Report calls for better management at SEC

The U.S. Chamber of Commerce Wednesday released recommendations aimed at improving the Securities and Exchange Commission's regulatory effectiveness primarily by improving how the agency manages itself.

The agency has come under intense criticism given the problems in the financial markets and the agency's failure to act more quickly against investment adviser Bernard Madoff, who is accused of creating the largest Ponzi scheme in history.

While there has been much discussion of whether the agency has adequate resources to do its job, former SEC Secretary Jonathan Katz, the report's author, said there has not been enough focus on the "allocation and management" of SEC resources.

Given this, many of the recommendations are focused on strengthening the management, structure and oversight of the agency. For example, the report calls for the hiring of a chief operating officer with "sufficient" authority to oversee daily operations throughout the SEC.

It called for the five-member commission to play a greater role in the application and interpretation of regulator policy. This may require congressional action to amend the Sunshine Act, which requires that all meetings of the commission be open to the public, to allow for greater communication between the commissioners and staff.

In addition, the report called for adding staff with expertise in economics, capital markets operations and the business operations of regulated firms. The report also called for the creation of "an accelerated conditional approval process for new investment products or services." Katz said such a move would take "the burden off the staff to predict the future" and would promote innovation.

The report made 23 recommendations based on discussions with outside experts and SEC officials and staff. The suggestions are focused on three core functions of the agency: staff no-action letters, which allow companies and financial services to gain informal staff advice on the legality of a new service or product; exemptive orders, which provide investment firms with exemptions from statutory requirements; and self-regulatory organization rule orders.

The report calls for an expedited process for those routine applications for exemptive relief that mirror past exemptive relief orders and for setting deadlines for staff review and action. In addition, the SEC should publish guidelines distinguishing the use of no-action letters and exemptive orders, the report said.

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