease and office construction projects 

completed, OAS will focus on initiatives such as expanding the use of performance-based 

contracts and strategic sourcing in agency acquisitions, enhancing the SEC's emergency 

preparedness plans, and planning the construction of a new child care center at Station Place. 

Human Resources: OHR will complete implementation of integrated human capital 

systems, focusing on selection, performance management, employee development, and 

succession planning. These systems will bring the SEC into alignment with the principles of 

the Human Capital Assessment and Accountability Framework (HCAAF) developed by the 

Office of Management and Budget (OMB), Government Accountability Office (GAO), and 

the Office of Personnel Management (OPM). 
Office of Information Technology 

Executive Summary 

I FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

1 2007 Request: Applicability of SEC Strategic Goals I I Goal 1 I Goal 2 I Goal 3 I Goal 4 I 

Enforce Compliance Promote Healthy 

With Federal Capital Markets 

The Office of Information Technology (OIT) will undertake several significant projects 

in 2007. These projects, several of which are highlighted below, will modernize existing 

processes or implement new tools and technology to support SEC staff in their work. 

Securities Laws 

Electronic Data Gathering, Analysis, and Retrieval (EDGAR) and Disclosure Review: 

The current EDGAR contract will expire in June 2006. OIT anticipates a significant effort to 

transition to a new performance based contract with incentive structures and performance 

goals built in, and potentially a new vendor, in late 2006 and early 2007. Also in 2007, the 

SEC will begin implementation of a multi-year project to consolidate and simplify EDGAR 

forms, to streamline the disclosure process for filers and investors. 

Foster Informed 

Investment 

Decision Making 

Enforcement and Examination Management: OIT will implement the initial phase of 

an upgrade to the Enforcement case tracking system. The system will improve the SEC's 

ability to manage its large portfolio of investigations and cases, as well as improve the 

handling of fines and disgorgements. The SEC also will roll out a similar tool for managing 

compliance inspections and examinations. 

Maximize the Use 

of SEC Resources 

J 

Information Security and Disaster Recovery: The IT Security program will focus on 

implementing the requirements of Homeland Security Presidential Directive 12 (HSPD- 12), as 

well as managing emergent security issues. HSPD- 12 implementation includes rolling out 

additional personal identity cards, and continuing to centralize the way the agency manages 

access to information systems and sensitive data. 
Office of Equal Employment Opportunity 

Executive Summary 

FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

2007 Request: Applicabilit of SEC Strategic Goals 

Goal 1 Goal 3 

Enforce 

Compliance With 

Federal 

Securities Laws 

Foster Informed 

Investment 

Decision Making 

Goal 2 

Promote Healthy 

Capital Markets 

Goal 4 

Maximize the 

Use of SEC 

Resources 

The Office of Equal Employment Opportunity (EEO) oversees the agency's compliance 

with federal laws that prohibit employment discrimination based on age, color, disability 

status, gender, national origin, race, religion, or sexual orientation, and prohibit discriminatory 

retaliation against individuals for participating in the EEO process or opposing discrimination. 

The Office also ensures compliance with the requirements of the No FEAR Act of 2002. An 

essential responsibility of the Office is to immediately and appropriately respond to any 

alleged violations of EEO laws, such as harassing conduct or the creation of a hostile work 

environment. 

Preventative programs will continue to remain a top priority in 2007. EEO training 

modules to be offered during 2007 will include: Preventing Harassment, EEO Training for 

National Treasury Employees Union (NTEU) Stewards, and Disability Employment Training 

for SEC Managers. 

The Office intends to analyze the 2006 EEO program, identify any weaknesses by 

applying the EEOC standards, and develop practical solutions. Over the last several years, the 

SEC has worked to become the "Employer of Choice" with such offerings as pay parity, 

flexible schedules, and improved benefits. In support of this effort, the Office has tried to 

create and support a work environment in which employees are personally satisfied, have 

opportunities for advancement, and are motivated to remain with the agency. 

Phase I1 of the Diversity Initiative is to continue in 2007 with the full implementation 

of the programs developed and initiated in 2006. The Office subsequently will evaluate the 

effectiveness of the individual programs and make modifications as necessary. 
Office of the Inspector General 

Executive Summary 

FTEs: Headquarters 

2005 2006 2007 

Actual Estimate Request 

2007 Request: Applicability of SEC Strategic Goals 

Goal 1 Goal 2 Goal 3 Goal 4 

The work of the Office of Inspector General (OIG) is driven by the rapid pace of 

significant internal and external changes affecting the Commission. Budgetary growth, new 

hiring authority, new pay for performance system, unionization of staff, and move to new 

headquarters have all had a major impact on Commission operations over the last several years. 

Moreover, after a period of unprecedented growth, the securities industry is now undergoing 

significant changes involving accounting and corporate governance issues, globalization, 

information technology, and numerous other trends. It is within that context that the Office 

continues to assess and mitigate impediments to the achievement of Commission goals and 

objectives. 

Enforce 

Compliance 

With Federal 

Securities Laws 

Promote Healthy 

Capital Markets 

Foster Informed 

Investment Decision 

Making 

Maximize the 

Use of SEC 

Resources