Tags: sec

SEC Overhauling Inspections Review

Friday, 09 Oct 2009 11:34 AM

The U.S. Securities and Exchange Commission has released a draft five-year strategic plan which includes an overhaul of the way it inspects investment advisers in the wake of the Bernard Madoff Ponzi scheme scandal.

In the plan, released on Thursday, the security regulator said it would, "conduct a top-to-bottom review of the effectiveness of its examination process, in response to systemic failures identified by the SEC's Office of Inspector General."

The regulator has come under criticism for its failure to follow up on clues that could have uncovered Madoff's $65 billion Ponzi scheme earlier.

A report by SEC Inspector General David Kotz last month, found that the agency missed numerous red flags, did not properly follow up on leads and dismissed tips and complaints that might have uncovered Madoff's investment sham.


According to the plan, which provides goals through to 2015, the regulator also plans to revise its rules to ensure improved registration and enhanced disclosure requirements for asset-backed securities.

It may consider changes requiring brokerages to be more transparent in disclosing information relating to their compensation and conflicts of interest.

The SEC said it is in discussions to shift to a self-funding structure, instead of depending on the government for its budget.

"While during the last several years SEC budgets have not always been sufficient to maintain staffing levels and make important technology investments, the demands on SEC resources have continued to grow."

The House of Representatives draft released earlier in the month is expected to give the regulator more ammunition by doubling its budget over five years and giving it authority to reward whistle-blowers.

The agency is seeking public comment on the plan.

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