Revolving-door study of SEC cites ethics-advice record

U.S. Securities and Exchange Commission employees who leave the regulator for work with private companies often find positions with firms most heavily involved with the agency, the Government Accountability Office said. More than a third of 224 recently departed SEC employees who returned before the SEC with business from 2005 to 2010, represented 16 financial, legal or consulting firms often in contact with the SEC, the GAO said in a report released today. Of 2,127 employees who left from 2006 to 2010, 37 percent took jobs as attorneys, economists, examiners or accountants, occupations that are “relevant” to SEC examination and investigative work, the GAO said. SEC Inspector General H. David Kotz has issued four reports since 2009 on revolving-door problems at the agency. The GAO report didn't highlight systemic issues with former SEC employees joining regulated firms. The report's primary criticism was that the SEC hasn't kept track of ethics advice the agency gives employees. “SEC has not consistently documented ethics-related advice,” the GAO reported. Recording such advice could show “that its officials are providing appropriate advice to current and former employees, and that the agency is taking steps to minimize the potential for post-employment violations or conflicts of interest,” the report said. In response, the SEC “has begun drafting standards concerning the documentation of ethics advice,” SEC Chairman Mary Schapiro told the government research office in a letter. In addition, commission spokesman John Nester noted that "the SEC’s recently implemented practice of collecting and documenting new employer information during exit interviews is unique among the other federal agencies we reviewed. . . While many of the agencies we reviewed informally may ask employees the name of their new employer, none but SEC and FINRA systematically document such information.” The average number of years of service in the SEC's core positions has increased to 13.5 in 2010 from 8.3 in 2006 because the financial crisis and economic recession “made private- sector employment less available and attractive,” the report said. In a revolving-door proposal filed with the SEC yesterday, the Financial Industry Regulatory Authority said it will ban former officers from making client appearances or testifying as experts in Finra cases within one year of leaving the regulator. --Bloomberg News--