On August 15, the Government Accountability Office issued a report citing weaknesses in the Securities and Exchange Commission’s Enforcement Division’s systems and procedures for planning, tracking and closing investigations. The result has been a backlog of investigations which the SEC is no longer pursuing with potentially negative consequences for those individuals and companies suspected of committing securities violations. The GAO’s report was also critical of the Enforcement Division’s distribution of settlement funds (Fair Fund) to harmed investors, noting that of $8.4 billion of such funds ordered to be distributed since 2002, only $1.8 billion had been received by harmed investors.
The GAO’s report recommended that the SEC take the following actions to remedy the deficiencies outlined in its report:
- establish written policies and criteria for reviewing and approving new investigations;
- establish controls to better ensure the reliability of investigative data entered into the Enforcement Division’s information technology systems;
- consider developing expedited procedures for closing investigations; and
- establish a plan to staff and identify the roles and responsibilities of the SEC’s new Fair Fund program office and to collect and analyze reports on completed Fair Fund plans.