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UPDATE 1-U.S. SEC to revamp way it reviews enforcement tips
March 5, 2009 / 7:59 PM / 9 years ago

UPDATE 1-U.S. SEC to revamp way it reviews enforcement tips

* US SEC moves to improve how it handles enforcement tips

* FINRA creates whistleblower office (Adds FINRA details)

WASHINGTON, March 5 (Reuters) - The U.S. Securities and Exchange Commission is taking steps to improve the way it handles whistle-blower complaints and enforcement tips, the SEC said on Thursday.

The SEC, under fire from lawmakers and investors for not catching Bernard Madoff’s alleged $50 billion fraud, is seeking a more centralized process to identify leads for potential enforcement action and high risk for compliance exams.

Currently, tips and complaints are funneled through several different divisions and offices within the SEC’s headquarters in Washington, as well as the agency’s 11 regional offices across the United States.

With the help of a federally funded research and development center called the Center for Enterprise Modernization, the SEC will examine how it evaluates tips, complaints and referrals.

“This comprehensive review will help us identify and improve areas within the agency where gaps or lack of communication may cause breakdowns that prevent us from ensuring swift and vigorous enforcement,” SEC Chairman Mary Schapiro said in a statement.

U.S. broker-dealer watchdog, The Financial Industry Regulatory Authority, also criticized for its role in the Madoff case, announced on Thursday that it had created a whistleblower office to expedite the review and handling of tips.

FINRA, which supervises nearly 5,000 U.S. brokerages, said the new whistleblower office will not replace the agency’s longstanding processes for handling thousands of routine regulatory tips and customer complaints each year.

“This new initiative will ensure that individuals with significant information will reach senior staff, who can quickly assess the level of risk involved and make sure that each tip is properly evaluated,” said FINRA’s interim chief executive Stephen Luparello in a statement.

“Those tips warranting additional review and investigation will be subject to an expedited regulatory response,” he said.

Reporting by Rachelle Younglai; Editing by Brian Moss, Bernard Orr

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