Securities and Exchange CommissionSecurities and Exchange CommissionSEC_4674bb13-c405-47c6-b283-c417d7940702The Securities and Exchange Commission (SEC) aims to be the standard against which federal agencies are measured. The SEC will strengthen the integrity and soundness of U.S. securities markets for the benefit of investors and other market participants, and will conduct its work in a manner that is as sophisticated, flexible, and dynamic as the securities markets it regulates._b6e0a86a-4228-4def-9eef-67573855b6c4The mission of the Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation._4838c4c0-e4a4-4dff-a326-e971812f6ec8IntegrityAs the federal agency entrusted with enforcing and regulating the U.S. securities markets, each member of the SEC staff has a personal responsibility to demonstrate the highest ethical standards to inspire confidence and trust in one another and in the public the agency serves.FairnessAs an agency with both regulatory and enforcement powers, the SEC must treat investors and market participants fairly in accordance with the law. As an employer, the SEC must seek to hire and retain a diverse staff, and ensure that all decisions affecting employees and applicants are fair and ethical. As professionals, the staff must treat all others with respect and dignity.Accountability The SEC staff embraces the responsibility with which it is charged. In carrying out its mission, the staff readily holds itself accountable to the public it serves and takes personal responsibility for achieving SEC goals.Resourcefulness The SEC staff strives to work creatively, proactively, and effectively in assessing and addressing risk to the securities markets, the public, and other market participants. The staff is committed to finding flexible and innovative approaches to the Commission’s work and using independent judgment to explore new ways to fulfill the SEC’s mission in the most efficient manner possible.Teamwork The SEC recognizes that its success requires a diverse, coordinated team committed to the highest standards of trust, hard work, cooperation, and communication. The staff is committed to these values and is striving to work more effectively as a team -- rather than as separate divisions or offices, and to coordinate more effectively with business, governments, and organizations in the U.S. and abroad.Commitment to Excellence The SEC demands the highest standards of excellence, integrity, commitment, and dedication from its staff. The investing public and the U.S. securities markets deserve nothing less.ComplianceEnforce Compliance with Federal Securities Laws_16f43124-5de3-4b92-aaf1-593ca3b7f6c71Congress designed the nation’s federal securities laws to instill investor confidence in the capital markets. By providing a formalized structure and government oversight, these laws carefully balance the desire for open,accessible, and competitive markets with the need to protect investors. Among other things, they impact:- Public offerings of securities;- Periodic reporting by companies with registered securities;- Mergers and acquisitions; - Corporate governance; - Securities trading; and- The activities of entities such as exchanges, broker-dealers, depositories, clearing agencies, transfer agents, investment companies, and investment advisers. The SEC works to both enforce the laws and promote compliance. With regards to the SEC’s enforcement authority, the Commission seeks to detect violations quickly, publicize misconduct where appropriate to alert investors to possible wrongdoing, and take prompt action to halt the misconduct and its effects. SEC staff uncover securities violations through many sources, including surveillance activities, research and data analysis, tips and complaints from the public, the media,and the agency’s examination and disclosure review programs. Each year, the SEC brings hundreds of civil enforcement actions against individuals and companies for non-compliance with the securities laws. Depending on the type of conduct involved and the venue of the proceeding, the agency can seek a wide range of remedies. These include civil injunctions, orders requiring special actions (such as audits, accounting for frauds, or special supervisory arrangements), civil monetary penalties and disgorgement of illegal profits, orders that bar or suspend an individual from serving as a corporate officer or director, censures,industry bars, or suspensions or revocation of the registration of regulated entities such as broker-dealers and investment advisers. The Commission also is empowered to halt trading in securities where there is inadequate public disclosure. The SEC works with the Department of Justice as part of the President’s Corporate Fraud Task Force to file and prosecute criminal charges against violators, and has established more than 30 formal arrangements with foreign counterparts for information sharing and other forms of cooperation to investigate and prosecute securities law violations. Such actions can help deter violations of the securities laws from occurring in the first place. But the SEC also works aggressively on a variety of additional fronts to reduce the probability that violations will occur and to detect problems before they become severe or widespread. For example,the agency works with industry participants to explain the intent and requirements of securities laws and regulations,providing guidance before activities are undertaken that could result in violations. These interactions range from phone calls requesting interpretive guidance to formal written requests for exemptive or no-action relief. The SEC also conducts examinations and inspections to address compliance problems. Working together with firms and their compliance officers, examiners can help identify areas where entities can improve internal controls and other compliance mechanisms. When necessary, the examination program refers any potentially serious violations it uncovers to the SEC’sDivision of Enforcement, or when appropriate to the registrant’sself-regulatory organization, for further investigation. A vigorous disclosure review program helps prevent violations by shining a spotlight on an issuer’s business and financial condition. By upholding requirements for the broad and timely dissemination of material information, this program ensures that everyone, including the individual investor, learns important information, such as earnings results, at the same time. The SEC further promotes compliance by actively monitoring– and requiring others to monitor – the condition of firms or the markets as a whole. For example, the Commission conducts research, analysis, and surveillance to identify factors impacting the markets, uncover non-compliant practices,and ensure that firms