WASHINGTON (Reuters) - At least 219 former officials at the Securities and Exchange Commission have left since 2006 to help clients with business before the agency, bringing fresh allegations of a “revolving door” that leaves the commission too cozy with the Wall Street firms it regulates.
According to a report to be released on Friday, between 2006 and 2010 there were 219 former SEC employees who filed letters with the agency indicating their intent to represent a client with business before the commission.
In all, those former officials advised firms on SEC business nearly 800 times, according to an advance copy of the report seen by Reuters.
The study by the nonpartisan Project on Government Oversight, which analyzed post-employment statements provided by the SEC after a Freedom of Information Act request, says the former officials joined a total of 131 firms to provide legal, lobbying, accounting and other advice to clients being investigated or regulated by the SEC.
Republican Senator Charles Grassley, a senior member of the Senate Finance Committee, said of the report: “The SEC’s revolving door seems to be more active than ever.”
Grassley said there should be public disclosure of where former financial regulators are working and what issues they are working on. “Transparency is a proven back-stop to enforce ethics rules,” he said.
A report by the SEC’s Inspector General earlier this year criticized the SEC for failing to keep adequate records about potential conflicts of interest.
While critics such as Grassley contend the system leaves the SEC unable to effectively regulate Wall Street, defenders argue the practice of officials leaving government agencies to work in the private sector is to be expected.
“Who do you want representing these clients before agencies such as the SEC with very, very complex rules,” said Roberta Karmel, a former SEC commissioner and now a professor at Brooklyn Law School. “Lawyers who know nothing about the rules — or lawyers who do?”
Professor Karmel added that the SEC is one of the few agencies that require former employees to provide written notice if they intend to represent a client before the commission.
SEC employees are barred by federal law for life from working on matters that they worked on while at the commission.
“We have a rigorous program for departing employees to help them meet both the spirit and the letter of the law,” said John Nester, an SEC spokesman.
The oversight group’s report shows some SEC officials joined new employees with business before the commission within days of leaving the agency. Alan Reifenberg, for example, a branch chief in the SEC’s Enforcement division, resigned on June 6, 2006. Six days later he joined Credit Suisse.
Many companies who hired SEC officials turned to them for help in SEC litigation. Jill Slansky, a former senior attorney in the SEC’s New York Regional Office, resigned in December 2009.
In June 2010, she filed a statement saying she had been retained to represent an unidentified client in a lawsuit brought by the SEC against Galleon Management, the complaint that charged billionaire hedge fund owner Raj Rajaratnam with insider trading. He was found guilty on 14 counts this week.
John Freeman, a former SEC lawyer and now an emeritus professor at the University of South Carolina School of Law, did his own SEC “revolving door” study in 2003 and found a high proportion of officials left to work for regulated entities.
“A lot of the brain power and logistical know-how that existed in the SEC was being used for the benefit of mutual fund managers and not for the benefit of shareholders,” said Freeman.
Reporting by Tim Reid; Editing by Tim Dobbyn