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GAO-10-448R 1 (2010-04-22)

handle is hein.gao/gaobaansb0001 and id is 1 raw text is: i ~G A 0 . A~couintabilty I Integrity * Reliability United States Government Accountability Office Washington, DC 20548 April 22, 2010 The Honorable Dennis Moore Chairman Subcommittee on Oversight and Investigations Committee on Financial Services House of Representatives Subject: Securities and Exchange Commission: Information on Fair Fund Collections and Distributions Dear Mr. Chairman: The Securities and Exchange Commission's (SEC) primary mission is to protect investors and maintain the integrity of securities markets. As a part of its responsibility to protect investors, SEC seeks to ensure that individuals who violate federal securities laws and regulations take responsibility for their misdeeds. Specifically, when individuals or firms are found to have violated securities laws, SEC may order civil monetary penalties and seek ill-gotten financial gains, or disgorgement, from the violators.' For its enforcement actions to be successful, SEC must have a collection and distribution program for both civil monetary penalties and disgorgement that functions effectively. In 2002, Congress passed the Sarbanes-Oxley Act to address corporate malfeasance and restore investor confidence in the U.S. securities markets. This legislation established numerous reforms to increase investor protection, including Section 308(a), the Federal Account for Investor Restitution provision, commonly known as the Fair Fund provision. This provision allows SEC to combine civil monetary penalties and other donations to disgorgement funds for the benefit of investors who suffer losses resulting from fraud or other securities violations. Fair Funds may be created through either SEC administrative proceedings or litigation in U.S. District Court, and either SEC or the courts may administer the funds. However, SEC is responsible for general monitoring of all Fair Funds created, reinforcing the need for SEC to have an effective collection and distribution program for both civil monetary penalties and disgorgement so that additional funds collected as a result of the Fair Fund provision can benefit harmed investors. In 2007, SEC created the Office of Collections and Distribution (OCD) to manage the collection of penalties and disgorgement, including Fair Funds, and speed the process of returning funds back to harmed investors. 'Disgorgement is a remedy designed to deprive defendants of their ill-gotten gains derived from their illegal activities. GAO-10-448R SEC Fair Fund Collections and Distributions

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