The Securities and Exchange Commission (SEC) is meeting today to discuss what they are doing to protect investors, foster efficient markets and promote capital formation. Market News First (www.mn1.com) received an article from the SEC earlier with the issues being discussed at its House Financial Services Committee meeting.
Some of the highlights from the release include the following:
1. “The staggering growth in Americans’ participation in the markets, the enormity of the SEC’s task becomes apparent. About 3,600 staff at the SEC are responsible for overseeing more than 10,000 publicly traded companies, more than 10,000 investment advisers that manage more than $37 trillion in assets, nearly 1,000 fund complexes, 6,000 broker-dealers with 172,000 branches, and the $44 trillion worth of trading conducted each year on America’s stock and options exchanges.”
2. “Today, the SEC’s Enforcement Division is significantly larger than it was five years ago. Our staff are engaged in combating abuses ranging from boiler rooms and Ponzi schemes to stock option grants to fictitious employees. We are pursuing individuals and firms who have falsified corporate documents, engaged in self-enrichment to the detriment of their investors, and attempted cover-ups of this sort of conduct. We are investigating and filing actions against perpetrators of Internet scams, pump-and-dump schemes, and prime bank frauds, executives who have lied to their auditors, and accountants, lawyers, and other gatekeepers who have joined in the fraud themselves.”
3. “The SEC has created special working groups within its Enforcement Division to deal with emerging risks such as hedge fund insider trading, stock options backdating, and microcap fraud. The SEC has also devoted special attention to combating Internet fraud, through an office within the SEC focused specifically on the threats posed to investors such as email messages like, “This Stock’s Ready to Explode,” “Ride the Bull,” and “Fast Money.” Very recently, the SEC instituted emergency enforcement actions to suspend trading in stocks that have been the subjects of these spam campaigns. And the SEC instituted well over 100 investigations of options backdating.”
4. “Another of our important initiatives to benefit individual investors is our drive to improve the quality and clarity of mutual fund and 401(k) disclosure, which we have undertaken along with other departments and agencies, including the Department of Labor. Forty-seven million Americans now have 401(k) accounts through their employers, and these and other defined contribution plans now represent over $3 trillion in assets. Nearly half of the $3 trillion that Americans have invested through defined contribution plans is in mutual funds, so we are hard at work on a simplified, plain English disclosure for mutual funds that gives investors what they need to know, in a form they can use. We are focused on a new, streamlined disclosure document for investors that will provide better information about investment objectives, strategies, risks and costs.”
5. “The SEC has intensified its focus on “soft dollars” that brokers receive from mutual funds to pay for things other than executing brokerage transactions. Recently, the Commission acted unanimously to publish interpretive guidance that clarifies that money managers may only use soft dollars to pay for eligible brokerage and research services – and not for such extraneous expenses as membership dues, professional licensing fees, office rent, carpeting, and even entertainment and travel expenses. At the same time, we are examining the adequacy of current accounting and disclosure for soft dollars.”
These are just a handful of the issues being discussed at the SEC meeting today, but MN1 will provide updates and more details as they become available.