SEC actions fall 9% on job vacancies

From Bloomberg News and Reuters

The Securities and Exchange Commission said it brought 9% fewer enforcement actions in fiscal 2006 after a budget crunch left staff vacancies unfilled.

The number of cases accusing companies and individuals of violating securities laws fell to 574 in the 12 months ended Sept. 30, the smallest total since 2001, the SEC said in a statement Thursday. The agency brought 630 cases in fiscal 2005.

The drop was largely a result of reduced staff, SEC Chairman Christopher Cox said in the statement. The agency restricted hiring in 2006 because it had to close a $48.7-million budget gap triggered partly by cost overruns in building a new headquarters in Washington.


SEC enforcement activity also slowed because of a new internal policy that limits bringing charges against corporations in cases in which shareholders already have been harmed by companies’ wrongdoing, agency officials have said.

At a time when corporate America is dealing with yet another scandal, involving the backdating of stock options, the SEC’s staff fell to about 3,700 employees as of Sept. 30, from about 3,850 a year earlier.

The front-line enforcement division’s staff shrank to 1,189 from 1,232, the SEC said.

Although the agency planned to start filling some of its vacancies, it had no timeframe for doing so, spokesman John Nester said.

Cox stressed that the pace of enforcement actions picked up in the second half of the fiscal year, to 308 cases from 266 in the first half. He also touted the agency’s 10 trial court wins during the fiscal year, without a loss. “This indicates the SEC is bringing the right cases and getting solid results,” he said.

But some in Congress are concerned about the SEC’s effectiveness.

The Government Accountability Office, prompted by a request from Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), agreed last month to investigate the SEC’s enforcement division.

The GAO said it would review the agency’s success rate in bringing cases and its oversight of regulators at the New York Stock Exchange.