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November 30, 2011

Funding for the SEC and SEC enforcement may be related

During the ongoing budget debate, discussion, morass, etc we read that the SEC thought they were underfunded to carryout its mandate.  They wanted resources to be more responsive in identifying problems (including fraud) and to be able to prosecute wrongdoers.  Congress pushed back on their request for funding.
More recently a judge would not approve a settlement that the SEC wanted to enter into with a “wrongdoer”.  The judge ruled that the proposed settlement was “…neither fair, nor adequate…”.  The SEC responded that they did not have the resources to prosecute the case.
An article in today’s Wall Street Journal, “SEC Pushes to Toughen Penalties for Offenders”, indicates that Congress has limited the SEC’s authority to impose penalties.  The SEC “…sought the power to impose much-larger penalties on financial firms and individuals that commit fraud.”
It could be argued that Congress faults the SEC for not carrying out its mandate and that Congress is a significant reason for that failure. 
With the many financial abuses and frauds that have come to light in recent years, most people would like to see improved detection and prosecutions.   I have seen very little in the media looking at both sides of this issue.  Either the failures or the lack of resources are discussed, not both.  We need to broaden our sources of information.  Only by learning the various sides of an issue can we responsibly know what to demand from our legislators.

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