Yesterday, the Senate Banking Committee held a hearing entitled "Oversight of the SEC Inspector General's Report on the 'Investigation of the SEC's Response to Concerns Regarding Robert Allen Sanford's Alleged Ponzi Scheme' and Improving SEC's Performance." Appearing before the Committee were the following witnesses:
- H. David Kotz, Inspector General, U.S. Securities and Exchange Commission
- Robert Khuzami, Director, Division of Enforcement, U.S. Securities and Exchange Commission
- Carlo V. di Florio, Director, Office of Compliance Inspections and Examinations, U.S. Securities and Exchange Commission
- Rose Romero, Regional Director, Fort Worth Regional Office, U.S. Securities and Exchange Commission
Chairman Christopher Dodd (D-CT) opened the hearing by expressing his concerns about the SEC's "failure to stop the Stanford financial fraud in a timely manner" through a series of "regulatory disconnects and mistakes" described in the SEC Inspector General's March 31 report, but emphasized that the hearing should look "not only to the past Commission performance, but also to the future Commission actions for improvement."
Mr. Kotz reviewed for the Committee key developments in the Sanford case and described the major conclusions of his report, including a span of eight years, and repeated examinations of Mr. Sanford's operations by the Fort Worth regional office, between initial suspicions and when the SEC finally took action to end Sanford''s scheme. He also described key recommendations in his report and responded to questions from the Committee regarding the SEC's announcement of civil fraud charges against Goldman Sachs at the time of release of his March report on the Sanford investigation, stating that the timing was "suspicious" and "strains credulity."
The second set of panelists acknowledged failures in connection with Sanford investigations, but tried to focus on measures taken by the SEC to address the Inspector General's criticisms and recommendatoins, enhance its enforcement procedures and begin implementing and using new authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act.