Donaldson Stresses Importance Of Pre-Emptive Action Over Corporate Wrongdoing

by Glen Shapiro, LawAndTax-News.com, New York

01 October 2004

Speaking recently to the US media, chairman of the Securities and Exchange Commission (SEC), William Donaldson revealed that the agency is seeking to change its tactics with regard to the detection of corporate wrongdoing in the financial services sector.

"We've got 400 inspectors out there trying to look over 8,000 funds and 7,000 brokerage firms. It can't be done the way we are doing it," he explained, adding:

"We're trying to move toward the more prudential approach of the Federal Reserve. When they find something wrong, they don't announce it and bring fines, they fix it."

According to the Washington Post, in line with its more pro-active approach, the securities regulator is in the process of streamlining its complaint-handling procedures in order to respond more efficiently to tip-offs, and is upgrading its computers to allow for closer analysis of potentially worrying trends.

The SEC has also asked leading Wall Street firms to identify potential compliance problems within their own organisations, and to propose solutions.

Additionally, staff from every division of the Commission have been asked to identify potential investor risks, with the results to be consolidated and acted upon by the newly established Office of Risk Management.

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