The Securities and Exchange Commission may have given a company that it subsequently contracted with to design a market surveillance system "an advantage that others did not have" and may have given "the apperance of favoritism," according to a General Accounting Office study of the contract award.
The GAO study released yesterday suggested no wrongdoing by the SEC or the firm but attributed the problems it uncovered to the agency's lack of experience in dealing with federal procurement regulations.
The SEC noted in comments on the report that it has been increasing and upgrading the staffing in its produrement and contracting office and otherwise has been attempting to improve its efforts in that area. But the agency rejected the notion that the firm in question, Monchik Weber Associates Inc., received an unfair advantage in competing for the system definition and design contract.
The GAO reviewed the SEC's actions in its effort to obtain an automated market-surveillance system, a computerized system to strengthen SEC efforts to detect trading practices that might violate federal securities law.
According to the GAO, top SEC officials discussed market-surveillance problems at great length with representatives of Monchik Weber three months before the public request for proposals was made. Monchik Weber is an investment adviser firm with offices in New York and Boston.
The SEC response to the GAO criticism characterized its discussions with Monchik Weber as informal and noted that the discussions, "coupled with Monchik's unsolicited letters, educated the commission staff concerning industry capability generally in the market-analysis area."
Monchik Weber recieved a $379,380 contract -- later increased to $567,780 -- to define and design a market-surveillance system.