SEC in the Hot Seat, Facing Ongoing Funding Fight and Criticism Over Ethics

SEC in the Hot Seat, Facing Ongoing Funding Fight and Criticism Over Ethics

by Marian Wang ProPublica

Mary Schapiro, head of the Securities and Exchange Commission, is finding herself in the hot seat quite a bit this week. Today, she heads to the Hill today to advocate for a funding increase [1], which Congressional Republicans have said that her agency doesn’t deserve [2].

Schapiro has also been criticized for hiring a top lawyer for the agency [3] who had financial ties to Bernard Madoff, whose massive Ponzi scheme the agency failed to pursue for years despite many red flags [4]. The SEC’s former general counsel, David Becker, was hit with a lawsuit [5] last month by the trustee recovering funds for Madoff’s victims.

Becker has said that he disclosed to Schapiro in 2009 that his late mother had an account with Madoff. He said the agency’s ethics counsel told him that possible enforcement actions against Madoff “did not have a direct and predictable effect [6]” on his financial interests and permitted his involvement in Madoff-related work, including helping determine compensation for Madoff’s victims.

In letters to six Republican lawmakers this week, Schapiro said she had instructed Becker to sort out [7] the matter with agency’s ethics officer, the Washington Post reported yesterday. She also asked the SEC’s Inspector General to investigate whether Becker had a conflict of interest.

The inspector general, David Kotz, had previously investigated the agency’s failure to uncover Madoff’s fraud. He found that while the SEC had failed to pursue Madoff, it “did not find that any improper professional, social or financial relationship on the part of any former or current SEC employee [8] impacted the examinations or investigations.”

That report was released in late 2009. Becker assumed the post as the SEC’s top lawyer in early 2009 and served for two years. He had previously served in the same position from 1999 to 2002.

But that’s not the only criticism the agency is facing this week. The Project on Government Oversight, an independent watchdog group, sent Shapiro a letter faulting the agency for failing to discipline employees and contractors [9] for wrongdoing. From POGO:

A POGO review found that of at least 98 SEC employees recommended for disciplinary action since 2008, only 11 were fired or removed from their contract. While many employees received lesser forms of discipline, the SEC took no action whatsoever in the case of 10 employees, many of whom the OIG found to have committed serious offenses.

Some of the cases involved employees who were recommended for discipline as part of the inspector general’s Madoff investigation, said POGO. A spokesman for the SEC declined to comment to Politico [10] on the letter, but said it takes seriously the recommendations of the inspector general.

The SEC is tasked with helping to implement the Dodd-Frank financial reform bill. Congressional Republicans, who have long been quick to criticize the agency [11], have sought to slash the agency’s budget despite urging from Wall Street lawyers [12] and investor groups [13] for the agency to be adequately funded.

As Forbes blogger Halah Touryalai has noted [14], the $1.4 billion SEC budget requested by the Obama administration is less than Bank of America’s 2010 marketing budget alone, less than what Citigroup spent on marketing and advertising in 2010, and several times less than what JP Morgan has set aside to fight lawsuits.


5 Responses to “SEC in the Hot Seat, Facing Ongoing Funding Fight and Criticism Over Ethics”
  1. Martskers says:

    The Schapiro pigeon is coming home to roost. When she was the head of the NASD (now known as FINRA), she had a cozy relationship with Bernie Madoff, who was the head of one of the governing committees of that entity. The NASD was always known to be a handmaiden to the industry it was supposedly “self-regulating.” Schapiro was paid $5 million dollars BY THE INDUSTRY to “regulate” it, and guess what: well, we’ve seen the result of that pathetic exercise.

    The NASD turned a blind eye to Madoff’s fraud, as it has to so many others. Harry Markopoulos, the Madoff whistle-blower, in his congressionial testimony even said that while he blamed the SEC for letting Madoff slip through its fingers, he couldn’t blame the NASD, since it was so corrupt (under Schapiro’s leadership)..

    It’s long past time to get rid of Mary Schapiro at the SEC and bring someone in who isn’t tainted by his/her kissass relationship with the securities industry.

  2. Why would the law makers who work for the bank give the SEC any money or more money, makes no sense at all, I mean who needs another regulator? the banks do not and the wealthy do not.

  3. joe parisi says:

    The SEC for years has been racked with the good ol boy network of favors and insider trading. Especially the oldsters still in the business. Should anything change?????????

  4. Pamela says:

    What ethics they don’t have any never have ,never will.No wonder they are in the hot seat.Tooo bad we can’t make it the electric chair instead of the mundane and oft talked about hot seat.

  5. l vent says:

    There is definitive proof of an unholy alliance here. There is clear proof this was and still is the biggest Ponzi Scheme robbery of America’s wealth in history, yet not one of the gangsters have been punished. They think the American people are stupid. The American people have had enough of paying for all of the fraud and corruption. We know we were robbed and are stll being robbed. We The People are through believing their lies. We refuse to be slaves for the elite.

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