Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, May 16, 2011

Watchdog Group Studies "Revolving Door" Policies at the SEC

A recurring and thorny issue is the "revolving door" policy (or lack thereof) of SEC employees who leave the agency and then begin to represent clients before the SEC.  This practice raises obvious issues of conflicts of interest -- most recently surfacing in connection with questions about the SEC's failure to investigate the Stanford ponzi scheme.  As many point out, however, the reality is that many of the SEC's "best and the brightest" come for the experience and training and accept the relatively low government salary because of the expectation that it will pay off with subsequent lucrative employment.  Hiring only SEC-"lifers" is not necessarily in the best interests of the agency.  What then is the best way to manage these conflicts of interests so they do not jeopardize the agency's mission of effective enforcement of the federal securities laws? 

As part of an effort to shed light on the revolving door at the SEC, and to examine whether the SEC has adequate policies and procedures in place to detect and mitigate conflicts of interest involving former SEC employees, The Project on Government Oversight (POGO) obtained five years' worth of statements filed by former SEC employees who appeared before the SEC seeking to represent outside clients within two years after leaving the agency. POGO has also made these post-employment statements publicly available in a searchable online database.

Among its findings, POGO reports that:

  • Between 2006 and 2010, 219 former SEC employees filed 789 post-employment statements indicating their intent to represent an outside client before the Commission.
  • Some former SEC employees filed statements within days of leaving the Commission, with one employee filing within 2 days of leaving.
  • Some former SEC employees filed numerous statements during this time period, with one former employee filing 20 statements.
  • There are 131 entities providing legal, accounting, consulting, and other services that were identified as new employers in the statements. Some entities recruited numerous SEC employees during the five-year period.
  • In the vast majority of statements, former SEC employees affirm that they did not participate personally or substantially in, or have official responsibility for, the matter on which they now expect to appear before the Commission.
  • POGO identified instances in which former SEC employees may have been required to file statements during the five-year period but did not.
  • Some former SEC employees disclosed that they consulted with ethics officers regarding the work they intended to do on behalf of their clients before the SEC, but in many other statements, it is unclear whether the former employees discussed their post-employment plans with an ethics officer.
  • Some statements indicate that the former employee did participate in or have responsibility for a related matter while they worked at the SEC, but that they discussed the matter with an ethics officer who advised them they could contact Commission staff on that issue on behalf of their new client.

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