SEC to Enlist State Regulators on Tips, Khuzami Says

SEC to Enlist State Regulators on Tips, Khuzami Says - 9/11/2009

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SEC to Enlist State Regulators on Tips, Khuzami Says
Joshua Gallu and David Scheer

Bloomberg. September 11, 2009
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EXCERPT: The U.S. Securities and Exchange Commission will turn for help to state regulators as it builds a central system for screening tips about financial crimes after missing Bernard Madoff’s $65 billion fraud. Federal investigators will concentrate on complaints about activities deemed to pose a high risk to investors, Enforcement Director Robert Khuzami said today at the North American Securities Administrators Association conference in Denver. The SEC also will give state authorities more information on active probes and may join the states to train investigators, he said. “We’ll take all the help we can in terms of developing expertise,” he said. As the agency sorts cases, “we’ll not spend as much time on those that are low risk. In a world of low resources that’s critical.” The SEC is overhauling its systems for sorting and investigating complaints to shore up weaknesses that let Madoff’s Ponzi scheme go undetected and to keep pace with developments on Wall Street. Khuzami has announced measures this year that also will trim layers of management, add front-line investigators and hone their expertise. The job of the SEC may expand as President Barack Obama pushes for a sweeping overhaul of industry regulations and proposes giving the agency primary responsibility for derivatives tied to equities, including credit-default swaps. “It appears likely that we’ll have additional authority over hedge funds and derivatives,” Khuzami said, adding that will place a greater burden on resources. Senator Charles Schumer said this month the SEC should be permitted to put all of the fees and fines it collects toward efforts to battle crimes. The difference between what the agency collects and the budget approved by the president and Congress could be used to update the SEC’s technological resources and hire experienced analysts and examiners, Schumer said.

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