Grassley reforms in place at the Securities and Exchange Commission
WASHINGTON – Senator Chuck Grassley today said he was glad to get a report from
Securities and Exchange Commission Chairman Mary L. Schapiro that reforms he recommended
almost two years ago, after investigating claims that an SEC lawyer had been fired for protesting
a decision to give special treatment to a Wall Street CEO, have been implemented by the SEC.
Grassley said that investors and the marketplace should benefit from these changes,
which standardize procedures, prioritize resources, increase transparency of external
communications and internal recusals, establish guidelines for handling employee complaints
and dismissals, protect whistleblowers and recognize the independence of the Inspector General
for the SEC.
“The case that resulted in the 2007 report was a violation of the public trust by the agency
that’s supposed to protect investors and maintain a fair market,” Grassley said. “The fact that the
recommendations have been put in place, and most of it done before this year, is encouraging,
even while it’s still hard to believe that no SEC official was ever held accountable for the
misconduct in the Pequot Capital Management case.”
Grassley asked for a report on the status of the recommendations he made in August
2007, in a report issued with Senator Arlen Specter, during Senate debate last month regarding
an amendment to give the SEC additional money for enforcement. A copy of the detailed
accounting from the Chairman is posted with this news release at http://grassley.senate.gov and
In the letter, which was delivered on Friday, Schapiro wrote, “I take very seriously the
charge that I have been given to restore the SEC’s reputation and credibility as the investors’
watchdog. I also know that this can only occur if this organization is managed in such a way that
employees are supported in the work that they do, are engaged toward a clear and common
mission, and accept the need for greater transparency and accountability that is part of public
The news release below describes the additional resources approved by the Senate for the
SEC and the Inspector General of the SEC in anti-fraud legislation sponsored by Grassley that
passed the Senate last month. The House recently passed the Senate bill with some amendments.
The House version is now awaiting action by the full Senate. The August 2007 report by
Grassley and Specter is posted at http://finance.senate.gov. Click on legislation, then scroll
down Legislative Archives. Click there and go to the document dated August 3, 2007.
For Immediate Release
Thursday, April 23, 2009
Grassley works to protect investors and free market by strengthening SEC watchdog
Senator secures commitment from commissioner to respond to 2007 wrongdoing
WASHINGTON – Senator Chuck Grassley said the agreement he reached today with
Senator Chuck Schumer of New York will give the Inspector General for the Securities and
Exchange Commission (SEC) an additional $1 million for each of the next two fiscal years to
oversee the work of the agency charged with protecting investors, maintaining fair, orderly and
efficient markets, and facilitating capital formation.
“The public deserves ongoing rigorous, independent oversight of the SEC,” Grassley
said. “Congress has dropped the ball with SEC oversight, and even the former Inspector General
failed in his important role. The good news is the current Inspector General for the SEC has
demonstrated a commitment to policing the agency and identifying problems that have
repercussions for every American. We ought to dedicate more resources to this effort, and
especially if Congress is going to give the SEC itself more money.”
The new funding for the SEC Inspector General and the SEC is part of pending
legislation sponsored by Grassley and Senator Patrick Leahy to fight fraud against the taxpayerfunded
bailout of America’s financial system and to strengthen the federal False Claims Act,
under which updates sponsored by Grassley in 1986 have recovered $22 billion for the U.S.
Treasury that would otherwise have been lost to fraud.
Grassley successfully made the case that some of the new resources Schumer sought for
the SEC in this broad-based legislation should go to beef up the SEC’s watchdog, especially
given recent failures by senior SEC enforcement officials, the SEC’s culture of deference to Wall
Street and the agency’s failure to identify market abuses, including Bernard Madoff’s Ponzi
scheme against investors.
In addition, Grassley won a commitment today from the SEC Chairman, Mary L.
Shapiro, to report on complete implementation of recommendations made in August 2007 by
Grassley and Senator Arlen Specter, based on their investigation which documented how an SEC
lawyer was fired for protesting special treatment by the SEC of a Wall Street CEO.
“It’s pretty unbelieveable that the SEC has refused to hold anyone accountable for the
misconduct in this case, which was verified by two independent inquiries,” Grassley said. “I
appreciate the new Commissioner’s commitment to taking action, and look forward to her reform
on May 8.”
A copy of the April 23, 2009, letter from Shapiro to Grassley is posted with this news
release at http://grassley.senate.gov and http://finance.senate.gov. A copy of the August 2007
report completed by Grassley and Specter, titled “The Firing of an SEC Attorney and the
Investigation of Pequot Capital Management,” is posted at
Under the Grassley-Schumer agreement, the Inspector General would receive $1 million
in 2010 and 2011, or $2 million total. The SEC would receive $20 million in 2010 and 2011, or
$40 million total. The total cost of the amendment is $42 million over two years.
The overall bill, the Fraud Enforcement and Recovery Act (S.386), is being debated by
the Senate this week.
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