WHY THE SEC HAS BEEN FAILING

Having missed the opportunity to stop Bernard Madoff and his Ponzi, and having been asleep at the switch for years over the Allen Stanford affair, a government audit of the Securities and Exchange Commission has outlined several areas where the SEC has, singularly failed, to protect America's interests.

The Government Accounting Office report notes, for example, that enforcement staff fell 11.5% between 2004 and 2008. Coupled with that, vacancies for paralegal and administrative staff went begging, which in turn forced SEC investigators and prosecutors to spend time filing documents, scanning documents and even making their own travel arrangements. According to one SEC attorney, who claimed he spent 2-3 hours a day on administrative chores, he actually had to go to a local photocopy shop himself when he needed documents copied.

The report went on to say that life at the SEC was so dismal under the past administration, it took weeks --- and in some cases, month --- for documents to be downloaded onto SEC computers. Furthermore, investigators did not have access to real-time market information. To get it, they needed to “manually query” brokerage houses. In turn, their data was often incomplete. Finally, the GAO report decided, the culture of risk aversion has been so ingrained at the SEC that investigators tend to spend as much as 40% of their time on internal review. The report cited one case when it took two and a half months to prepare a single paragraph to request permission to send a notice to an offending party to say it faced fraud charges. Once too much time passed, investigators simply dropped the case as too old.

Current SEC chairwoman, Mary Schapiro, has promised to make things right.