SEC head Mary Schapiro's agency must show it is serious about accountability, a group says. Watchdog: SEC ignores misconduct

The watchdog group Project on Government Oversight sent a letter to the Securities and Exchange Commission on Tuesday, raising concerns about the agency’s difficulty disciplining employees found to have committed serious misconduct.

“It’s hard for the public to have faith in the integrity of the SEC when the agency is so reluctant to discipline its employees,” the project’s executive director, Danielle Brian, said in a statement. “Given the agency’s history of hiding and dismissing recommendations made by the inspector general, it’s well past time for the SEC to show it is serious about holding its employees and contractors accountable for misconduct.”


The project combed through reports of the Office of Inspector General and found that disciplinary action had been recommended for 98 SEC employees and contractors since 2008, with some 27 recommended for disciplinary action up to dismissal.

“However, it appears that only 11 employees and contractors were terminated or removed from their contract during this period. Many received lesser forms of disciplinary action, including counseling, suspensions and reprimands. Sixteen employees resigned rather than facing disciplinary action. And the SEC took no action whatsoever in the case of 10 employees, many of whom were found to have committed serious offenses,” a final draft of the letter read.

Brian wrote that she was “surprised to see” final disciplinary action is still pending for employees involved in the Madoff and Stanford probes, “especially given the significant congressional and media attention focused on the SEC’s embarrassing failures to detect these massive Ponzi schemes.”

Brian urged the SEC to foster a culture that “holds employees and contractors fully accountable for their misconduct.”

“As a general practice,” the draft read, “the SEC should commit to implementing OIG recommendations in a timely fashion, including recommendations for disciplinary action, or explaining in the public record why it disagrees with the OIG’s findings.”

SEC spokesman John Nester said the commission could not comment on the letter because it had not yet received it but said the SEC takes IG recommendations seriously.

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