President's Perspective, April 2009: There has been much discussion both inside and outside the SEC over the past several years – not to mention the last several months – about how to improve the SEC’s Enforcement program. Beyond the obvious suggestion of hiring more staff, many opportunities exist to refocus the manner in which the Division of Enforcement leverages its highly skilled frontline employees to advance the Commission’s mission.

Perhaps the single biggest challenge facing Enforcement (as well as other SEC offices and divisions) is the out-dated, multi-layered and redundant management structure that currently hamstrings frontline employees who handle investigations on a day to day basis. In Enforcement, every four or five employees report to a Branch Chief, who reports to an Assistant, who reports to an Associate. In this structure, Branch Chiefs are responsible for the investigations that they supervise, but they have little or no real decisional authority. This multi-leveled structure leads to multiple review of work product and rewards extreme risk aversion by managers, which substantially hampers the Enforcement mission of protecting investors. Serious change is needed.

A good approach to this problem would be to eliminate the first level of management, by re-designating Branch Chiefs as senior investigative staff at Grade 15 or 16, but without supervisory authority over other employees. Indeed, constant supervision by Branch Chiefs is unnecessary in the vast majority of SEC Enforcement investigations, because most frontline Enforcement staffers are highly qualified, skilled and motivated to handle their investigations independently. As senior investigative staff, the former branch chiefs would handle their own investigations. All non-management staff would report directly to the Assistant in their current management chain.

The immediate benefits of flattening the management structure in this fashion are obvious:

• Substantially increase the frontline investigative staff by as much as 20%, without seeking increased funding from Congress and without demoting those staffers;
• Immediately eliminate a layer of the management bureaucracy, which would increase the speed and efficiency of the Enforcement program, while simultaneously achieving one of the administration’s key governmental reform goals;
• Decrease the large amount of wasted time currently involved in drafting and circulating action memos and other documents to the Commission, and in making decisions in cases;
• Increase frontline investigative employee morale, engagement and empowerment; and
• Create a new Grade 15 or 16 non-management position for staff to aspire to.

Other opportunities to further empower and increase the morale of frontline Enforcement employees also exist. The renewed scrutiny that we currently face at the SEC should be viewed as an opportunity for the Division of Enforcement to make long overdue improvements.

by Chapter 293 President Greg Gilman