SEC Personnel Weaknesses Said by GAO to Undermine Effectiveness

The U.S. Securities and Exchange Commission hasn’t fully implemented plans to strengthen its workforce and remove communication barriers that contributed to past enforcement failures, according to a government watchdog.

Personnel management failures contributed to the SEC’s ranking of 19th among 22 agencies for employee satisfaction and commitment, the Government Accountability Office said in a report posted on its website today. The agency hasn’t developed a plan to groom future leaders and employees haven’t bought into a system designed to measure performance, the GAO said.

“GAO determined that SEC’s organizational culture is not constructive and could hinder its ability to effectively fulfill its mission,” the GAO reported. “Many current and former SEC employees cited low morale, distrust of management, and the compartmentalized, hierarchical, and risk-averse nature of the organization.”

The GAO is required to review SEC workforce management systems under the Dodd-Frank Act of 2010. Investigators made seven recommendations to address human-resource weaknesses, including providing incentives to promote more better teamwork.

In a response to the report, SEC Chairman Mary Jo White wrote that agency officials have “work to do in these areas and are committed to ensuring that progress continues.”

In a separate report posted on its website today, the GAO recommended that the SEC develop alternative methods to identify “accredited investors,” those permitted to invest in private and less-liquid securities. The congressional watchdog said the test could include a minimum amount of liquid investments or use of a registered investment adviser.

The SEC currently defines accredited investors as persons with net worth greater than $1 million, excluding a primary residence, or annual income exceeding $200,000. Approximately 8.5 million households qualify as accredited based on the net-worth test. Some investor advocates say the current test isn’t a good proxy for a person’s investing expertise.

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