The SEC's Money Problems


The SEC's Money Problems

By Hester Peirce |
Apr 03, 2012

The General Accountability Office has issued its second adverse decision in six months with respect to the Securities and Exchange Commission’s handling of money.  Last week, the GAO announced that the SEC held on to money that should have gone to the Treasury.  Instead of turning the interest on late payments collected from securities law violators over to Treasury, the SEC diverted the money into a victims fund.  The SEC asked GAO to presume that Congress would have approved of this practice.  After all, who could object to making additional money available to victims?

But as GAO explained, Congress is constitutionally charged with determining how the government spends money.  The late payments, which belong to the government, should have gone to the Treasury so that Congress could decide what to do with the funds.  Unelected agencies, even when they are motivated by noble purposes, cannot step into Congressional appropriators’ shoes.

The first adverse decision came back in October 2011, when GAO considered the SEC’s lease of Constitution Center, a fancy new office building in Washington, DC.  The SEC, already the occupant of one glassy Washington, DC office complex, entered into a ten-year lease on the building in anticipation of filling it with additional staff to carry out the agency’s new obligations under the Dodd-Frank Act.  Although the lease was projected to cost approximately $400 million, the SEC, in violation of the law, recorded only $180,000 of the total cost.  This accounting sleight of hand enabled the SEC to sign the expensive lease without adequate Congressional budget authorization, which is illegal.  Incidentally, after its leasing troubles, the SEC handed responsibility for leasing over to the General Services Administration.  In light of this week’s news about the GSA, the SEC might still have to worry about leasing decisions.

Both GAO decisions add to the concern that the SEC’s own internal management challenges may be getting in the way of its real work of protecting investors and markets. Together, these GAO decisions do little to help the SEC repair its flagging reputation.


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