Friday, May 08, 2009
Christopher Cox
The Securities and Exchange Commission’s leadership during the Bush administration worked against its own staff when it came to policing Wall Street firms, according to a new report by the Government Accountability Office. Under former SEC Chairman Christopher Cox, who was appointed by President George W. Bush, the agency adopted rules that slowed down investigations and interfered with staff attorneys’ ability to impose fines on firms that had violated federal rules. Over time, a perception developed among the SEC’s rank-and-file that politically-appointed commissioners were thwarting the mission of the agency.
One of the biggest criticisms of the SEC was its failure to detect the $65 billion Bernard Madoff Ponzi scheme, which first began in the 1980s, before it got out of hand. But the GAO also discovered that commissioners adopted rules in January 2006 that linked the imposition of fines to how big the crime was and its impact on company shareholders. Also, Cox pushed through a procedure in 2007 that required enforcement attorneys to seek approval from commissioners before negotiating corporate penalties—something SEC lawyers had never had to do before. That requirement was eliminated after new SEC Chairwoman Mary Schapiro took over this year.
SEC enforcement staff and attorneys told the GAO that the policies led to “fewer and smaller” corporate fines, reduced incentives for corporations to cooperate with SEC investigations and generated a backlog of cases.
-Noel Brinkerhoff
Cox’s SEC Hindered Probes, Slowed Cases, Shrank Fines, GAO Says (by Jesse Westbrook and David Scheer, Bloomberg)
Securities and Exchange Commission: Greater Attention Needed to Enhance Communication and Utilization of Resources in the Division of Enforcement (Government Accountability Office) (PDF)
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