Securities and Exchange Commission: Division of Enforcement Should Document Its Procedures for Generating Public Reports

GAO-20-47 Published: Oct 28, 2019. Publicly Released: Nov 27, 2019.
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Fast Facts

SEC’s Division of Enforcement investigates and litigates fraud, financial and accounting irregularities, and other misconduct. Since 2017, it has published an annual report highlighting its accomplishments and presenting enforcement statistics.

But the division lacks written procedures for generating the annual report. Written procedures—including documentation requirements—could help ensure the reliability and accuracy of the report content and that processes could be repeated annually even if personnel changed.

To help ensure continuity of the division’s report process, we recommended developing and implementing such procedures.

The seal of the U. S. Securities and Exchange Commission

The seal of the U. S. Securities and Exchange Commission

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Highlights

What GAO Found

Since 2009, the Division of Enforcement (Enforcement) in the Securites and Exchange Commision (SEC) has made modifications to its reporting of enforcement statistics, including by releasing a stand-alone annual report beginning in fiscal year 2017. The Enforcement Annual Report included additional data on enforcement statistics not previously reported and narratives about enforcement priorities and cases. Enforcement staff told us the annual report was created to increase transparency and provide more information and deeper context than previous reporting had provided.

Enforcement has written procedures for recording and verifying enforcement-related data (including on investigations and enforcement actions) in its central database. However, Enforcement does not have written procedures for generating its public reports (currently, the annual report), including for compiling and verifying the enforcement statistics used in the report. To produce the report, Enforcement staff told GAO that staff and officials hold meetings in which they determine which areas and accomplishments to highlight (see figure). Enforcement was not able to provide documentation demonstrating that the process it currently uses to prepare and review the report was implemented as intended. Developing written procedures for generating Enforcement's public reports and documenting their implementation would provide greater assurance that reported information is reliable and accurate, which is important to maintaining the division's credibility and public confidence in its efforts.

Production Process for the SEC Enforcement Annual Report, as Described by Enforcement Staff

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Enforcement supports SEC's mission by bringing civil and administrative actions against individuals and entities for fraud, financial and accounting irregularities and misstatements, and other misconduct. According to SEC, these enforcement actions serve as a deterrent against future wrongdoing. Since 2017, Enforcement has published an annual report that provides statistics on its enforcement activities and highlights its priorities for the coming year.

GAO was asked to examine SEC reporting of enforcement statistics. This report examines (1) the ways that enforcement statistics reporting changed over the last 10 years, and (2) policies and procedures for recording, reviewing, and reporting enforcement statistics. GAO reviewed SEC's internal policies, procedures, and manuals for recording, verifying, and reporting data. GAO also interviewed SEC officials and reviewed past SEC reports containing enforcement statistics.

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Recommendations

GAO recommends that SEC's Co-Directors of Enforcement develop written procedures for generating Enforcement's public reports, including procedures for compiling and verifying statistics used in the reports, and documenting their implementation. SEC agreed with the recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Division of Enforcement The Securities and Exchange Commission's Co-Directors of Enforcement should develop written procedures for generating Enforcement's public reports, including procedures for compiling and verifying statistics used in the reports and documenting their implementation. (Recommendation 1)
Closed - Implemented
In November 2020, the Securities and Exchange Commission's Division of Enforcement developed and approved written procedures for compiling and verifying metrics for inclusion in its Enforcement Annual Report. The new written procedures include descriptions of key roles for staff generating the Enforcement Annual Report, steps for generating the Enforcement Annual Report, and requirements for certifying metrics published in the Enforcement Annual Report. As part of the certification process, the Division of Enforcement created a certification form to document the steps and data sources for each metric included in the report. These documented procedures will help ensure the reliability and accuracy of reported information as well as manage risk associated with staff turnover.

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