SEC Urged To Strengthen Enforcement

by Glen Shapiro LawAndTax-News.com, New York

18 September 2007

A new report by the Government Accountability Office (GAO) has found that the Securities and Exchange Commission's system for tracking cases of securities violations is "virtually unusable", and reinforced the need for the SEC to beef up its enforcement activities, according to Senator Chuck Grassley.

The GAO report, released on September 17, found that two-thirds of the SEC’s cases had been open for more than two years, one-third had been open for more than five years, and 13% had been open for more than 10 years. The report concluded that many of these cases “had not resulted in an enforcement action and were no longer being actively pursued,” and that the SEC’s system for tracking cases was “severely limited and virtually unusable”.

Grassley, ranking member of the Senate Finance Committee, argued that these findings reinforced the need for the implementation of recommendations he made to the SEC in August 2007, following an extensive investigation of the allegations of a fired SEC Enforcement Division attorney.

“This GAO report tells me that our congressional investigation into the SEC was on the money," he commented. "We heard an allegation last year that many of the cases that the SEC tells Congress it’s pursuing are really just at a standstill, waiting to be closed, and this report confirms it. That’s not fair to those under investigation and it misleads the public by implying that the SEC is more active than it really is."

Grassley added that: “Although the SEC has big plans to fix the problems identified by GAO with a new computer system, it should not put all its eggs in one basket and just rely on the promise of new technology to manage the agency. The SEC also needs to implement the recommendations we made last month to draft a procedures manual and to identify important cases that need more resources to get the job done in a timely manner."

He concluded: "The GAO recommended that SEC start documenting criminal referrals of cases to other agencies two years ago, but it still hasn’t happened. I hope it doesn’t take that long to get action on these new recommendations.”

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