Compliance May 6, 2009

GAO: SEC Still Needs More Efficiency Initiatives

While federal securities regulators have made progress in working out internal organizational kinks, the U.S. Securities and Exchange Commission (SEC) still has a way to go before reaching peak efficiency, a new auditors’ report said.
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The report, released Wednesday by the U.S. Government Accountability Office (GAO), listed the continuing issues as: the level of administrative and technical support provided to investigative attorneys, and the process for division review and approval of enforcement actions against alleged violators.

“Inadequate administrative and paralegal services, specialized services and subject matter expertise, and information technology support can delay the completion of a case or affect its quality and scope,” auditors wrote in the report. “Similarly, although Enforcement should take due care in exercising its authority and discretion in bringing an enforcement action, a burdensome internal review process can undermine efficient use of investigative resources.”

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The auditors continued: “As noted in SEC’s strategic plan, making effective and efficient use of resources is a priority. While Enforcement management has moved to address some of these resource concerns, the effort may benefit from a focus that includes both process and organizational culture issues.’

The GAO called on SEC officials to expand their internal organizational improvement efforts to include the level and mix of resources available to investigative staff in the areas of administrative and paralegal support, specialized services and expertise, and information technology support. The SEC also needed to further ponder the impact of the review process on organizational culture factors such as risk aversion and incentives to drop or narrow the scope of cases.

Finally, the GAO said the SEC needs more improvement in its process for managing the imposition of penalties as part of the enforcement process.

The report, “Securities and Exchange Commission: Greater Attention Needed to Enhance Communication and Utilization of Resources in the Division of Enforcement,” is available here.

Products May 6, 2009

Pennsylvania Securities Commission Urges Adviser Background Checks

The Pennsylvania Securities Commission (PSC) said it offers background information of brokers and investment advisers for consumers.
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Officials at the PSC said the Madoff Ponzi scheme and other high-profile breaches of trust by financial professionals are strong reminders of the need to check the background of financial professionals before trusting them with your money.

“Information is the number one tool that the public can have to protect them against fraud,” said Securities Commission Chairman Robert Lam, in a press release. “It’s an easy and simple process for any citizen to call our office and find out if a broker or security salesperson is licensed and in good standing. That’s a sound first step in thoroughly researching any investment opportunity, large or small.”

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The PSC said it offers investors extensive employment, disciplinary, and registration information about stockbrokers and investment advisers. Anyone can request a public report of background information on any stockbroker, brokerage firm, investment adviser, and investment adviser firm registered to do business in the state.

Consumers can receive background information by calling the PSC at 717.787.8061 or 1.800.600.0007. Callers should ask for all materials from the Central Registration Depository (CRD) about a brokerage firm or its agents. For similar information about an investment adviser firm or its representatives, callers should ask for all materials from the Investment Adviser Registration Depository (IARD).

The computerized national databases contain licensing and registration information on more than 650,000 stockbrokers and more than 260,000 investment advisers. Files include information about employment, examination and disciplinary histories, civil judgments, arbitration decisions, criminal convictions, bankruptcies, as well as customer complaints, disciplinary actions, arbitration and civil proceedings, according to the PSC.

FINRA recently unveiled an expansion of its BrokerCheck service to make records of final regulatory actions against brokers permanently available to the public (see “FINRA Proposes Disciplinary Disclosure of Former Brokers’).

 

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