SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

D.C . 20549

2024 Report and Certification of Internal Supervisory Controls

Introduction

Section 961 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the

“Act”) 1 requires that not later than 90 days after the end of each fiscal year, the Securities

and Exchange Commission (“SEC” or “Commission”) shall report to the U.S. Senate

Committee on Banking, Housing, and Urban Affairs and the U.S. House Committee on

Financial Services on the conduct by the Commission of enforcement investigations,

reviews of corporate financial securities filings, and examinations of registered entities. 2

This report is being submitted for the Commission’s fiscal year ending September 30, 2024.

Background

The SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and

facilitate capital formation. Although the SEC’s functional responsibilities are organized

among six divisions and 25 offices, the scope of the activities covered in Section 961 of the

Act fall principally under the purview of: the Division of Enforcement (“Enforcement”), the

Division of Corporation Finance (“Corporation Finance”), the Division of Examinations

(“EXAMS”), and the Office of Credit Ratings (“OCR”). Therefore, in the context of this

report, references to “the Commission’s internal supervisory controls” or “internal

supervisory controls of the Commission” relate to the relevant internal supervisory controls

of Enforcement, Corporation Finance, EXAMS, and OCR.

Enforcement is principally responsible for assisting the Commission in executing its

law enforcement function by, among other things, conducting investigations of

potential securities law violations; recommending in appropriate circumstances that

the Commission institute civil actions in federal court or before an administrative law

judge; and prosecuting cases on behalf of the Commission. Corporation Finance is

principally responsible for selectively reviewing disclosure documents that securities

issuers (other than investment companies) file with the Commission. Through

Corporation Finance’s review process, the Division provides comments where it

believes filers can improve or enhance their compliance with the disclosure

requirements of the federal securities laws. EXAMS principally administers the

examination program for SEC-registered entities including, among others, self1

15 U.S.C. § 78d-6.

2

References to “examinations” within this report refer to both examinations and inspections conducted by either

the Division of Examinations or the Office of Credit Ratings.

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regulatory organizations, broker-dealers, transfer agents, clearing agencies, municipal

advisors, investment companies, and investment advisers. EXAMS conducts

examinations to improve compliance with the securities laws, prevent fraud, monitor

risks, and inform policy. Finally, OCR is responsible for conducting examinations and

monitoring the activities of nationally recognized statistical rating organizations to

assess and promote compliance with statutory and Commission requirements.

This report describes the scope and methodology used to evaluate the internal supervisory

controls and relevant procedures applicable to the Enforcement, Corporation Finance,

EXAMS, and OCR staff who perform enforcement investigations, reviews of corporate

financial securities filings, and examinations of registered entities. Furthermore, this report

describes the assessments performed and whether those assessments identified any

significant deficiencies in the internal supervisory controls under Section 961 as of the end

of the fiscal year. This report also includes a description of the inherent limitations of

procedures applicable to staff, internal supervisory controls, and the evaluation process.

Finally, this report includes the Certification of Supervisory Controls that is required by the

Act and a summary of the Comptroller General’s review pursuant to Section 961(e) of the

Act.

Internal Supervisory Controls and Procedures Applicable to Staff

Section 96l(b)(l) of the Act requires the assessment of both the Commission’s internal

supervisory controls and procedures applicable to the Commission staff who perform

enforcement investigations (i.e., Enforcement), reviews of corporate financial securities

filings (i.e., Corporation Finance), and examinations of registered entities (i.e., EXAMS and

OCR). The terms “internal supervisory controls” and “procedures applicable to staff” are not

defined in the Act. Consistent with the scope of Section 961(b)(1)(B), “procedures

applicable to staff” refer to the established “day-to-day” procedures to be followed by the

employees” performing examinations, investigations, and reviews. “Internal supervisory

controls” refer to the process established by Enforcement, Corporation Finance, EXAMS, and

OCR that supervisors perform during examinations, investigations, and reviews, to provide

reasonable assurance that Section 961 objectives of consistently conducting examinations,

investigations, or reviews with professional competence and integrity (“Section 961 Objectives”)

are achieved. The evaluations of internal supervisory controls and procedures applicable to

staff covered by this report for the Commission’s fiscal year ending September 30, 2024,

represent the 15th time such evaluations have been conducted pursuant to the requirements

of Section 961 of the Act.

