COVID-19 UPDATE: We are open! Our team is working and offering consultations via phone, e-mail, and video conferencing.

Free Consultations Available


S.E.C. Watchdog Urges Sweeping Changes on S.E.C.'s Fraud Failures: What This May Mean For Some Denver Businesses

I recently wrote of the S.E.C.’s abysmal failures in not detecting Bernard L. Madoff’s billion dollar Ponzi scheme. (See “Bernard Madoff: An Epilogue, Parts I and II”). H. David Kotz, the S.E.C.’s inspector general has now issued two reports in which he recommends dozens of changes in the way the agency evaluates tips, trains investigators and documents examinations of securities firms.
The first report, pertaining to the S.E.C’s inspections and examinations office, recommends 37 improvements that would effectively overhaul nearly every aspect of the division’s operations. The recommendations include the manner in which investigators follow up on tips and the creation of step-by-step procedures in identifying potential securities laws violations.
The inspector general also issued 21 recommendations to the S.E.C.’s division of enforcement, including a formal process for handling complaints and improving the working relationships within the division. One recommendation would mandate that tips and complaints be reviewed by at least two persons with experience in the subject area before taking further action.
The S.E.C. has been directed to establish formal procedures regarding the scope and planning of examinations and the selection of staff members for specific investigations. Mr. Kotz ordered the two S.E.C. divisions to submit a written plan within 45 days detailing how they would apply the recommendations.
A re-reading of my previous blogs on this subject is recommended in order to give context to the ills addressed by the inspector general.