are addressing issues before undue risk adversely affects investors. Furthermore, the SEC requires that registrants actively monitor and report certain activities and that the SROs and company board committees who oversee compliance maintain their independence. The Commission’s activities in these areas also have an additional benefit. By promoting full disclosure of firms’activities, the SEC gives investors the tools they need to make better-informed investment decisions. As a result, securities industry participants have a powerful incentive to comply with the laws and regulations that govern their practices.Detection and PreventionPotential problems or issues in the securities markets are detected early and violations of federal securities laws are prevented._9a5f279d-94e7-46a2-b1c5-7d2b9e63d2811.1Supporting Initiatives: 1. Risk Assessment: The SEC will expand its initiative to identify and manage emerging risks and market trends that threaten the Commission’s ability to fulfill its mission. By creating a formalized risk assessment function, the agency will be better prepared to determine more quickly whether new business trends and industry practices warrant further SEC attention and to proactively adjust operations and resources to address these new challenges.2. Risk-Based Inspection Cycles: The SEC will fully implement a risk-based methodology for selecting and setting examination and inspection cycles for investment advisers and funds. Larger or higher risk entities will be examined more frequently to ensure that the agency quickly identifies problems before they affect large pools of savings. 3. Better Access to Registrant Data: The agency will assess strategies for establishing broader electronic access to registrant data to regularly assess their condition, compliance with the law, and risk to the markets.4. Enhancing the Interpretive Guidance Process: Theagency’s enterprise architecture business model identified wide variances in how Commission staff receive, respond to, and analyze interpretive,exemptive, and no-action requests. As a significant component of the agency’s workload, the effort will determine whether a more efficient “customer driven” process can be developed that meets the needs of staff, the public, and other external stakeholders. This initiative may result in changes to business processes as well as the development or integration of information systems.ViolatorsViolators of federal securities laws are detected and sanctioned._077decc2-1f4f-4970-8f0e-fe828f77ecbd1.2Supporting Initiatives: 1. Risk Assessment: Through the SEC’s risk assessment initiative, a new Office of Risk Assessment and risk assessment teams within each program will map out potential risks that threaten investors. This risk assessment process will help the agency be much more proactive in identifying and addressing fraud.2. Coordination with Other Securities Regulators: Because fraud often reaches beyond U.S. borders,law enforcement must also have a global reach. Therefore, the agency will work to enhance cooperation with foreign authorities in overseeing globally active firms and improve information sharing on investigations and cases to enhance compliance with federal securities laws. The SEC also will build upon its strong partnerships with other domestic authorities that oversee the securities markets. 3. Document Management: The SEC receives millions of pages of documents in the course of its examinations and enforcement investigations. The examiners and attorneys who handle these activities could enhance their efficiency and effectiveness by having access to imaged documents in an electronic document management system that allows for better search, analysis, and disaster recovery. 4. Automated Tools: Over the next several years, the Commission will expand the use of automated tools to organize, analyze, and recognize aberrant patterns and exceptions in large databases of information to target high-risk activity, monitor registrants, and more quickly identify violations. In addition, the agency will modernize the Commission’s extensive databases to improve its ability to detect potential violations.5. Staff Training: The SEC strongly believes that a well-trained staff is key to the agency’s success in pursuing wrongdoers. Through efforts like “SEC University,” the agency will provide professional development opportunities that improve the performance, skills, and industry knowledge of staff. The SEC will share tools and techniques with financial regulators and other government agencies to ensure that the agency’s training program reflects the best practices in this area. Potential measures for monitoring progress: 1. Percentage of investment advisers and investment companies examined relative to risk-based exam cycles. 2. Number of interpretive requests, no-action letters,and exemptive requests responded to by staff. 3. Results of broker-dealer, investment company, and investment adviser examinations, including the number/percent of examinations with “significant findings.” 4. Criminal proceedings relating to SEC investigations or cases. 5. Monetary remedies or civil penalties ordered andcollected.6. Number, nature, and complexity of requests to and by foreign regulators for enforcement assistance.Regulatory EnvironmentSustain an Effective and Flexible Regulatory Environment_d466096a-e6c0-4c53-b871-8d14fca6b5142Federal securities laws seek to promote fair, orderly, and competitive markets that protect investors from undisclosed risk while fostering innovation and market access. The Commission’s role is to put those laws into action— by establishing a regulatory environment that permits competition to flourish, while at the same time protecting investors. Most securities regulation flows from two central principles. First, all investors should have equal access to accurate,complete, and timely information about the securities they buy, sell, and hold. Securities regulations require that issuers and other regulated entities disclose information about their current and expected future financial performance, to provide investors with an accurate idea of what a security represents. Second, investors should be able to rely upon self-regulatory organizations (SROs), broker-dealers, investment advisers and investment companies, and other market participants to conduct their securities transactions efficiently and in the investor’sbest interests. For example, the regulations often require that these entities register with the Commission, disclose potential conflicts of interest, and maintain effective internal controls. Federal law gives the Commission broad authority to shape the regulatory framework for the securities industry. Rulemaking may be required because of Congressional mandates, changing