SEC's Efforts To Find Lost and Stolen Securities

GGD-84-42: Published: May 18, 1984. Publicly Released: May 18, 1984.

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The Securities and Exchange Commission (SEC) maintains a program to find securities, such as stocks and bonds, that financial institutions and their customers report as lost or missing. GAO reviewed the SEC program to determine its effectiveness in finding such securities.

SEC requires financial institutions to register under the program. Registration entitles institutions to report lost or stolen securities and check securities they receive in commercial transactions. GAO found that: (1) the number of securities recovered through the program has increased since its inception, but SEC has not accurately reported the dollar value of securities actually found through the program; and (2) SEC has exempted from the program securities that do not have industry identification numbers, and certain securities that were formerly reported to Federal Reserve Banks are no longer reported to either the Federal Reserve or SEC. GAO also found that: (1) financial institutions are not complying with reporting requirements under the program; and (2) SEC has not coordinated its program with the National Crime Information Center (NCIC), which also lists lost and stolen securities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: SEC and FBI reached an agreement in principle in October 1986 to link the two systems. FBI will retain its independent system, but it will periodically incorporate its data into the SEC system.

    Recommendation: The Chairman, SEC, and the Attorney General should link SEC and NCIC lists of lost and stolen securities.

    Agency Affected: Department of Justice

  2. Status: Closed - Implemented

    Comments: SEC: (1) sent financial institutions reminder notices of their responsibilities; (2) clarified bank examination report requirements to encourage compliance with the Lost and Stolen Securities Program; and (3) after seeking public comments, decided to maintain its existing procedures for notifying law enforcement agencies of lost, stolen, and recovered securities.

    Recommendation: The Chairman, SEC, should, in consultation with the bank regulatory agencies, concentrate on obtaining improved compliance with lost and stolen securities regulations by ensuring, through appropriate enforcement and administrative actions, that financial institutions become registered with the program and that registered institutions report lost and stolen securities and check the status of securities received.

    Agency Affected: United States Securities and Exchange Commission

  3. Status: Closed - Implemented

    Comments: Based on comments received from the public and the industry, SEC voted to retain the $10,000 transaction exemption. Commentators thought the associated costs and benefits did not warrant changing the exemption.

    Recommendation: As an initial step toward improving the program's capability to find lost and stolen securities, the Chairman, SEC, should develop a pilot program to assess whether the $10,000-or-less transaction exemption should be continued, weighing the regulatory compliance burden against the improvement in securities found for financial institution customers, as well as the decreased deterrent effects.

    Agency Affected: United States Securities and Exchange Commission

  4. Status: Closed - Not Implemented

    Comments: SEC, on a pilot basis, allowed participants to report and inquire about non-CUSIP securities on a voluntary basis. SEC voted not to include this as an amendment, but will continue voluntary reporting.

    Recommendation: As an initial step toward improving the program's capability to find lost and stolen securities, the Chairman, SEC, should assess the effect of the underreporting of lost and stolen securities without a securities industry identification number and, if warranted, direct the program operator to assign identification numbers to these securities.

    Agency Affected: United States Securities and Exchange Commission

  5. Status: Closed - Implemented

    Comments: SEC approved the amendments to Rule 17f-1, including registered form government securities in the SEC Lost and Stolen Securities Program, on September 15, 1988.

    Recommendation: As an initial step toward improving the program's capability to find lost and stolen securities, the Chairman, SEC, should require that lost or stolen securities formerly required to be reported to the Federal Reserve Banks be reported to the SEC program.

    Agency Affected: United States Securities and Exchange Commission

  6. Status: Closed - Not Implemented

    Comments: Action was taken during the GAO review to correct this deficiency, but GAO was not notified until the exit conference. An accomplishment report is not appropriate.

    Recommendation: The Chairman, SEC, should include in any accomplishment report only those securities actually found by the program.

    Agency Affected: United States Securities and Exchange Commission

  7. Status: Closed - Implemented

    Comments: SEC reemphasized to participants the importance of reporting dollar values for securities they report as lost or stolen, via correspondence and news releases directed to the institutions.

    Recommendation: The Chairman, SEC, should, at a minimum, notify financial institutions to comply with the program requirements that call for dollar values to be specified for all securities that are reported to the program.

    Agency Affected: United States Securities and Exchange Commission

  8. Status: Closed - Implemented

    Comments: SEC and the Federal Bureau of Investigation (FBI) reached an agreement in principle in October 1986 to link the two systems. FBI will retain its independent system, but it will periodically incorporate its data into the SEC system.

    Recommendation: The Chairman, SEC, and the Attorney General should link SEC and NCIC lists of lost and stolen securities.

    Agency Affected: United States Securities and Exchange Commission

 

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