The Corporate World - Wednesday, December 3, 2008 15:43 - 0 Comments

Inspector General Kotz shakes up the SEC

When H. David Kotz took over as Inspector General (IG) at the Securities and Exchange Commission in December 2007, he saw a need to restore credibility to the office. His predecessor had just been criticized by a Senate report over the SEC’s handling of the Pequot Capital Management insider trading matter. The IG’s office was criticized for failing to effectively hold the SEC’s feet to the fire. Kotz made a pledge to shake up the SEC. Since then the new IG has been tough and has been harshly critical of the SEC – and in particular when it comes to its Enforcement Division and its director, Linda Thomsen – for cutting deals with white collar defense lawyers while at the same time overriding the recommendations of line SEC enforcement staff.

It’s high time that the SEC did the job it is supposed to be doing. Enforcement decisions by the SEC, and disclosures of information about them, should be based on the merits of a case. Access to senior officials of the SEC by influential representatives of power brokers on Wall Street should not be tolerated. It certainly appears that things need changing at the SEC. Kotz told Corporate Crime Reporter that he has about 30 cases under investigation. He has a staff of about 14 full time auditors and investigators. He stated during an interview:

When I first came here, given the criticism the office took from Congress and the Senate report, I pledged to restore the credibility of the office, to ensure that the office was aggressive, viable and vibrant, and looked into important matters and issue important reports that don’t pull any punches. And I believe that I have to a large extent achieved that with the issuance of these reports. Internally, it is very clear that the Office of Inspector General is an important office in the SEC. It’s going to be scrutinizing the SEC’s operations carefully. And where it deems appropriate will criticize the agency.

The SEC has been critical of Kotz for the reports he has issued. Hopefully, that won’t slow him down. It’s high time somebody got the SEC’s attention and made the agency do its job.

Source: Corporate Crime Reporter