economic conditions, advances in technology, the advent of novel products or services, or new types of abuses. When properly crafted, these rules serve to protect investors and promote competition, market efficiency, and capital formation. Therefore, rulemaking is designed to strengthen the structure of the trading markets, improve corporate governance, enhance disclosure, promote reliable accounting standards, ensure the accountability of market professionals, and facilitate the flow of important information to the public, among other goals. The Commission’s rulemaking activities are supported by a wide range of analyses, with the goal of promoting the mission of the SEC while minimizing undue burdens on market participants. The division or office proposing the rule, along with the Office of the General Counsel, examines the legal basis for the rule and its interactions with other laws and regulations. An important component of the rulemaking process is economic and quantitative analysis performed by the proposing division or office and the Office of Economic Analysis (OEA), in an effort to make sure that a rule is narrowly tailored to achieve its intended objective, avoids unintended consequences, and is economically and financially sound. The various statements and reports that issuers, broker dealers,and others are required to file with the Commission are submitted in a format or form proscribed by the SEC’s rules. The forms specify which rules are applicable and explain who must file, the amount of the information required, and when the information must be provided. Since disclosure is such an important part of the regulatory landscape, these forms play an important part in defining the extent of the disclosure obligation and carry the legal force of the rules they implement. Beyond its rules and forms, the agency provides guidance when it sets forth the views of the Commission or its staff on questions of current concern, without stating them in the form of legal requirements. The principal form of these statements is through a publicly distributed SEC bulletin containing thestaff’s position on a particular legal or accounting issue or its interpretation of a rule or regulation. The Commission also issues concept and other releases that solicit the views of the public on securities issues, so that it can better evaluate the need for future rulemaking. This collaborative process ensures a broad and accessible forum in which interested parties can offer input on regulations—input which sometimes can have a significant impact on the shape of the final rule proposal. This collaboration serves to make the final rules that are adopted by the Commission better structured and more effective. The staff also responds to inquiries from individuals or companies about whether an activity undertaken in a specified manner would violate the securities laws. The inquiries take the form of written requests that the staff not recommend enforcement or other action to the Commission if the activity is completed as specified. The originators of “no-action” requests submit their inquiries privately, but the staff publicly releases both the request and the agency’s response upon completion. In addition, in order to ensure that the financial statements investors use to make investment decisions are presented fairly,consistently, and with credibility, the Commission monitors or participates in domestic and international standard setting initiatives involving accounting and auditing practices. Finally, because rulemaking is one of the SEC’s primary functions and involves staff in virtually every program,the agency recognizes that regular reviews of Commission regulations and its rulemaking processes are necessary to confirm that intended results are being achieved. Just as the securities rules require that company disclosures be clear and precise, the Commission also attempts to write rules that are easily understood and not overly prescriptive. For that reason, the agency makes a concerted effort to eliminate obsolete and redundant filing requirements, especially when it promulgates new rules that must work in concert with existing regulations. As required by the Sarbanes-Oxley Act, the Commission has engaged in extensive rulemaking to address issues of corporate and fund governance. New standards for the independence of directors and key board committees and the governance policies and practices of SROs will have significant effects for years to come. Many companies are recognizing anew that it is a good business practice to comply not just with the letter of the securities laws, but also with their spirit and underpinnings. If market participants view reforms as opportunities to improve internal controls,improve the performance of the board, and improve their public reporting, they ultimately will be better managed, more transparent, and therefore more attractive to investors.Regulations and StandardsInvestors are protected by regulations that strengthen corporate and fund governance and adhere to high quality financial reporting standards worldwide._07bf5ad0-6e77-45e9-8ee5-884d72c377ce2.1Supporting Initiatives:1. Accounting Profession Oversight: The SEC will work closely with the Public Company Accounting Oversight Board on regulation of the accounting profession and the promulgation and interpretation of auditing standards.2. Investment Management Industry Regulation: The agency will complete and monitor the results of rulemaking initiatives that will promote mutual fund investor rights. These rules would, among other things:a. Provide mutual fund investors with more information about fees and expenses,including fund transaction costs, sales load breakpoints, point-of-sale information about brokers’ fees and other items, and the reasons why the board of directors approved the fund’s advisory contract and fees;b. Require that fund fees and expenses be presented in dollars as well as percentages; c. Provide more frequent disclosure of fund portfolio investments and additional information about the portfolio manager’srelationship with the fund;d. Establish a code of ethics for investment advisers;e. Prohibit funds from using brokerage commissions to pay broker-dealers for selling fund shares; f. Combat late trading, market timing, and selective disclosure abuses in the mutual fund industry; and g. Explore alternatives for possible hedge fund manager oversight.3. Corporate and Fund Governance Rules: The SEC will complete rulemaking activities that strengthen corporate and fund governance practices by:a. Enhancing shareholder access to the proxy process, and bolstering the disclosure requirements related to shareholder proxy access; b. Enhancing independence of the chairs and other members of mutual fund boards of