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Securities and Exchange Commission's Oversight of Securities Industry Self-Regulatory Organizations

Published: Mar 05, 1986. Publicly Released: Mar 05, 1986.
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Testimony was given concerning the Securities and Exchange Commission's (SEC) oversight of self-regulatory organizations (SRO). GAO noted that SEC: (1) oversees the quality of SRO regulation by directly examining broker-dealers for compliance with various laws and regulations, inspecting SRO, and reviewing proposed changes to SRO regulations; and (2) is supposed to identify whether violations exist and, if so, why they were not detected. GAO found that: (1) between fiscal years 1982 and 1984, SEC found hundreds of violations each year that had been missed in the course of SRO examinations; (2) even though SEC found numerous missed violations, not all regional office reports identified the reasons why SRO missed the violations; (3) although SEC has the authority to use formal remedies to resolve compliance deficiencies, it prefers a negotiating process which often takes a long time to resolve highly complex or controversial problems; (4) SEC reviewed proposed rule changes within reasonable timeframes; and (5) SEC adequately provided the opportunity for public comment. GAO also found that: (1) while the securities market has grown in size and complexity, SEC personnel resources have remained stable or declined; (2) SEC needs to seek more efficient ways of regulating and overseeing industry participants; and (3) SEC has dealt with its expanded workload by turning more regulatory responsibilities over to SRO and increasing the use of automation to improve the efficiency with which oversight examinations are conducted.

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