Scope and Methodology

The Directors of Enforcement, Corporation Finance, EXAMS, and OCR, each with the

assistance of their supervisory staff and other office or division personnel, evaluated the

effectiveness of internal supervisory controls and relevant procedures applicable to staff.

Consistent with Section 961(c)(2)(C), the internal supervisory control assessment

encompassed controls in place during the final quarter of the fiscal year ending on

September 30, 2024, and the evaluation of the effectiveness of those controls encompassed

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the 90-day period ending on the final day of the fiscal year. Upon completion of the

evaluation, each Director signed a certification concerning the adequacy of the

Commission’s internal supervisory controls with respect to their office or division.

Assessments of the effectiveness of the relevant procedures applicable to the staff were

conducted throughout the year as part of on-going monitoring activities, specific procedure

assessments, or through other assessments. The conclusion regarding the effectiveness of those

procedures was made as of the end of the fiscal year.

To facilitate an effective, efficient, and consistent approach to the evaluations, the agency

established a working group consisting of staff from Enforcement, Corporation Finance,

EXAMS, OCR, and the Office of the Chief Risk Officer. The working group met and

communicated regularly to discuss the execution of each division’s or office’s assessment

and to ensure a consistent methodology for conducting the Section 961 assessment

corresponding with relevant government-wide internal controls standards and guidance.

Enforcement, Corporation Finance, EXAMS, and OCR engaged in a “top-down, risk-based”

consideration of their functional responsibilities, focusing on assessing their respective

Section 961 Objectives of consistently conducting investigations, reviews of corporate

financial securities filings, or examinations in accordance with adopted policies and

procedures. This approach involved identifying risks to achieving the Section 961 Objectives

of consistently conducting examinations, investigations, or reviews with professional

competence and integrity, determining whether controls exist (or should exist) to address

those risks, and evaluating the design and operating effectiveness of the controls included in

the evaluation. The procedures for collecting information to evaluate the effectiveness of

internal supervisory controls consisted principally of interviews, observation, process

walkthroughs, inspection of documents, self-assessments, and through the application of

judgment, as appropriate. The approach of Enforcement, Corporation Finance, EXAMS,

and OCR in assessing the effectiveness of the procedures applicable to the staff who perform

enforcement investigations, reviews of corporate financial securities filings, and examinations of

registered entities involved (1) identifying the staff procedures most relevant and important to

achieving the Section 961 Objectives; (2) gathering information from various activities and

sources that provide insight into the effectiveness of those staff procedures; and (3) assessing

whether those procedures enable achievement of the Section 961 Objectives.

In addition, relevant members of the working group reviewed and considered background

material that included the review of the internal supervisory controls pursuant to the

requirements of Section 961 of the Act, the Federal Managers’ Financial Integrity Act

(“FMFIA”) assurance statements for fiscal year 2024, and recent Office of Inspector General

(“OIG”) and Government Accountability Office (“GAO”) findings.

Finally, Enforcement, Corporation Finance, EXAMS, and OCR reviewed any deficiencies

identified in the design or operation of internal supervisory controls to determine whether

such deficiencies were considered significant, either individually or in the aggregate.

Enforcement, Corporation Finance, EXAMS, and OCR assessment teams provided

summary information for such determination and for the evaluation, as a whole, to the

respective office or division Director in order to support the relevant effectiveness

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conclusions and the assertions within the certification. The SEC will continue to enhance the

approach taken in 2024 to improve the effectiveness and efficiency of the efforts going

forward. The results of GAO’s reviews under Section 96l(e) of the Act may also result in

adjustments to the process in future years.