directors; c. Expanding interpretive guidance regarding critical disclosure requirements such asmanagement’s discussion and analysis of financial condition and results of operations, and d. Enhancing SRO efforts to strengthen marketgovernance.4. Global Accounting Standards: The agency supports ongoing convergence initiatives between the Financial Accounting Standards Board and the International Accounting Standards Board to enhance the quality of financial reporting worldwide. The SEC also will support ongoing efforts to improve audit standards and mechanisms for their oversight worldwide.5. Accounting Studies: The SEC will follow up on recommendations from the staff study and report on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System, and complete a report for the President and Congress on the use of, and financial reporting for, off-balance sheet transactions and the special purpose entities used to facilitate such transactions.Markets and IndustryIndustry efforts to provide innovative and competitive products and trading platforms are supported while the markets remain fair, vibrant, accessible, and financially sound._5c46a6fd-3444-4a94-8eb0-87c111e333f82.2Supporting Initiatives:1. Review the National Market System: Taking into account the increasingly global nature of the markets,the SEC will propose rules and analyze public input on updating the national market structure. The agency also will enhance the operational efficiency of the clearance and settlement process in markets with a view toward straight-through processing.2. Review Changing Market Conditions: The SEC will assess the need for a regulatory structure for credit rating agencies. In doing so, the agency will evaluate alternatives for obtaining disclosure from a broader community of filers, including hedge fund managers and government-sponsored enterprises.3. Facilitate Market Access: The SEC intends to reduce the number of requests by investment companies for exemptive relief by adopting rules that address the growth and evolving operations of these vehicles. The agency will propose rules to provide accelerated access to capital markets for the largest and most liquid issuers, and provide more specificity regarding disclosure and registration requirements for asset backed and other derivative securities transactions.4. Assure Market Continuity of Operations: The agency is working with critical market participants to develop adequate plans and procedures so that back-up infrastructure and personnel are able to maintain continuity of operations through any future market disruptions.Regulations and ReportingRegulations are clearly written, flexible, and relevant, and do not impose unnecessary financial or reporting burdens._9f06562f-01b1-48ab-ab0d-8245aaf275c02.3Supporting Initiatives:1. Improve Agency-Wide Coordination of the Rulemaking Process: The SEC will seek additional ways to break down internal organizational barriers and foster greater collaboration among divisions and offices on rulemaking initiatives. The agency will establish collaboration tools to more effectively gather and analyze data from across the SEC and manage rulemaking activities. The agency also will explore new ways to collect and disseminate rulemaking-related information electronically. 2. Enhance the Economic and Quantitative Support for Commission Rules and Regulations: The SEC will work to enlist the assistance of the Office of Economic Analysis (OEA) earlier and more often in the rulemaking process, so that the Commission’srules and regulations will be more firmly grounded in economic reasoning and analysis. 3. Update and Consolidate Forms and Guides: The SEC will update Commission rules and guidance to reflect the current requirements for electronic submission and eliminate references to paper-based filings, e.g., 1933 Act and 1934 Act Industry Guides,Regulation C under the 1933 Act, and Regulation S-K and S-B requirements. The agency also intends to simplify forms currently in use, such as Form D, and standardize those forms used by multiple regulators, such as Regulation A offering statements. 4. Assess the Impact of Prior Commission Rulemakings: The SEC will periodically assess the impact of past Commission rulemakings to gauge their effectiveness and determine whether more effective alternative approaches may have become available. Where possible, these determinations should employ empirical analysis. Pertinent divisions and offices will establish collaborative tools to more effectively conduct and coordinate such ex post analyses,which should inform current rulemaking. Potential measures for monitoring progress: 1. Number of SRO rule filings reviewed and closed and of those, the number that significantly enhance the quality and efficiency of the securities markets. 2. Time to complete SEC reviews of SRO rules. 3. Amount of funds lost resulting from failure of SROs to ensure compliance with its rules. 4. Number of requests from foreign regulators for nonenforcement related technical assistance. 5. Stock market capitalization as a percentage of gross domestic product by country. 6. Average cost of trading. 7. Percentage of households owning securities and mutual funds. 8. Global access to U.S. markets: number of new foreign private issuers registering under the ’33 and ’34 Acts,and the dollar amount of securities registered by foreign private issuers. 9. Volume of trading in new markets or exchanges resulting from granting exemptive requests. 10. Dollar value of investor holdings of new types of investment company issuers. 11. Reductions in burden hours for filing requirements. 12. Number of duplicative or obsolete rules eliminated. 13. Length of time to respond to no-action letters, exemptive applications, and interpretive requests.Investment DecisionmakingEncourage and Promote Informed Investment Decisionmaking_8d15d73b-d839-4b82-9817-5cf4f34e76803Investors who have access to information and know what questions to ask will be more likely to invest wisely. Because an educated investor ultimately provides the best defense against fraud and costly mistakes, the federal securities laws place great emphasis on ensuring that the issuers of securities provide clear, complete, and truthful information to the investing public. The Commission helps promote informed investment decisions through two main approaches: its full disclosure program and investor education initiatives. First, as part of its full disclosure program, the SEC requires issuers to disclose meaningful financial and other information to the public, which provides a common pool of knowledge for all investors to use to judge for themselves if a security is a good investment. The Commission staff review the filings that companies and other entities submit to determine whether