SEC Enforcement: More Actions Needed to Improve Oversight of Disgorgement Collections

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A letter report issued by the General Accounting Office with an abstract that begins "Every year investors lose money to individuals and corporations that violate federal securities laws. One mission of the Securities and Exchange Commission (SEC) is to deter such violations and return lost funds to investors. SEC's primary tool is the disgorgement order, which requires violators to give up money obtained through securities law violations. In order for disgorgement to succeed, SEC must have an effective disgorgement collection program. Although the courts have ordered billions of dollars in disgorgement in the last decade, concerns exist about SEC's success ... continued below

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United States. General Accounting Office. July 12, 2002.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "Every year investors lose money to individuals and corporations that violate federal securities laws. One mission of the Securities and Exchange Commission (SEC) is to deter such violations and return lost funds to investors. SEC's primary tool is the disgorgement order, which requires violators to give up money obtained through securities law violations. In order for disgorgement to succeed, SEC must have an effective disgorgement collection program. Although the courts have ordered billions of dollars in disgorgement in the last decade, concerns exist about SEC's success in collecting these funds. For several reasons, SEC's disgorgement collection rate is not an adequate measure of the effectiveness of SEC's disgorgement program. First, while SEC data showed a collection rate of 14 percent for the $3.1 billion in disgorgement ordered in 1995-2001--compared with the 50 percent collection rate GAO reported in its 1994 report--GAO found that the rate varied widely from year to year and was influenced by large individual disgorgement orders. Second, the data used to calculate the collection rate was not reliable because of weaknesses in entering and updating information in SEC's disgorgement tracking database. Third, factors beyond SEC's control, including violators' inability to pay, reduce the likelihood that SEC will be able to collect the full amount of disgorgement ordered. To deprive securities law violators of illegally obtained funds, SEC needs an effective collection program with clearly defined objectives and measurable goals, specific policies and procedures for its staff, and systems to allow management to monitor performance. However, SEC's strategic and annual performance plans do not address disgorgement collection or clarify its priority relative to other activities. SEC has improved its process for recommending receivers and has taken steps to monitor receivers' actions, but lacks a mechanism for tracking receiver fees. In response to concerns noted in a recent internal report, SEC also has improved its waiver recommendation process for disgorgement orders."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • July 12, 2002

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  • June 11, 2014, 5:03 a.m.

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United States. General Accounting Office. SEC Enforcement: More Actions Needed to Improve Oversight of Disgorgement Collections, report, July 12, 2002; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc291446/: accessed December 14, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.