SEC Enforcement Division needs to make massive changes according to Office of Inspector General Report
According to a recent report issued by the Office of the Inspector General (OIG), the Securities and Exchange Commission’s (SEC) enforcement division needs to improve its processes and procedures for investigating and managing the fight against securities fraud. The main example cited in the report was the most current and most blatant example of the SEC’s failure to properly investigate securities fraud complaints - Bernard Madoff’s multi-billion-dollar Ponzi scheme. The report issued by the OIG stated that complaints about Mr. Madoff’s possible involvement in securities fraud were received by the SEC as long ago as 1999. Even though complaints of alleged fraud were made to the SEC in regard to Mr. Madoff, SEC staff failed to recommend that the SEC take action on these complaints.
The purpose of the OIG’s report was to determine the SEC enforcement department’s shortcomings and to identify those areas in which the department needs to make improvements to better fight securites fraud. The goal of the report was to bolster SEC enforcement measures in an effort to prevent another securities fraud case with such far-reaching implications and consequences as the Madoff case. It is the SEC’s job to protect investors from securities fraud. When the department fails to properly carry out its job duties the ramifications can spell disaster for investors.
The following systemic problems within the SEC’s enforcement department were identified in the OIG’s report: staff’s failure to thoroughly review complaints; due diligence was not exercised regarding complaints; inexperienced staff conducted unsupervised investigations; complaints were not sufficiently reviewed; staff failed to seek assistance from other departments and divisions; staff did not verify information with independent third-party representatives; administrative tasks were not completed in a timely manner. According to the OIG report, additional areas in which staff felt changes needed to be made and information clarified included: case handling procedure, program priorities, and working relationships.
The report issued by the OIG offered 21 recommendations to the department in order to create a more effective program. These recommendations focused on management control, establishment of formal guidelines, and a review of existing policy and procedures. The Director of Enforcement at the SEC stated that these measures would be implemented.
To read more on the this of OIG Recommendations view the following: Office of Inspector General (OIG) Audit on SEC - Program Improvements Needed within the SEC's Enforcement Division, Housingwire.com