the disclosures are adequate and accurate. Reviews can involve in-depth accounting and legal analysis of a filing’sfinancial and business discussions as well as any incorporated documents. In connection with a review, the agency may issue comments to prompt better compliance with applicable disclosure requirements. In response, a filer may revise financial statements or amend the accompanying narrative to provide additional or improved information. Compliance may avert costly investor litigation or Commission enforcement action. Most recently, the Sarbanes-Oxley Act requires the Commission to review disclosures made by reporting issuers and investment companies at least once every three years. The SEC also is refining the disclosure review program further to ensure that resources are directed toward those issuers, filings,companies, or industries that most warrant review. On an annual basis, the Commission receives and processes more than 15 million pages of information from corporate, investment company, and individual filers via the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Because it is important for investors to have access to meaningful information on which to base their investment decisions, the Commission requires that almost all of these documents be filed electronically and makes a majority of those filings immediately available to the investing public through the SEC’s website www.sec.gov. The SEC also works together with self-regulatory organizations like the National Association of Securities Dealers and the North American Securities Administrators Association (NASAA) to ensure that the public can access information on stockbrokers and investment advisers. For example in 2001,the SEC began providing electronic access to the Investment Adviser Public Disclosure (IAPD) website www.adviserinfo.sec.gov. The site contains registration forms filed by investment adviser firms, including important information about each firm’sbusiness operations and certain disciplinary events involving the adviser and key personnel. Comparable information on brokers is available on NASD’s website at www.nasdr.com. The second component of the Commission’s efforts to promote informed investment decisions is investor education. TheCommission’s investor education staff works closely with numerous federal and state agencies, financial industry associations, consumer groups, and educational organizations to leverage collective resources and to minimize duplicative efforts. The Commission uses its materials as a catalyst to help foster investor education initiatives throughout the nation. Over the past decade, the SEC has developed extensive materials to help investors understand the basics of investing on such topics as: - The risks and rewards of various products and strategies; - The importance of diversification; - How to research stock brokers and investment advisers; and - Where to find disclosure and other information about companies. The Commission also undertakes targeted initiatives to promote informed investment decisions and help investors detect and avoid fraudulent schemes. For example, during 2002 and 2003,the SEC launched a series of fake scam websites designed to warn investors who rush into investment opportunities on the Internet without fully investigating the offers. Borrowing from the tactics of stock market con artists, the websites appeared to be investment opportunities offering tremendous financial gains. Despite containing obviously fictitious claims,the websites have received hundreds of thousands of hits. Individuals who attempt to invest funds land on a warning page that states: “If you responded to an investment idea like this…you could get scammed!” The page also tells investors how to research investment offers and where to call for help. In addition to the fake scam websites, other targeted educational initiatives include: - An investor information page on the SEC website that features a searchable database of answers to frequently asked questions; dozens of publications on products, strategies, and other investment related topics; interactive quizzes and calculators; and investor alerts; - Educational events held throughout the U.S.,including elder fraud programs, visits to high schools and colleges, and investor seminars; - Free publications that educate investors; - A toll-free investor assistance telephone line; and - Individual responses to investors who contact the SEC with questions or complaints. The SEC’s investor education program benefits not only individual investors, but also the agency itself. The Office of Investor Education and Assistance (OIEA) staff collect data from investor questions and complaints and use it to track trends in the securities industry and to identify problematic brokers, firms, or sales practices. Sharing this information contributes to the agency’s overall approach to risk assessment and helps target the resources and shape the initiatives of other SEC offices and divisions. Moreover, a public that learns to recognize securities fraud and knows where to report it promptly can serve as an important early warning system to help regulators fight fraud. During fiscal year 2003, the OIEA and the Division of Enforcement’s Internet Complaint Center received nearly 250,000 e-mails, including tips, complaints, questions, and forwarded spam e-mails that contain potentially fraudulent securities-related solicitations.Disclosure MaterialsInvestors have accurate, adequate, and timely public access to disclosure materials that are useful, and can be easily understood and analyzed across companies, industries, or funds._ec61645f-9c15-426a-8855-bcbf0a1f2fc33.1Supporting Initiatives: 1. Expand Disclosure Requirements: The SEC will enhance market transparency through broader dissemination of information by market participants including: a) Disclosing fees and expenses paid by investment company shareholders;b) Disclosing incentives and conflicts of interest that intermediaries have in offering investment company shares to investors; c) Expanding the types of significant events that must be reported; d) Accelerating the filing periods for which certain activities are reported; and e) Disclosing company activities which raise concerns about global security risks that are material to investors. 2. Modernize Commission Databases: SEC databases will be enhanced so that information on mutual funds is more accessible and the electronic disclosure of information about investment advisers is enhanced. 