Inherent Limitations

All control systems, including internal supervisory controls, are subject to inherent

limitations. No matter how well-conceived and operated, an internal control system cannot

provide absolute assurance regarding the achievement of objectives, nor can an evaluation

of an internal control system or procedures applicable to staff provide absolute assurance

that significant deficiencies will be identified. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that internal supervisory controls may

become inadequate because of changes in conditions, or that the degree of compliance with

the policies or procedures may deteriorate.

Because of the nature, including breadth, of the Commission’s investigation, review of

corporate financial securities filings, and examination functions, as well as limitations on

resources, management and staff must exercise judgment in conducting enforcement

investigations, reviews of corporate financial securities filings, and examinations of

registered entities. As such, staff procedures are inherently designed to allow for the

application of judgment in decision-making. There may be instances where judgments made

in good faith are in hindsight deemed inappropriate. Despite the limitations described

above, the evaluations of the Commission’s internal supervisory controls and procedures

applicable to staff are designed to provide reasonable assurance for the conclusions

expressed in this report. See Summary of FY 2024 Assessment Results below.

Certification and Reporting

Section 96l(c)(2)(D) requires each respective Director of Enforcement, Corporation Finance,

EXAMS, and any successor offices (e.g., OCR) to certify that they have disclosed to the

Commission any significant deficiencies in the design or operation of internal supervisory

controls that could adversely affect the ability of the applicable division or office to

consistently conduct enforcement investigations, reviews of corporate financial securities

filings, or examinations of registered entities with professional competence and integrity.

Under the terms of Reorganization Plan No. 10 of 1950, the executive and administrative

functions of the Commission are transferred to the Chair of the Commission, including,

among other functions, the appointment and supervision of personnel employed under the

Commission. 3 Accordingly, the Director of each respective division or office should make any

required disclosures to the Chair of the Commission. To make this clear, the attached

certification states that the respective Directors have “disclosed to the Chair of the

Commission any significant deficiencies in the design or operation of internal supervisory

controls.” A copy of this report is also being provided to each Commissioner.

3

15 F.R. 3175, 64 Stat. 1265. Section l(a).

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As part of the evaluation process described above, the respective Enforcement, Corporation

Finance, EXAMS, and OCR assessment teams evaluated their findings to determine whether

any deficiencies in the design or operation of internal supervisory controls existed as of the

end of the fiscal year. For any such deficiencies, the severity was evaluated to determine

whether any, either individually or in the aggregate, constituted a significant deficiency.

For purposes of making the determinations described above, a “significant deficiency”

meriting the attention by the Chair of the Commission, is any deficiency, or combination of

deficiencies, in internal supervisory controls that inhibits the respective office or division

from achieving the overall goals established by senior management for consistently

conducting enforcement investigations, reviews of corporate financial securities filings, or

examinations of registered entities with professional competence and integrity.

Summary of FY 2024 Assessment Results

Following the process and methodology described above, Enforcement, Corporation

Finance, EXAMS, and OCR evaluated for the fiscal year ending September 30, 2024, the

effectiveness of the applicable internal supervisory controls and staff procedures with

respect to Enforcement investigations, Corporation Finance reviews of corporate financial

securities filings, and EXAMS and OCR examinations of registered entities. The results of

these evaluations provide reasonable assurance, as of that date, that (1) the internal

supervisory controls for such activities were effective; (2) no significant deficiencies were

identified in the design or operation of internal supervisory controls that could adversely affect

the ability of the Division or Office to consistently conduct investigations, reviews of corporate

financial securities filings, or examinations of registered entities with professional competence

and integrity; and (3) the most important and relevant staff procedures applicable to such

activities enabled the achievement of the Section 961 Objectives.

