SEC Report Applauds Internal Reforms While Admitting to Control Problems

In her “Message from the Chairman,” Securities and Exchange Commission head Mary Schapiro celebrated the SEC’s performance related to internal reforms over the past year. Her note was included in the agency’s FY 2010 Performance and Accountability Report. Schapiro applauded the SEC’s changes to its examinations and enforcement programs. She said that revisions will strengthen the agency’s ability to protect investors, encourage capital formation, and promote markets that were fair, efficient, and orderly. Other improvements for the year that Schapiro highlighted:

• The Office of Compliance and Inspections and the Enforcement Division both enhanced their abilities to fulfill their regulatory duties.

• Enhanced technology and an ambitious regulatory agenda.

• OCIE’s risked-focused, national exam program that has been designed in a manner to maximize limited resources.

Schapiro said that the agency’s structural and cultural changes, as well as its investment in human and technological capital would not only create “immediate performance gains,” but also they set up an “infrastructure” supportive of the SEC’s additional duties that the Dodd-Frank Wall Street Reform and Consumer Protection Act has bestowed upon the agency.

In SEC chief financial officer Kenneth Johnson’s message, which was also included in the agency’s report, he said that the commission had identified two material weaknesses in internal controls over financial reporting. The first one is in information systems as a result of issues involving user access controls, patch management, security management, and configuration management. The second one is related to accounting processes and financial reporting and is a result of combined deficiencies involving filing fees, financial reporting, disgorgement, budgetary resources, required supplementary information, and penalty transactions. Johnson said that the SEC is aiming to strengthen its security over its financial data by shifting to a new financial service system by a federal shared service provider.

2010 Performance and Accountability Report, SEC
In Report, SEC Hails Internal Reforms, Acknowledges Internal Control Problems, BNA Securities Law Daily, November 17, 2010

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