SEC inspector general pledges changes

By Rachelle Younglai

WASHINGTON (Reuters) - The new internal watchdog at the U.S. Securities and Exchange Commission has pledged future investigations will be thorough and credible after the agency was accused of mishandling an insider trading case that included a failed effort by one staffer to subpoena a powerful Wall Street figure.

SEC Inspector General David Kotz said he was working "diligently to restore confidence in the Office of the Inspector General at the SEC" in a February 13 letter addressed to Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee.

A copy of the letter was provided by Grassley's office on Wednesday.

The SEC inspector general is responsible for conducting independent audits, investigations and inspections to detect agency abuse and fraud, as well as promote efficiency.

Grassley and Pennsylvania Sen. Arlen Specter, the top Republican on the Senate Judiciary Committee, had accused the SEC of mishandling the 2005 dismissal of an agency investigator.

The former employee, Gary Aguirre, said he was fired after an insider trading probe got too close to a powerful Wall Street banker.

Aguirre led an insider trading probe involving hedge fund Pequot Capital. Aguirre said he wanted to subpoena John Mack, who is now the chief executive of Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), as part of the probe, but was stopped by supervisors because of Mack's political clout.

In an August report, the Senate Finance and Judiciary committees said the SEC's office of inspector general, then headed by Walter Stachnik, failed to conduct a serious, credible investigation of Aguirre's claims.