FISCAL YEAR 2019 Agency Financial Report PROTECT INVESTORS U.S. SECURITIES AND EXCHANGE COMMISSION Chairman Jay Clayton Certicate of Excellence in Accountability Reporting ® in recognition of outstanding effort in preparing the Agency Financial Report for scal year 2018 presented to the Ann M. Ebberts, MS, PMP Chief Executive Ofcer, AGA Diane L. Dudley, CGFM, CPA Chair, CEAR Board U.S. Securities and Exchange Commission MESSAGE FROM THE CHAIRMAN Our Vision To promote capital markets that inspire opportunities market participants. This year we celebrated 85 years since the enactment of the Securities Exchange Act of 1934, which created the Commission. That document, crafted with purpose and foresight in the wake of the market crash of 1929, entrusted us with broad authority over all aspects of our securities markets and its participants. Much has changed since 1934, both at the Commission and in our markets. But the commitment of the Commission and its staff to our mission to protect investors, maintain fair, orderly, and efcient markets, and facilitate capital formation, with that same purpose and foresight, remains steadfast. This report details several notable Commission accomplishments in Fiscal Year (FY) 2019. It continues to be a privilege for me to chair this Commission, whose more than 4,000 women and men come to work every day with the interests of our long-term Main Street investors at the top of their minds. I say it often, but thats because it is important to me to emphasize whenever I have the opportunity: the SECs most critical resource is our people. They are the most direct connection we have with investors, and they enable all of the work that is described in this report. It is one of my priorities as Chairman to continue to foster a community of care for investors, professionalism, diversity, inclusion, and opportunity within the agency. Over the past scal year, we have reached signicant milestones in pursuit of the goals of the Commission as outlined in our Strategic Plan for 20182022. Our rst goal is to focus on the long-term interests of Main Street investors. This year we have continued to place a high priority on direct engagement with investors and other market participants. Staff in divisions and ofces traveled around the country to attend events to both educate investors and listen to the challenges they have experienced rst-hand in our markets. It is invaluable for us to hear from them, in their own words, how our capital markets are working for them and how we can improve. In perhaps the longest awaited investor-focused rulemaking in our 85-year history, this year we also adopted a package of initiatives designed to enhance the quality and transparency of retail investors relationships with investment professionals. These actions represent decades of work on these issues by the agencys expert staff and reect their unique understanding of a diverse and complex marketplace. Im very proud of the staffs work to get this package across the nish line. Just a small sample of the other work done by the Commission on behalf of Main Street investors over the past year includes: forming the Teachers Initiative and Military Service Members Initiative, which focus additional enforce- ment and investor education resources on instructing and protecting those groups from investment fraud; continuing the Division of Investment Managements modernization of the design, delivery, and content of fund disclosures; facilitating capital formation in our public markets, including by expanding important JOBS Act initia- tives to all companies, such as the “testing the waters” exemption and proposing additional amendments designed to recognize that a one-size regulatory structure for public companies does not t all; improving Investor.gov, including short, educational videos created with retail investors in mind; and proposing amendments to enhance retail investor protections in the over-the-counter securities market, part of the Commissions ongoing effort to better address risks to retail investors and promote market efciency. Our second goal is to be responsive and innovative in the face of signicant market developments and trends. The Commission advanced this goal on several fronts in FY 2019, including: Cryptocurrencies and Digital Assets We launched the Strategic Hub for Innovation and Financial Technol- ogy (FinHub), a resource for public engagement on the Commissions FinTech related issues and initiatives. The Cyber Unit also continued to investigate and recommend enforcement actions against fraudulent ICOs and in other cryptocurrency-related cases. Modernizing our Regulatory Framework We adopted and proposed several rules and amendments designed to streamline the regulatory framework for exchange-traded funds, “fund of funds,” and closed-end funds. We also took important steps toward improving the proxy voting process and Regulation NMS. Our third goal is to elevate the agencys performance by enhancing our analytical capabilities and developing the human talent I mentioned previously. This year we focused on the recruitment and retention of staff in certain areas that are critical to our mission such as quantitative analysts with expertise in Treasury and xed-income markets; an equity market microstructure expert; a former FINRA senior investigator; a trading practices compliance expert; an expert in clearing agency risk management practices for the Division of Trading and Markets; nancial economists in the Division of Economic and Risk Analysis; and compliance examiners with experience working in the credit rating sector, with particular exper- tise in the municipal market, xed income, and structured nance offerings. We also dedicated resources to improv- ing and updating our information technology systems, including through encouraging interofce collaboration. This years Agency Financial Report also includes the results of the independent audit of our FY 2019 nancial statements, which is once again an unmodied opinion. The nancial and performance data in this report are also complete and accurate under the Ofce of Management and Budget guidance. While the SEC has remediated the previously reported material weakness in cybersecurity risks following meaningful action on the part of the SEC, we recognize that we must continue to work to improve the security of the agencys information systems and overall cybersecurity risk prole. I am enormously proud of the work of the Commission over the past year as detailed in this report, and to be a part of the dedicated team that made it all possible. I look forward to accomplishing even more in the days ahead. JAY CLAYTON Chairman November 13, 2019CONTENTS . . 4 . . 4 . . 6 . . 8 . . 13 Financial Highlights . . 24 . . 32 . 37 Annual Assurance Statement . . 38 Managements Assessment of Internal Control . . 39 . . 40 . . 41 Financial Management System Conformance . . 42 . 42 45 Message from the Chief Financial Officer . . 46 . . 48 . 54 SEC Financial Statements . . 55 Notes to the Financial Statements . . 61 . . 97 . 99