SEC Has Made Progress In Managing Enforcement But Needs To Improve Communications: Auditors

SEC Has Made Progress In Managing Enforcement But Needs To Improve Communications: Auditors - 5/5/2009

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SEC Has Made Progress In Managing Enforcement But Needs To Improve Communications: Auditors
Marcy Gordon

Associated Press. May 5, 2009
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EXCERPT: The Securities and Exchange Commission has made progress in tightening its procedures for managing its caseload of enforcement investigations but internal communications and use of resources still must be improved, congressional auditors have concluded in a new report. The workings of the SEC's enforcement division have come under intense congressional scrutiny after revelations in December that the agency failed to detect the massive Ponzi scheme run by money manager Bernard Madoff, despite red flags raised to its staff by outsiders over the course of a decade. The report released Wednesday by the Government Accountability Office, Congress' investigative arm, said the turmoil in the financial markets that began in mid-2008 has "underscored the importance of the role (the enforcement division) plays." While noting that the division has brought several actions with record penalties against companies and senior executives in recent years, the report said there are questions about its "capacity to effectively manage its activities and fulfill its critical law-enforcement and investor-protection responsibilities." The enforcement division faces challenges in balancing its personnel and other resources against a ballooning workload, while it grapples with inefficient operations and deficiencies in its information systems, the GAO auditors said. The division's overall resources have been at a stable level, but the number of investigative attorneys dropped 11.5 percent from fiscal years 2004 through 2008, the review found. The GAO undertook the review last summer at the request of Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, and Sen. Jack Reed, D-R.I., who heads the subcommittee with oversight of the SEC. It did not address the SEC's regulatory failure in the Madoff situation — an issue being examined by the SEC's inspector general. […] The old policy was considered to have resulted in delays in cases and fewer fines and penalties against companies, the GAO report said.

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