During the private credit storm, nearly a quarter of the staff have left the relevant regulatory agencies of the U.S. SEC.

Ask AI · How did the government efficiency department initiative lead to a large number of departures from SEC regulatory staff?

According to a recent report, nearly a quarter of the employees in the U.S. Securities and Exchange Commission (SEC) department responsible for regulating hedge funds, private credit firms, mutual funds, and a range of investment products left their jobs last year.

In a report released Friday, the U.S. Government Accountability Office (GAO) said that the SEC’s Division of Investment Management lost 24% of its employees in fiscal year 2025, and that the division has experienced a “loss of specialized rulemaking capacity.” In other words, many professionals who would be involved in developing regulatory rules have left that SEC division.

These departures are happening amid a U.S. private credit boom that has brought tighter scrutiny to various funds and has made investor sentiment more cautious. Some of the largest asset managers, including Apollo Global Management and Ares Management, have recently restricted investors from withdrawing funds from certain funds.

Although the departure rate in the SEC’s Division of Investment Management was the highest, SEC staff overall also saw losses of up to 18% in the same period. Some of these departures are also related to broader personnel adjustments across the federal government, triggered by the “government efficiency department” initiative promoted by Musk.

The GAO said that the departing employees “either have unique knowledge or possess specialized professional capabilities in specific fields,” and that these personnel changes may “pose a risk to the agency’s ability to fulfill its mission.” The report states that among the institution’s roughly 5,000 staff members, 871 employees left, including 599 who accepted a voluntary separation program.

An SEC spokesperson said the agency still has the staffing it needs to carry out its duties, adding that SEC Chair Paul Atkins is working to ensure that any hiring needs can be met in a timely manner. The spokesperson said: “Voluntary separations create opportunities for new talent to join. They will work alongside existing dedicated public service personnel to continue to protect investors, promote capital formation, and maintain fair, orderly, and efficient markets.”

The GAO also noted that in fiscal year 2026, after the SEC offered another round of voluntary early retirement and incentive compensation, 42 more employees left the agency.

An article on the Wall Street Insights website this week mentioned that the U.S. SEC has recently launched inquiries into whether credit rating agencies such as Egan-Jones can continue to issue credit ratings with integrity. This statement is not routine review; rather, regulators are publicly questioning the reliability of key mechanisms in the private credit market. As redemption gates gradually close and asset valuations come under scrutiny, the shifting of blame for responsibility among market participants is accelerating.