And You Guys Say The SEC Doesn't Do Anything......
WASHINGTON -- Two enforcement lawyers at the Securities and Exchange Commission are being investigated by federal prosecutors and the FBI for possible insider-trading violations, according to a report from the SEC's inspector general.
The criminal investigation, which was disclosed to SEC Chairman Mary Schapiro in a March 3 memo, came about after SEC Inspector General H. David Kotz conducted his own investigation into the matter and referred it to criminal authorities after discovering suspicious trading activity.
The names of the two attorneys were redacted from the report, but Mr. Kotz said he has also recommended that disciplinary action be taken against them.
"Our investigation revealed suspicious activity, appearances of improprieties, and we identified stocks for which there is evidence that [attorney 1] and [attorney 2] may have traded on nonpublic information or engaged in insider trading," the report said.
A third attorney, meanwhile, was found to have violated reporting rules regarding personal securities transactions.
The investigation comes as yet another embarrassment for the agency's enforcement division, which came under harsh criticism for its failure to detect Bernard Madoff's $65 billion Ponzi scheme. Mr .Kotz is also heading an internal investigation into the Madoff failures.
Since her confirmation, Ms. Schapiro has been working to restore the division's image, hiring a former U.S. prosecutor as its new director to send a message that the agency is not afraid to go after big Wall Street players who violate U.S. securities laws.
On Thursday, Sen. Charles Grassley (R., Iowa), who has been a critic in the past of the SEC's enforcement division, sent a letter to Ms. Schapiro in response to Mr. Kotz's report.
In particular, he raised concerns about findings in the report that suggest the agency has "no compliance system in place to ensure that Commission employees" do not make trades for personal gain based on information they receive as SEC employees. Sen. Grassley has asked Ms. Schapiro to reply to a number of questions, including what kinds of disciplinary action the SEC may take against the lawyers.