3. Enhance Disclosure Review: The SEC will examine the business processes and supporting technology of the disclosure review program, with an eye towards streamlining these activities, enhancing the information available to the public, and making it easier for the public to analyze that data.Investor UnderstandingInvestors have a better understanding of the operations of the nation’s securities markets._d5325c0a-d81b-43d1-8758-c9e90822ac073.2Supporting Initiatives:1. Investor Education Fund: The SEC will assist with the establishment of a non-profit grantmaking program designed to equip investors with the knowledge and skills necessary to make informed investment decisions, using funds from the global settlement of enforcement actions involving analyst conflicts of interest. 2. Website Enhancements: The agency will redesign the Commission’s website to improve access to information, expand the use of technology to provide investors with prompt, accurate responses to their questions and complaints, and implement selected e-government initiatives sponsored by the Administration that improve the public’s ability to interact with federal agencies. 3. Targeted Investor Education Initiatives: The SEC will explore new ways to shape and target education initiatives to maximize their impact among the investing public. For example, the agency will analyze complaint data on a regular basis to spot trends that will inform its education programs. Potential measures for monitoring progress: 1. Percentage of investment company and issuer disclosures reviewed annually. 2. Average time to issue initial comments on full review registration and merger proxy statements. 3. Number of disclosures significantly changed in response to staff comments. 4. Percentage of filings that can be analyzed because they are submitted in a structured format. 5. Percentage of filings submitted electronically.6. Rate of use for agency website and number of on-line searches. 7. Percentage of filings that are publicly available on the website. 8. Total number of investor contacts broken out by complaint type. 9. Average time for resolution of investor complaints or questions. 10. Number of investor education initiatives and campaigns shaped by analysis of complaint data. 11. The number of visitors to the Fast Answers interactive database of commonly asked questions.Resource UtilizationMaximize the Use of SEC Resources_1d99a7bb-a17a-4228-9b03-147c901a934a4An efficient, well-managed, anticipatory SEC is critical to protecting investors and the markets. As such, the Commission is concentrating on enhancing organizational effectiveness, as well as investing in staff, new technologies, and new internal controls. Over the past two years, dramatic changes have occurred in theCommission’s operating environment. Starting in fiscal year2002, legislation was adopted that allowed the agency to begin offering salary and benefit packages to its employees that are competitive with those of other federal financial regulators. In2003, the President and Congress approved significant funding and staffing increases that allowed the SEC to hire hundreds of new employees to help address the challenges facing the securities industry. Additional legislative changes in theCommission’s hiring authority made it possible for the agency to move more quickly to add highly qualified candidates to its staff. Taken together, these changes are helping the SEC to retain talented and experienced staff while recruiting new highly qualified individuals that reflect the population from which they are drawn as well as the citizens they will serve. These new resources also allowed the SEC to create and begin implementing a multi-year strategy to enhance its information technology systems. This strategy will give SEC staff new and innovative tools to analyze and scrutinize investigatory evidence, company disclosures, and other information used by the staff. In addition, the investment strategy revitalizes the agency’s long-standing commitment to citizen-centered electronic government by providing the public with greater access to more information, more quickly than ever before. Consistent with the President’s Management Agenda, the agency is exploring ways to improve management activities in the areas of performance measurement, improved financial controls, and budget and performance integration. This emphasis on agency management and operations will improve the SEC’s ability to assess and enhance its performance and establish accountability for mission success. The Commission’s ability to fulfill its mission depends upon astable long-term funding source. Under current law, the agency collects fees from the securities industry that offset the budget. In 2007, the law reduces the fees collected by the Commission from their peak in 2006 of about $2.1 billion to an estimated$1.1 billion. In anticipation of this drop in fee collections, it may be appropriate to consider whether self-funding or other changes to the fee and funding structure are necessary. Strategic Management of Human Capital The Commission’s most vital asset is its workforce. Yet throughout the 1990’s, the Commission had difficulty attracting and retaining qualified staff. For reasons ranging from uncompetitive compensation to an increasing workload, the agency lost employees to the private sector or to other federal regulatory agencies. Each time this happened, the agency incurred costs to train replacement staff to work on the enforcement investigations, inspections,disclosure reviews, or other projects that were underway. Now with pay parity, excepted service hiring authority, and increased financial resources, the agency has made considerable progress in keeping turnover rates low, while recruiting hundreds of first-rate employees from a variety of sources. The expertise and specialized skills intrinsic to the field of securities regulation is a significant factor shaping the agency’shuman capital planning efforts. The SEC must identify the mission-critical roles and competencies the agency requires today and in the future. To ensure a pool of trained and prepared staff, senior management, working with human resources staff, must identify the requisite skills, determine whether gaps exist in the SEC’s workforce, and develop ways to bridge these gaps through training or recruiting strategies. In addition, the agency must plan for filling leadership positions by establishing strategies on succession planning,supervisory training, and management development. To attract and hire the correct people to fill these gaps, the SEC will continue its nation-wide recruitment efforts. Recently,the agency bolstered its efforts to identify and attract highly qualified accountants by retaining two executive recruiting firms – a first in the agency’s history. The Commission also has reaffirmed its commitment to a diverse workforce, structuring its recruitment efforts to attract new staff from a wide variety of demographic groups. Additionally, the SEC is broadening the range of skills