Morning Speech

Morning Speech

Good Morning. I’m very pleased to be with you today to outline our plans to strengthen examination oversight of broker-dealer and investment adviser firms. In the wake of Madoff and other frauds, we’re making changes to examination oversight that will sharpen examiners’ ability to detect fraud and other types of violations. In many instances, these changes have been formulated collaboratively with FINRA. Many of these changes have already been implemented, and others are longer-term in nature. All will impact regulatory examinations of your firms.1
We are:
    • enhancing examiners’ training and expertise in fraud detection,
       
    • enhancing examiners’ expertise in complex financial products, trading and other areas,
       
    • conducting focused examinations and an exam sweep of firms with higher potential fraud risk profiles,
       
    • improving the tools available to examiners to detect fraud, and leveraging the work performed by the firm’s independent auditor,
       
    • improving surveillance and risk-based targeting, and
       
    • improving our handling of tips and complaints inside the SEC.
As I said, taken together, these changes will sharpen examiners’ ability to identify signs of fraud, and more broadly, will improve examiners’ ability to identify deficiencies and violations in today’s markets.
First, some background is in order. At the SEC, our mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. In the examination program, our goal is to identify potential fraud and other violations, to encourage firms to have strong compliance and supervisory programs, and to provide information to the Commission and other SEC staff about compliance in the industry. SEC examiners are objective, perseverant, skeptical and enormously hard-working. We examine all types and sizes of firms, and about 80% of our exams find some type of deficiency...