Monday, March 22, 2010

WHAT DOES THE SEC DO NOW?

The Securities and Exchange Commission is a government agency with a serious PR problem. First, it failed to discover Bernie Madoff’s $60 billion in misdeeds even after receiving numerous tips questioning Madoff’s ability to generate the kind of returns he did. Just recently it failed in its attempt to get under Lehman Brothers’ problems via an SEC investigation team under the leadership of none other than Tim Geithner, Treasury Secretary. This happened before the esteemed investment banking firm went belly-up. Since then it was discovered that Lehman was moving critical assets off its books before it announced earnings-- to mask its shaky finances; once the announcements were made those items returned to the books. None of this was discovered by the SEC “troops.”

Thus, the reputation of the SEC has taken a major hit. These high profile defeats I would bet have led many to believe that the SEC can’t successfully investigate anything. This is obviously not true, but confidence in the organization undoubtedly has reached a low ebb. In fact, it leads one to wonder: What kind of talent resides in the SEC? Are they well organized? Are they trained in doing investigative work? Are the investigators just a bunch of lawyers using the SEC as a way station until they move into private practice, thereby spawning a devil-may-care attitude? If the Secretary of Treasury cannot conclude a successful management engagement, what is the quality of the oversight day-to-day? Are there any conflicts of interest----investigations compromised by the promise of future jobs?

So what is the SEC to do to strengthen its standing and reputation among business and the general public? An op-ed, “A Foreign Service for Wall Street,” which appeared in Saturday’s New York Times (3/24) by author Scott McCleskey, suggests “alongside reform, we need to overhaul the way regulatory agencies are staffed” and cites the Foreign Service as a perfect model. The latter builds and trains career professionals who spend lifetimes there, and the SEC needs the same, rather than inexperienced lawyers to conduct investigations and other core tasks. As McCleskey notes, establishing this kind of institutional program “would be a lot cheaper than another financial crisis.”

With the SEC’s mission focused on protecting the investor, it also is incumbent on the leadership to speak out on its missteps and explain the system breakdown. If such explanation has indeed occurred, I have missed it. A top SEC representative needs to travel the nation speaking before business groups and being interviewed by the media to reach both business and the individual investor -- to tell the SEC story, how they plan to strengthen the organization, clarifying their activities and responsibilities, while shedding light on the Madoff and Lehman cases. These same messages need to be converted into op-ed pieces which appear in target media and then be placed on the SEC website. There is nothing on the current website home page that I can find that addresses these confidence-diminishing issues. The campaign needs to carefully integrate the Internet to garner feedback and allow for questions and answers --- influencing actions and enabling accountability.


Technorati Tags: The Securities and Exchange Commission, Bernard Madoff, Lehman Brothers,The New York Times, communications, public relations, Makovsky

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