GAO to Review SEC

At the request of Sen. Charles Grassley (R-Iowa), the Government Accountability Office (GAO) is preparing to perform a broad review of two of the Securities and Exchange Commission’s divisions – the Office of Compliance, Inspection, and Examination (OCIE) and the SEC’s Enforcement unit.

According to published reports, Grassley, chairman of the Senate Banking Committee, asked the GAO to examine these SEC divisions because of the regulators handling of an insider trading investigation involving Pequot Capital Management, a $7 billion hedge fund run by Arthur J. Samberg.

The GAO’s priorities will be to zero in on whether the SEC properly monitors self-regulatory organizations like the New York Stock Exchange and NASD.  Grassley also recently requested that the heads of the Treasury Department, SEC, and other federal agencies to tell him what information hedge funds are required to report to them.

Despite the DC Circuit Court of Appeals decision to overturn the SEC’s hedge fund adviser registration rule earlier this year, it is widely expected that the SEC will re-propose some sort of regulation which attempts to regulate the hedge fund advisers in the near future.  The likelihood of this is further increased due to the attention that is being paid to hedge fund related issues in Congress.

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