for which it recruits in order to ensure that the agency maintains a staff reflective of those it oversees and serves. The SEC recognizes that employee satisfaction plays a major role in recruitment, retention, and employee performance. As such, the agency is working to help staff maintain an appropriate balance between work and personal life by enhancing employee benefits, offering classes and counseling,and working to build a “virtual workforce” with expanded options for telecommuting and working remotely. To enhance the staff’s knowledge base, the SEC is implementing initiatives such as the “SEC University” (SECU),a comprehensive redesign of the agency’s training and orientation programs. Through a variety of in-house and electronic courses, SEC-U will help the agency develop and reinforce a strong operating culture, enhance employee performance, and broaden staff knowledge of industry trends. Another important goal of SEC-U is to help the agency maintain quality leadership. Through training and mentoring, SEC-U can help current and future managers more effectively motivate and manage staff. This effort is particularly important given that 14 percent of SEC managers will be eligible to retire by the end of 2005.The SEC is working to build a culture of accountability, where excellence is encouraged, noted, and rewarded. For example,the Commission has developed a Pay-for-Performance system that recognizes and equitably compensates employees for contributions made that help the SEC achieve its mission. Supporting the Pay-for-Performance system is the agency’s effort to establish a system that tracks key measures and holds managers and staff accountable for achieving the Commission’s strategic and performance goals. The SEC will continue to explore ways to improve the design of its programs and its organizational structure. In particular,the SEC will examine whether these structures could be better aligned towards the customers the agency serves. Information Technology and Electronic Government Technology plays a major role in determining how the SEC conducts its business and how it interacts with the public and its partners. Effective integration of improved technology into the Commission’s work processes is key to the agency’songoing success. As a result of recent funding increases, the Commission is moving much more aggressively to identify and develop strategic IT initiatives that improve agency business functions and enhance operational effectiveness. Using a rigorous planning process that is consistent with the requirements of the Clinger-Cohen Act and OMB guidance,the SEC’s technology planning committees are strengthening the agency’s decisionmaking processes by requiring that all requests for new information systems be developed in a consistent manner. The process also requires that requests be reviewed and approved by a diverse group of senior program staff based upon the needs and priorities of the entire agency. To continue meeting its technology planning and management challenges, the SEC is conducting an in-depth review of all information technology efforts and developing a comprehensive,multi-year strategic IT plan. Coupled with the agency’senterprise architecture efforts, this strategic IT plan will help ensure the effective implementation of innovative technologies that meet the needs of staff and the public for years to come. In particular, the IT program is focused on the following strategic priorities: - Improving the Commission’s discovery and case management capabilities; - Improving the accessibility and usability of registrant filings to the public and SEC staff; - Increasing the SEC staff’s personal productivity and work flexibility; - Using enterprise architecture principles to streamline processes and better leverage technology investments;- Increasing information security and disaster preparedness; and- Enhancing the agency’s capital planning and project management processes. The Commission’s recent investment decisions reflect how technology is driving significant changes within the agency,as resources are increasingly being directed toward the application of new technologies to gather and analyze data. In particular, electronic discovery, computer forensics, and data analysis continue to be critical components of agency efforts to proactively identify issues affecting the markets, assess risks,conduct enforcement investigations, and target disclosure review and inspection activities to those firms and filings that pose the greatest risk to the safety of the markets. Because the agency increasingly conducts its activities electronically, the public and other stakeholders are in turn demanding far greater access to Commission data and services via the Internet. The agency’s strategic IT plan will build upon past successes in the electronic government arena, which include the SEC’s website, www.sec.gov and the EDGAR system. Budget and Performance Integration The use of performance measurement systems is helping SEC management identify programs that are working effectively and efficiently. In early 2003, the Chairman created periodic management reports, known as “dashboards,” that illustrate division and office progress towards budget, staffing, and performance objectives. These reports provide a more detailed picture of the Commission’s operations and effectiveness than has ever before been available. The Chairman and senior managers will use these reports regularly to identify emerging problems, discuss possible solutions, and hold managers accountable for staff activities and performance. A performance budget for the agency’s fiscal year 2006 request will reflect this strategic plan and efforts to introduce activity-based costing and performance-based budgeting into SEC programs. Improved Financial Performance Under the recently enacted Accountability of Taxpayer Dollars Act of 2002, the Commission is required to meet all proprietary accounting guidelines for federal agencies and to undergo annual audits. Prior to the Act, the Commission was working to enhance its internal controls and meet applicable reporting requirements. In early 2002, the Inspector General conducted an assessment of Commission financial management systems controls. This assessment did not find any systematic problems that would indicate the Commission lacks the ability to account for any funds. However, the assessment did identify several issues that are being addressed through the creation of internal task forces, support from contractors, and the hiring of additional staff. The SEC is implementing an aggressive plan to upgrade some of its management systems and processes in order to undergo its first complete financial audit in2004. Efforts to upgrade financial systems, strengthen and streamline business processes, and improve information technology security will continue as a multi-year effort. The SEC’s Inspector General requested and the Comptroller General agreed that the General Accounting Office (GAO) will act as the Commission’s auditor for an initial period.Human CapitalHuman capital strategies are aligned to achieve mission, goals, and outcomes._1baed294-13ad-4934-b898-369329ffc0c24.1Supporting Initiatives: 1. Linking Performance to SEC Mission: The SEC will implement a Pay-for-Performance System and other aspects of the pay parity program that strengthen incentives and recognize performance in achieving the Commission’s strategic and performance goals. 