Study recommends SEC reorganization

Friday, March 11, 2011

The Securities and Exchange Commission, which is responsible for policing Wall Street, may need to scale back its ambitions to live within its means, according to a newly completed study that Congress ordered in response to the financial crisis.

The study by a private consulting firm recommends that the agency reorganize itself to become more efficient and effective.

But that alone may not solve the problem, the report says.

Congress may face a choice, it says: Increase the agency's budget, or change the SEC's role "to fit available funding."

"There are mission critical activities that the SEC is not performing that force it to make intelligent but hard tradeoffs," says the report.

The roughly $5 million report, released Thursday, comes at a time when the SEC is lobbying Congress to increase its budget.

The final version of the report differed in some respects from an earlier draft obtained by The Washington Post.

The draft suggested "much deeper and broader" SEC supervision of the Financial Industry Regulatory Authority, a self-regulatory group for securities firms that was once led by SEC Chairman Mary L. Schapiro.

"In many of the regulatory areas where FINRA is active, it is increasingly becoming a single point of failure and the sole active regulator," the draft said.

In the final version, the phrase "single point of failure" disappeared.

The final version said the SEC "should consider whether a more tailored approach to oversight [of the group] is warranted."

- David S. Hilzenrath

© 2011 The Washington Post Company