Rep. Fossella Applauds SEC Reforms to Inspections & Examinations Process

Reforms Address Several Concerns Raised By Fossella Legislation Last Year

[Washington, DC] – Congressman Vito Fossella (R-NY13) today applauded Securities and Exchange Commission (SEC) Chairman Chris Cox for implementing several reforms of the agency's inspections and examinations process, two of which were contained in comprehensive legislation introduced by Fossella last year.

"Chairman Cox's reforms will help improve efficiency and accountability of inspections and examinations and enhance investor protections," Fossella said. "This represents a positive first step in reforming the examinations and inspections process. My legislation was intended to highlight the shortcomings of OCIE and start a dialogue within the industry on the need for reform. We have succeeded in spurring the SEC to take action, and I look forward to working with all parties to further improve investor protections."

Cox announced yesterday in a hearing before the House Financial Services Committee the following reforms of OCIE:

·       OCIE will be required to notify the Chairman and Commission prior to initiating a sweep examination;
·       OCIE will be is required to notify registered entities of the status of an investigation after 120 days and provided formal notification upon completion, and

·       Enhancements to the pre-examination process to avoid duplication of examinations.

Fossella's bill, The Compliance, Inspections and Examinations Restructuring Act (H.R. 4618), would abolish the SEC's Office of Compliance, Inspections and Examinations (OCIE) and redistribute its inspections and examinations authority to the operating divisions that oversee the securities industry, as it was prior to 1995. It would also reform "sweep" examinations by requiring approval from the Commission before they are commenced, just as the Division of Enforcement at the SEC is required to do prior to the opening of an investigation.

The legislation also requires the SEC to:

·       Notify registrants when an investigation or inspection has been closed.

·       Update registrants every 120 days during an ongoing investigation on the progress of the case.

·       Appoint an Ombudsman, who would guide registrants through processes within the agency, receive complaints, and encourage registrants to come forward with questions regarding compliance issues.

"Too many of the current regulations are user-unfriendly," Fossella said. "Leaving companies in the dark on the status of investigations or when they are completed only served to increase capital costs, reduce efficiency and impair capital formation with no benefit to the investor. The goal is to improve compliance, not make companies fearful of asking questions or working with the SEC on issues they are facing. That 'culture of fear' can be eliminated by enacting additional common sense reforms that increase efficiency, accountability and investor protection."

 

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