Summary: In response to a congressional request, GAO examined the Securities and Exchange Commission's (SEC) oversight of securities industry self-regulatory organizations (SRO), such as stock exchanges.
In its evaluations of SRO examinations of dealer/broker compliance with securities regulations, SEC found hundreds of dealer/broker violations that SRO missed. Although SEC did not consistently disclose the reasons for the violations, it has begun to assemble more comprehensive information on the extent of continuing violations. SEC has influenced SRO to improve their inspections; however, its open approach allows SRO to disagree with its recommendations and to spend additional time resolving problems. Because of its staffing problems, SEC has not been able to cover all of the items in its self-regulatory inspection program. The SEC surveillance inspection program has resulted in improvements in data collection, analysis, investigation, and discipline. In order to maintain adequate oversight of growing markets, SEC has shifted more responsibility to SRO for conducting certain examinations. If SRO can successfully handle more of the examination work load, the shift will not affect the extent and quality of the examinations. However, because of staff concerns, SEC plans to monitor the shift of responsibility closely.
