Kelley Applauds Lawmaker’s Support Of Frontline SEC Employees


1/5/09: NTEU National President Colleen Kelley today welcomed recognition by key House members that structural issues involving both the SEC and more broadly the nation’s financial regulatory system played a major role in the proliferation of a long-running financial scheme.

President Kelley pointed in particular to the view expressed by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, who, in speaking about SEC employees, said in the face of structural problems at the agency, that “no one should blame SEC employees” for the financial activities of Bernard Madoff, noting that the scandal could not be attributed to a lack of diligence on behalf of SEC employees.

“Any investigation into the Madoff situation needs to be done impartially,” President Kelley said, “and not have a pre-determined conclusion about where to lay blame.”

Under the current leadership, Kelley noted, SEC staff has been cut, resources have been limited, employees have faced serious workplace issues and deregulation of the financial industry has been pursued. In fact, said Kelley, the frontline employees at the SEC have been outgunned, underfunded and have suffered from inadequate leadership.

Rep. Frank’s comments were delivered at a committee hearing on the growing scandal involving the financial activities of Madoff, who is alleged to have conducted a so-called ‘Ponzi’ scheme running over many years, causing financial harm both to individuals and organizations, including charities.

The hearing was called by Rep. Paul Kanjorski (D-Pa.), chairman of Capital Markets, Insurance and Government-Sponsored Enterprises Subcommittee, who noted a sharp decline in enforcement personnel assigned to review the operations of investment advisors, such as that run by Madoff.

Separately, former SEC Chairman Arthur Levitt wrote in an op-ed piece published in today’s Wall Street Journal that while the number of investment advisors has grown by some 50 percent since 2002, the agency’s enforcement resources have been flat or reduced, noting that enforcement division personnel were cut by 146—to 1,192 from 1,338—from 2005 to 2007.

In mid-December, SEC Chairman Christopher Cox sought to lay the blame for the Madoff scandal on agency frontline employees. President Kelley rejected the chairman’s statements and noted the importance of ensuring that financial regulatory agencies, such as the SEC, have sufficient resources and personnel to perform their congressionally-mandated missions. “That clearly has not been the case in recent years,” President Kelley said.