SEC Needs to Improve Collection of Fines, Report Finds

The Securities and Exchange Commission is trying harder to collect fines it levies on corporate wrongdoers but has recovered less than 50% in recent years by some measures, a congressional report released Thursday found.

In an update of a 1998 report, the General Accounting Office found the SEC and Commodity Futures Trading Commission had collected about 94% and 99%, respectively, of the total dollars levied in cases closed from January 1997 through August 2002.

That was an 11 percentage point improvement for the SEC from the 1992-1996 period covered by the 1998 report and an 18-point gain for the CFTC.

But when open cases were added to the calculations, the SEC collected only about 40% of the dollars levied in the period most recently reviewed and the CFTC collected 45%.

“Collecting fines ordered for violations of securities and futures laws helps ensure that violators are held accountable for their offenses and may also deter future violations,” the GAO wrote. The “SEC and CFTC have continued to improve their collection programs since we issued our 2001 fines report, but SEC needs to make additional improvements to its program.”

Three Democrats who requested the GAO review welcomed the improvements but drew attention to continuing problems, such as the lack of a target date for completing a new case-tracking computer system.

Reps. Barney Frank of Massachusetts, Paul E. Kanjorski of Pennsylvania and John D. Dingell of Michigan asked the GAO to report back in 18 months.

In response to the GAO findings, the SEC said the first phase of its new debt-tracking system would be completed by Sept. 30, but deadlines for integrating its separate databases into that system had not been set.

SEC enforcement chief Stephen Cutler has said violators have often spent their ill-gotten gains or have hidden the funds by the time fines are imposed.