Tuesday, February 17, 2009
The U.S. Chamber of Commerce's Center for Capital Markets Competitiveness recently released a report, Examining the Efficiency and Effectiveness of the U.S. Securities and Exchange Commission. While recent criticisms of the agency have focused on agency's failures to prevent the collapse of Bear Stearns and Lehman Brothers and to detect Bernard Madoff's ponzi scheme, this Report, written by Jonathan Katz, former Secretary of the SEC for 20 years, focuses on improving the effectiveness and efficiency of certain core regulatory functions that are less visible but highly important, including staff no-action letters, investment company exemptive orders, and SRO rule orders. A theme throughout the Report is to improve coordination among the agency's divisions both to shorten delays in the approval process and to prevent matters from falling between the cracks. Thus, a key recommendation, which it acknowledges will be controversial, is the creation of a Chief Operating Officer to oversee daily operaitons.
Another recommendation that is worthy of serious consideration is the realignment of the Division of Trading and Markets and the Division of Investment Management into a Division of Investor Protection and Retail Financial Services Regulation and a Division of Market Oversight and Operations, with the Examination Programs of OCIE assigned to these new divisions. The Division of Investor Protection and Retail Financial Services Regulation would have responsibility for regulation of all retail investment products and services, whether stocks or mutual funds, and all professionals, whether broker-dealer or investment adviser, while the Market Oversight Division would be responsible for oversight of secondary market operations and oversight of the back-office and capital adequacy of regulated entities. In addition, returning the examination functions into the new divisions is an important recommendation. As many have recently observed, the 1994 creation of the separate OCIE Division may have diminished the effectiveness of the operating divisons by depriving them of real-time information from the field.
In short, there is much in this Study that contributes to the ongoing discussion of ways to improve the effectiveness of the SEC.