Securities Industry: Strengthening Sales Practice Oversight

Highlights

GAO reviewed the Securities and Exchange Commission's (SEC) oversight of four self-regulatory organizations' (SRO) monitoring and enforcement of sales practice compliance among securities industry firms.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
United States Securities and Exchange Commission	The Chairman, SEC, should develop a timetable for fully inspecting the sales practice programs of all SRO.	Closed – Implemented SEC has established a formal inspection cycle for all SRO as of the beginning of fiscal year 1992.
United States Securities and Exchange Commission	The Chairman, SEC, should include direct testing of each SRO examination methods and results in the SEC program for reviewing the adequacy of SRO oversight. To the extent that either SEC or SRO examination methods prove superior, SEC should ensure that both use the better methods.	Closed – Not Implemented SEC field offices tried replicating SRO exams without improving existing procedures. Therefore, they intend to continue their current oversight methods.
United States Securities and Exchange Commission	The Chairman, SEC, should continue to place a high priority on implementing a new customer complaint system but also improve the proposed system by including the ability to interface with SRO and state customer complaint systems.	Closed – Implemented The SEC new customer complaint system became operational on June 1, 1991. SEC is working with SRO and others to determine the feasibility of exchanging customer complaint information.
United States Securities and Exchange Commission	The Chairman, SEC, should explore ways to record and maintain information on the actual number of each type of violation found in SEC and SRO broker-dealer oversight examinations. Options could include assessing existing SRO databases or incorporating the data into the Examination Activity Tracking System.	Closed – Not Implemented SEC believes the costs involved in such a system outweighed the benefits.

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Topics

Financial Markets and Institutions

Brokerage industryFinancial institutionsInspectionInvestigations by federal agenciesMonitoringNoncomplianceProgram managementSecurities regulationSelf-regulatory organizationsSecurities