August 2, 2011 / 8:16 PM / 8 years ago

UPDATE 1-Key U.S. congressman wants to revamp SEC structure

* Rep. Bachus calls for structural revamp of SEC

* Bachus drafting legislation to implement changes

* Bill will also bolster internal ethics practices

* Committee postpones Thursday hearing on the bill

* SEC prefers to make changes internally without bill (Adds a comment from SEC spokesman John Nester)

WASHINGTON, Aug 2 (Reuters) - An influential U.S. Republican congressman is drafting legislation to restructure the U.S. Securities and Exchange Commission and bolster its ethics practices.

Spencer Bachus, chairman of the House Financial Services Committee, plans to introduce a bill that would consolidate offices and divisions, shore up ethics guidelines for SEC employees, and address conflicts of interest that could arise from the “revolving door” of people who go from the commission to often high-earning jobs on Wall Street. [ID:nN12129379]

“The SEC is structurally flawed and suffers from operational inefficiencies and organizational incoherence,” Bachus, an Alabama Republican, said on Tuesday.

Bachus said the bill, dubbed the SEC Modernization Act, would scrap the agency’s Office of Compliance, Inspections and Examinations and merge its staff into the agency’s trading and markets and investment management divisions.

The compliance office was criticized in 2009 for its failures to detect Bernard Madoff’s $65 billion Ponzi scheme. The SEC has since revamped its examinations program.

It would also do away with the Division of Risk, Strategy and Financial Innovation, a recently created arm of the SEC given the task of anticipating market problems. [ID:nN02258915]

The SEC Modernization Act is based on recommendations from the SEC’s inspector general, the Government Accountability Office and the Boston Consulting Group, which conducted a $4.8 million study of the SEC’s operations earlier this year.

SEC spokesman John Nester said on Tuesday that the agency is “actively reviewing a number of similar recommendations” from the Boston Consulting Group study, and that the agency does not think new legislation is the best approach.

“By continuing to undertake reforms internally rather than legislatively, we can more readily adapt our structure to market dynamics as they evolve,” Nester said, noting that the SEC has already undertaken large restructuring initiatives.

SEC Chairman Mary Schapiro is scheduled to testify this week about the agency’s operations, but the Financial Services Committee postponed the hearing.

The bill should “not be interpreted as criticism of SEC Chairman Mary Schapiro or any of her predecessors,” and aims to make changes to the “dysfunctional structure” that has dogged the agency for years, Bachus said in a press release. (Reporting by Sarah N. Lynch; Editing by Robert MacMillan and Steve Orlofsky)

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