The Securities and Exchange Commission's Enforcement Division came under fire in a report that criticized the division's oversight of its caseload.
The Government Accountability Office said the division's processes and systems for planning, tracking, and closing investigations had "significant limitations," hampering the Enforcement Division's ability to effectively manage operations and allocate resources. While the division had established a centralized process for reviewing and approving new investigations, the GAO complained that Enforcement had not yet established written procedures and assessment criteria.
The division plans to upgrade its computerized case activity tracking system by the end of the year. The old system had not been able to provide detailed reports on the status of certain investigations, but the GAO found that the division had not yet established procedures to make sure that information gets entered in a timely manner into the new computerized system, known as the Hub.
The GAO also faulted the SEC for its backlog of cases. As of March 2007, nearly 300 of the office's 840 open investigations were two or more years old, were no longer being pursued, and had no pending enforcement actions. The report noted that in May, the Enforcement division said it would devise procedures for promptly closing investigations that were no longer being pursued. But the procedures did not fully address the backlog, the GAO noted, pointing out that the failure to close the investigations could have negative consequences for companies and individuals that were no longer suspected of committing securities violations.
The GAO also found problems with the SEC's Fair Fund program, which is intended to redistribute the proceeds of monetary penalties and disgorgements into a single fund that could be distributed to harmed investors. Only $1.2 billion of the $8.4 billion collected in the fund since 2002 had been distributed by June of this year.
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