SEC to Put More ‘Targeted Resources’ Into Accounting Fraud, Chairman Says
By Yin Wilczek
The Securities and Exchange Commission will commit more resources to pursuing accounting and financial fraud, Chairman Mary Jo White said June 18.
“You’ll see more targeted resources in that area going forward,” White said. She noted that such frauds were a traditional focus for the SEC, and an area in which she is particularly interested.
However, White said that does not mean that the SEC will create a new specialized unit for accounting and financial fraud. “I think you can bring focus in different ways,” such as through a working group or a task force, she said.
White spoke at the CFO Network 2013 hosted by the Wall Street Journal. SEC Enforcement Division Co-Director George Canellos similarly said June 17 that it is unlikely that a specialized unit will be created for accounting and financial fraud [see related report in this issue]. Canellos also discussed various options in which the SEC could enhance its investigation and pursuit of such frauds.
At the same event, White announced the revision of the SEC’s longstanding “neither admit, nor deny” practice.
In other comments, White told the gathering that the SEC must bring a “laser focus” and a “sense of urgency” to market structure issues. “We want to be sure that we really are focused” on the technical, systemic, and fragmentation issues arising out of the U.S. equity market structure, she said.
In addition, the SEC “must get its arms around” the impact of matters such as dark pools and fragmentation, White continued. There may be benefits arising from off-exchange venues such as dark pools, and the SEC should not regulate without fully understanding the harm or advantages of those subjects, she said. White added that the new Market Information Data Analytics System–or “Midas”–will help the commission in that regard. The system is “yielding very, very useful market structure information” beyond what was previously available to the SEC, she said.
Midas collects, stores, and analyzes orders posted on the national exchanges, the modification and cancellation of those orders, the trade execution of those orders, and all off-exchange executions.
Meanwhile, White said that one matter that “keeps her up at night” is the SEC’s lack of resources to examine investment advisers. The SEC currently examines only about 8 percent of registered investment advisers annually, she observed. Even though the SEC’s risk-based exams are helping to identify the advisers on which the SEC should focus, the commission really needs more resources for better coverage, she said.