Note to Readers:  We'd welcome your thoughts on this story, which can be sent to:  Janice@Compliance-Insights.com. 

H. David Kotz, the SEC Inspector General, testified before a House subcommittee on appropriations, in what appeared to be an appeal for additional funding (for the Agency).  For most of his speech (some 77%), Mr. Kotz presented a series of significant failures and waste or misuse of funds by the Commission.  Only in his closing remarks, does Mr. Kotz offer any form of support for the SEC - i.e., a paragraph appealing for additional funding (to implement his department's recommendations) and a single compliment (for the SEC's new CIO). 

As is customary for an SEC staffer when speaking in public, Mr. Kotz began his testimony by noting, "I am representing the [Office of Inspector General], and the views that I express are those of my Office, and do not necessarily reflect the views of the Commission or any Commissioners."  Unfortunately, what comes across as positives for Mr. Kotz's inspection team comes off sounding like negatives for the rest of the SEC.  In effect, a "backhanded compliment" at a time when the Agency is in dire needs of funds. 

    Throwing Good Money After Bad.   The Office of the Inspector General "has conducted numerous comprehensive investigations into significant failures  of the SEC in accomplishing its regulatory mission, as well as investigations into allegations of violations of statutes, rules and regulations, and other misconduct by Commission employees and contractors.  Several of these investigations involved senior-level Commission officials and represent matters of great concern to the Commission, Congressional officials and the general public. Where appropriate, we have reported evidence of improper conduct and made recommendations for disciplinary actions, including removal of employees from the Federal service, as well as recommendations for improvements in agency policies, procedures and practices.

In August 2009, we issued a 457-page report of investigation analyzing the reasons why the SEC failed to uncover Bernard Madoff’s $50 billion Ponzi scheme.  This report was issued after a nine-month investigation in which we conducted 140 interviews and reviewed approximately 3.7 million e-mails.  In March 2010, we issued a thorough and comprehensive report of investigation regarding the history of the SEC’s examinations and investigations of Robert Allen Stanford’s alleged $8 billion Ponzi scheme. More recently, we issued reports on the circumstances surrounding the SEC’s proposed settlements with Bank of America, which included an analysis of the impact of Bank of America’s status as a Troubled Asset Relief Program (TARP) recipient on the SEC’s Enforcement action and settlement, and allegations of improper coordination between the SEC and other governmental entities concerning the SEC’s Enforcement action against Goldman Sachs & Co.

    Mr. Kotz's Relentless Testimony.   We welcome C-I readers to continue reading Mr. Kotz's testimony, which covers, among other things, SEC OIG Audits, and SEC OIG’s Identification of Waste of Government Funds, go to:   [SEC Testimony, 2/10, H. David Kotz]