June 16, 2010

WASHINGTON -House Conferees today adopted an amendment offered by Rep. Ed Royce and Ranking Member Spencer Bachus that will restructure the Securities and Exchange Commission (SEC) to improve the ability of the Agency to protect investors.

Rep. Ed Royce said, "This amendment is an attempt to hold the SEC more accountable to ensure we have a more competent regulatory body overseeing our capital markets. Earlier this year, the Committee heard from Harry Markopolos, an industry whistleblower, who for more than a decade attempted to bring Bernie Madoff's ponzi scheme to the attention of the SEC.  Outside of one individual in the SEC's Boston office, Markopolos was alone in his decade long pursuit. Without establishing an actual office within the SEC, we run the risk of allowing the SEC to continue its subpar treatment of whistleblowers like Mr. Markopolos.  I applaud the Conference Committee's decision to keep this language included."

Ranking Member Bachus said, "This amendment will ensure the SEC will have a high ranking official and office to coordinate and pursue the huge volume of whistleblower tips that very well could prevent future frauds like Madoff and Allen Stanford, which the SEC failed to detect for years. Complaints from within industry or by investors are the cheapest, most effective way to identify fraudsters, and I thank Mr. Royce for his leadership to bring this needed change."

The Royce-Bachus amendment will improve the stature of whistleblower complaints within the SEC by establishing a separate office within the Commission to better protect whistleblowers and ensure their concerns are being acted upon by the SEC.  According to a recent report, whistleblower tips were responsible for detecting 54% of fraud schemes at public companies whereas external audits (like those conducted by the SEC) accounted for 4% of fraud cases detected.

"Whistleblowers are an important asset in detecting and prosecuting the Madoffs and Stanfords of the world," Bachus said.

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