SEC Responds To GAO Criticisms

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

16 June 2005

Speaking earlier this month before the House Subcommittee on Commercial and Administrative Law, Securities and Exchange Commission official, Lori Richards responded to criticisms levelled at the regulator by a recent Government Accountability Office (GAO) report.

The GAO had criticised the Commission for its failure to detect the late trading and market timing mutual fund abuses which were uncovered last year, and has additionally suggested that the agency's record-keeping procedures are inadequate.

According to reports, several speakers at the hearing agreed with this reading of the situation, with Subcommittee chairman James Sensenbrenner Jr. (R-Wis) suggesting that the SEC was "years late in uncovering the trading abuses" and Massachusetts' Secretary of the Commonwealth, William Galvin arguing that:

"Almost every major enforcement action or investor protection issue was first brought or raised not by the SEC or NASD, but by state securities regulators."

Richards hit back, responding that when the news of the mutual fund abuses (which were kept secret by those participating in such schemes) first broke, "the SEC moved rapidly to investigate this issue in the broader mutual fund industry".

She went on to add that reforms undertaken by the SEC in the wake of the scandals make it unlikely that such abuses will ever occur again.

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