SEC and CFTC

Fines are one way for regulators to sanction those who violate securities and futures industry rules. However, for fines to be effective, regulators must collect them. This report reviews fine collection by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and nine exchanges and industry associations that act as self-regulatory organizations (SRO) in the securities and futures industries. GAO (1) compares how the securities and futures regulators' current collection rates have changed since GAO's November 1998 report 1998 and assesses the changes they made in their fine imposition practices; (2) discusses the steps taken by SEC and CFTC to oversee the SROs' fine imposition activities, including the actions they have recently taken to improve this oversight; and (3) assesses the effectiveness of actions taken by SEC and CFTC to refer unpaid fines to the Financial Management Services (FMS). GAO found that collection rates at SEC, CFTC, and the SROs were generally comparable to, or higher than, their rates at the time of GAO's earlier report. Among the SROs, the National Association of Securities Dealers (NASD) and the National Futures Association (NFA) had the lowest collection rates between 1992 and 1996. However, fine collection rates for both organizations improved after they changed their fine imposition practices. SEC has begun to collect data that would allow it to analyze securities sanctions throughout the industry. Similarly, CFTC has begun to document the results of its review of industrywide futures sanctions. Both SEC and CFTC have reviewed the extent to which their respective SROs maintain automated fine collection records. FMS' efforts to collect SEC's fines have been hampered by SEC's delays in approving compromise offers, delays by SEC's Commissioners in responding to FMS' requests for more timely action, and by SEC's failure thus far to adopt the regulations it needs to again submit its fines to the Treasury Offset Program to benefit from the associated collection opportunities. Although CFTC has only recently begun submitting fines to FMS for collection, concerns about the timeliness of these submissions already exist. The agency's Inspector General staff has recommended steps to ensure that CFTC fines are submitted more timely to FMS, but these steps have yet to be implemented. Weaknesses in procedures for ensuring that CFTC submits all needed information to FMS to collect its unpaid fines also appear to have caused further delays in FMS' collection efforts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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