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Securities and Exchange Commission: Existing Post-Employment Controls Could Be Further Strengthened

GAO-11-654 Published: Jul 12, 2011. Publicly Released: Jul 12, 2011.
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Many Securities and Exchange Commission (SEC) employees leave the SEC each year, and some of these former employees go to work for firms regulated by SEC or the law or consulting firms that represent them. This practice raises questions about the potential impact on SEC's ability to effectively carry out its mission, including the potential for undue influence by former SEC employees on SEC matters or cases. The Dodd-Frank Wall Street Reform and Consumer Protection Act required GAO to examine the movement of former SEC employees to regulated firms and the associated concerns. Among other things, this report examines (1) the extent to which employees leave SEC to work for or represent regulated entities and the potential issues associated with such movements and (2) internal controls SEC has in place to manage potential conflicts of interest and how these controls compare across other agencies. To address these objectives, GAO analyzed data on former SEC employees, reviewed SEC's and other agencies' internal controls, and interviewed current and former SEC officials.


Recommendations for Executive Action

Agency Affected Recommendation Status
United States Securities and Exchange Commission To promote transparency and help strengthen SEC's procedures for documenting events related to potential current and post-employment issues associated with the movement of employees between SEC and other employers, the SEC Chairman should establish standards for documentation of ethics advice.
Closed – Implemented
Consistent with GAO's recommendation, SEC established standards in 2011 for documentation of advice relating to employment issues, including issues related to post-employment. According to the standards, written documentation of advice relating to employment issues should contain at least the following information: (1) the date on which the advice was given; (2) a summary of the relevant facts as described by the employee; (3) citation of the applicable legal authority; and (4) a summary of advice rendered. Some of the ways in which written documentation can be accomplished include the following means: by email, by completing the post-employment and seeking employment advice checklists with appropriate commentary, and by writing a memo to file, a copy of which is given to the Ethics Counsel. GAO obtained samples of documented ethics advice regarding a wide array of employment issues, including post-employment issues, covering years 2013 and 2014, and determined that SEC has implemented GAO's recommendation.

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