Back At The Ranch: SEC Responds To Report Critical Of Its Actions Regarding Stanford’s Alleged Ponzi Scheme

Late last week, while the Securities and Exchange Commission was getting ready to go after Goldman, it released a report by the SEC Office of the Inspector General that was highly critical of the SEC's actions in connection with R. Allen Stanford's alleged Ponzi scheme – a report highly reminiscent of the criticisms the SEC faced following its failure to find the Madoff fraud on a timely basis. 

SEC Chair Mary L. Schapiro released a statement that stated: "This report recounts events that occurred at the Commission between 1997 and 2005. Since that time, much has changed and continues to change regarding the agency's leadership, its internal procedures and its culture of collaboration. The report makes seven recommendations, most of which have been implemented since 2005. We will carefully analyze the report and implement any additional reforms as necessary for effective investor protection."
 
The SEC also indicated that it was addressing the OIG recommendations and that it was taking steps to enact them. The recommendations include:
·                     Establishing escalation procedures and revamping the process for handling tips, complaints and referrals;
·                     Changing performance metrics so that quantity does not trump quality;
·                     Considering potential, and potentially growing, investor harm;
·                     Establishing and consistently applying factors for referring matters to others agencies;
·                     Making effective use of other resources within the agency, such as economic and international experts:
·                     Sensitizing employees who leave the organization to their ongoing restrictions.