Certification of Internal Supervisory Controls

See Exhibit A - Section 961(c)(2) Certification

Summary of Reviews by the GAO

Section 96l(e) of the Act requires a triennial review by the Comptroller General of the

United States of the adequacy and effectiveness of the Commission's internal supervisory

control structure and procedures. Section 961(b)(3) of the Act requires this report to contain

a summary of the GAO’s review. The SEC staff appreciates the benefit of these regular

GAO reviews, which have enabled the SEC to improve its internal supervisory control

systems and procedures over the past decade:

•

In April 2013, the GAO completed its first triennial review under Section 961(e).

This report (GAO-13-314) contained one recommendation for SEC action, which the

SEC implemented. The GAO considers this recommendation closed, indicating on

its website that it found in a subsequent review that the “SEC has improved the

design, operation, and documentation of its internal supervisory controls since the

issuance of GAO-13-314.”

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•

In October 2016, the GAO completed its second triennial review. This report (GAO-1716) contained one recommendation for SEC action, which the SEC implemented. The

GAO considers this recommendation closed, indicating on its web site that the actions

taken by the SEC were a “critical step to streamline their 961 supervisory control

documentation, and increase the operating efficiency and effectiveness within and across

the divisions and offices.”

•

In December 2019, the GAO completed its third triennial review. This report (GAO20-115) contained five recommendations for SEC action, which the SEC

implemented. In September 2021, the GAO updated its website to indicate that all

five recommendations have been implemented and are now closed.

•

In November 2022, the GAO completed its fourth triennial review. This report

(GAO-23-105465) contained three recommendations for SEC action, which the SEC

implemented. In May 2023, the GAO updated its website to indicate that all three

recommendations have been implemented and are now closed.

Page 6

Exhibit A

SECTION 961(c)(2) CERTIFICATION

Pursuant to the requirements of Section 961(c)(2) of the Dodd-Frank Wall Street Reform and

Consumer Protection Act, I hereby certify that:

1.

I am directly responsible for establishing and maintaining the internal supervisory

controls of the division or office of which I am the head.

2.

I am knowledgeable about the internal supervisory controls of the division or office

of which I am the head.

3.

I have evaluated the effectiveness during the 90-day period ending on the final day of

the fiscal year ended September 30, 2024 of the internal supervisory controls relevant

to section 961 of the division or office of which I am the head.

4.

I have disclosed to the Chair of the Commission any significant deficiencies in the

design or operation of internal supervisory controls identified as a result of the

evaluation described above that could adversely affect the ability to consistently

conduct with professional competence and integrity, respectively:

(a)

Enforcement investigations by the Division of Enforcement;

(b)

Reviews of corporate financial securities filings by the Division of

Corporation Finance; or

(c)

Examinations of registered entities by the Division of Examinations and the

Office of Credit Ratings.

This certification concerning the adequacy of the Commission’s internal supervisory controls

relevant to Section 961 is based on the review described in the accompanying report of the

internal supervisory controls and procedures applicable to the staff who perform the duties

described above within the division or office of which I am the head and is accurate to the best of

my knowledge and belief. This review was performed with the assistance of my supervisory

staff and other personnel within my division or office.

Page 7

With Respect to Enforcement Investigations:

Division of Enforcement

Name:

Sanjay Wadhwa

Title:

Acting Director

Date:

12/3/24

Signature:

awjay at/wa

With Respect to Reviews of Corporate Financial Securities Filings:

Division of Corporation Finance

Name:

Erik Gerding

Title:

Director

Date:

Digitally signed by

Signature:

ERIK GERDING

ERIK

2024.12.03

GERDING Date:

12.04:52 -05'00'

With Respect to Examinations of Registered Entities:

Division of Examinations

Name:

Keith Cassidy

Title:

Acting Director

Date:

Keith.22"oso

Signature: Cassid

y,

ate: 2024.12.03 10.0444-0500

With Respect to Examinations and Inspections of Registered Credit

Rating Agencies:

Name:

Lori Price

Title:

Director

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Signatw-e:

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