GAO Questions SEC's Oversight of Mutual Funds

Another problem, according to GAO, is that while the SEC relies on experienced staff to oversee all exam stages, it does not require that supervisors review work papers or document their review. GAO said it found “deficiencies in key SEC exam work papers, raising questions about the quality of supervisory review.” The SEC also does not require written exam plans, which could be helpful in serving as a “guide for conducting exams and reviewing whether exams were completed as planned,” GAO said.

GAO also found that the SEC’s oversight of self-regulatory organizations (SROs) is lacking. To assess SRO oversight of SROs, which include the stock, options, futures, and commodities exchanges, SEC reviews SRO exam programs and conducts oversight exams of broker/dealers, including their mutual fund practices, GAO said. The SEC exams occur every six to 12 months after SROs conduct their exams so that SEC can assess the quality of SRO exams. However, GAO found in 1991 that “SEC’s oversight exams provided limited information in helping SROs to improve their exam quality, because SEC and the SROs used different exam guidelines and their exams often covered different periods.” GAO found that the same problems exist today. Looks like the SEC has some work to do.–Melanie Waddell