2. Enhance Recruitment and Staffing: The agency will aggressively implement strategies to achieve targeted staffing levels throughout the Commission by using intensive recruiting campaigns to reach applicants, hire staff through excepted service authority, and automate classification and staffing processes to reduce hiring cycle times. 3. Enhance Benefits and Work/Life Programs: The SEC aims to enhance employee satisfaction and staff retention by expanding benefits and developing additional work/life programs. 4. Virtual Workforce: The agency will explore ways to help staff work from home or other off-site locations, working to create the technological and management infrastructure for this purpose.5. SEC University: Through the SEC-U, the agency will enhance and redesign the agency’s staff development activities, including revising the SEC orientation program for new employees, developing a competency model for senior managers with training curricula for each level of agency management, and offering online courses to provide staff with continued opportunities for professional growth.Financial Management and Internal ControlsFinancial management and internal controls are sound._4458f3d7-bff5-4669-961c-9faffc8bd9ae4.2Supporting Initiatives: 1. Audited Financial Statements: Under the authority of the Accountability for Taxpayer Dollars Act, the SEC will prepare its first audited financial statements, which will cover fiscal year 2004. As part of these efforts, the agency will implement a new disgorgement system for tracking penalties and complete the certification and accreditation of general support and financial management systems. 2. Section 31 Fees: The SEC adopted Rule 31 which establishes an auditable system forthe collection of payments made pursuantto Section 31 of the 1934 Exchange Act. 3. Performance Budgeting: The agency will explore newways to monitor and evaluate agency performance and integrate budget and performance systems. New performance budgeting systems should help the agency clarify and delineate links between the risksit identifies, the strategies it will employ to addressthose risks, and the allocation of budgetary resources.Information TechnologyBusiness improvements are promoted through the innovative use of information technology._a1338382-584e-49cd-9e14-096f675f034f4.3Supporting Initiatives: 1. Strategic IT Plan: The agency will assess its strategic IT needs based on a combination of program-specific priorities as well as agency-wide priorities, and establish a plan for transitioning the agency to its desired architecture and systems. 2. Electronic Discovery and Case Management: The SEC will move towards an inspection and discovery process based on electronic search and retrieval of imaged documents, and integrate the document workflow into an overall set of automated case management and examination management processes and tools. 3. Accessibility and Usability of Registrant Filings: The SEC will explore the use of “tagged data” formats such as XBRL for financial disclosure, streamline forms and filing processes for registrants, and improve the internal processes and analytical tools used by staff to review filings. 4. Rulemaking and Correspondence Management: The agency will streamline the receipt and tracking of comment letters and other correspondence by integrating processes across Commission offices and by types of communication. 5. Enhanced Employee Productivity: The agency aims to improve the personal productivity of Commission staff through: a. Automation and collaboration technologies to facilitate “workforce virtualization” and improved information flow, b. Knowledge management tools that capture and institutionalize the expertise of staff, and c. Web-based forms and workflow automation tools to automate internal Commission activities. 6. Enterprise Architecture Migration: The SEC will establish a comprehensive plan to consolidate redundant Commission applications, centralize and simplify Commission data repositories, and enhance data sharing and collaboration within the Commission and with registrants and regulatory partners. 7. Presidential Management Agenda e-Government Initiatives: The SEC will continue to participate ingovernment-wide electronic government initiatives, including those currently under review such as e-Travel, e-Rulemaking, and e-Authentication. 8. Secure and Reliable Systems: The agency will establish a fully functional alternative disaster recovery site, certify and accredit major agency systems for security, and continue to monitor and improve the security of Commission systems and the privacy of Commission data. 9. IT Capital Planning and Project Management Processes: The SEC will enhance the process used to select and manage IT investments to ensure that all projects promote agency-wide priorities, capture the benefits of business process redesign, and contribute to the agency’s enterprise architecture, and leverage federal e-government initiatives where feasible. Potential measures for monitoring progress: 1. Staff vacancies/percentage by program area. 2. Length of tenure for accountants, attorneys, examiners and supervisors. 3. Attrition rate for accountants, attorneys, examiners and supervisors. 4. Percentage of management and staff attending training programs. 5. Audited financial statements are issued without qualified opinions. 6. Length of time to issue audited financial statements after year end. 7. Percentage of centrally managed applications meeting federal security requirements for accreditation and certification. 8. Percentage of examinations and enforcement actions relying primarily on electronic format discovery. 9. Percentage reduction in hours required to complete agency filings, as measured by the Paperwork Reduction Act. 10. Implementation dates achieved for disaster recovery plans including alternate data center. 11. Percentage of projects with costs and benefits clearly defined and tracked throughout project lifecycle.2003-10-012009-09-302010-02-08http://www.sec.gov/about/secstratplan0409.pdfArthurColman (www.drybridge.com)colman@drybridge.com