Skip to Highlights
Highlights

The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) impose penalties, disgorgements, and restitution on proven and alleged violators of the securities and futures laws, respectively. GAO has issued a number of previous reports on agency collection efforts and made numerous recommendations for improvement. This report follows up on open issues from the previous reports and (1) discusses SEC's progress in improving its tracking of penalty and disgorgement collection data, (2) assesses the steps SEC has taken to improve collection program management, (3) evaluates SEC's implementation of the Fair Fund provision in the Sarbanes-Oxley Act of 2002, and (4) describes CFTC's actions to address previous GAO recommendations.

Skip to Recommendations

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Securities and Exchange Commission 1. SEC has taken actions to strengthen its data tracking and management practices for its penalty and disgorgement collection program. However, the agency could take additional steps to ensure that collection staff members have the necessary tools and support to carry out their responsibilities efficiently and are being used effectively. Therefore, the Chairman, SEC, should develop a method to ensure that case management specialists and collection monitors in Enforcement receive consistent supervision and the necessary monitoring and guidance to carry out their duties and that SEC management can ensure that staff are following the collection guidelines.
Closed - Implemented
SEC has been providing routine training to case management specialists and collection monitors. Training included topics related to CATS 2000 and Phoenix. The branch chief for the case management specialists holds monthly conference calls at which the following topics are discussed: current issues, new protocols, the review or clarification of existing protocols, and upcoming reporting deadlines. In addition, SEC created a management position in the Office of Collections and Distributions (OCD) to provide oversight of collections staff. An assistant director in OCD also holds monthly conference calls with the case management specialists to discuss similar topics. SEC has also created a debt collection status report to ensure that collections staff are following guidelines.
United States Securities and Exchange Commission 2. SEC has taken actions to strengthen its data tracking and management practices for its penalty and disgorgement collection program. However, the agency could take additional steps to ensure that collection staff members have the necessary tools and support to carry out their responsibilities efficiently and are being used effectively. Therefore, the Chairman, SEC, should establish procedures for staff in the Office of Financial Management to notify Enforcement staff on a timely basis about data entered into CATS.
Closed - Implemented
SEC has created electronic notification procedure for Office of Financial Management staff to notify Enforcement staff when data is entered into CATS. The "procedure" is embedded in computer code. When OFM posts a disgorgement or penalty cash receipt, an automatic email is generated which is sent to both the branch chief and case management specialist assigned to the matter. Also, SEC has deployed the Phoenix system and has created a working group.
United States Securities and Exchange Commission 3. SEC has taken actions to strengthen its data tracking and management practices for its penalty and disgorgement collection program. However, the agency could take additional steps to ensure that collection staff members have the necessary tools and support to carry out their responsibilities efficiently and are being used effectively. Therefore, the Chairman, SEC, should determine the effectiveness of new case management specialists, collection monitors, and collection attorneys by using formal approaches such as periodically surveying staff attorneys that interact with collection staff to evaluate the assistance the staff provides.
Closed - Implemented
SEC has created the Office of Collections and Distributions. It is currently establishing collections procedures and developing an alternate structure to the office in response to two subsequent GAO reports (GAO-07-830 and GAO-09-358).
United States Securities and Exchange Commission 4. To continue to ensure that the collection program meets its goal of effectively deterring securities law violations and returning funds to harmed investors, the Chairman, SEC, should continue to identify and establish appropriate performance measures to gauge the effectiveness of collection activities and begin collecting and tracking data to implement the timeliness measure presented in SEC's 2004 annual performance plan, if SEC still considers that measure appropriate.
Closed - Implemented
In 2006, SEC developed and included in its PAR a distributions performance measure. After SEC deployed the Phoenix system in 2006, to further refine the performance measure, the Division of Enforcement gathered and provided the business requirements to the SEC's Office of Information Technology that would permit Enforcement to record and monitor distribution related information, including information reported on the newly developed standardized accounting reports for distribution funds. For FY 2008, SEC reported the measure in its PAR for the first time by using manually prepared reports and information provided by the Phoenix and CATS systems.
United States Securities and Exchange Commission 5. To continue to ensure that the collection program meets its goal of effectively deterring securities law violations and returning funds to harmed investors, the Chairman, SEC, should ensure that management determines, on an aggregate basis, (1) the amount of disgorgement distributed each year to harmed investors, (2) the amount of civil monetary penalties sent to Treasury, and (3) the amount of receivers' fees and other specialists' fees and that the agency uses this information to more objectively monitor the distribution of monies to harmed investors.
Closed - Implemented
SEC deployed the Phoenix system in 2006. The Division of Enforcement gathered and provided the business requirements to the SEC's Office of Information Technology that would permit Enforcement to record and monitor distribution related information, including information reported on the newly developed standardized accounting reports for distribution funds. In 2006, SEC developed and included in its PAR a distributions performance measure. The completion of the Collections and Distributions modules necessarily depends on the agency's overall IT efforts. Although these modules have not been rolled out, we consider SEC management to have taken necessary actions to address this recommendation.
United States Securities and Exchange Commission 6. To continue to ensure that the collection program meets its goal of effectively deterring securities law violations and returning funds to harmed investors, the Chairman, SEC, should ensure that management establishes a procedure for consistently collecting and aggregating its Fair Funds data to assist in the monitoring and managing of the distribution of monies to harmed investors and establishes measures to evaluate the timeliness and completeness of distribution efforts.
Closed - Implemented
After SEC deployed the Phoenix system in 2006, the Division of Enforcement gathered and provided the business requirements to the SEC's Office of Information Technology that would permit the Division to record and monitor distribution related information, including information reported on the newly developed standardized accounting reports for distribution funds. The completion of these Collections and Distributions modules necessarily depends on the agency's IT efforts. Meanwhile, the Office of Collections and Distributions maintains a spreadsheet to track the Fair Funds data. We consider that SEC management has taken actions to address this recommendation.

Full Report