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News October 16, 2006 Issue

Atkins Continues to Beat OCIE Reorg Drum

For at least the fourth time in the past eighteen months, Commissioner Paul Atkins has delivered yet another speech calling for the SEC to consider whether OCIE should be disbanded and examiners returned to the Divisions of Investment Management and Market Regulation.

In his September 13 remarks, which were recently posted on the SECís website, Atkins described the question of whether OCIE should remain a stand-alone office as "one of the most pressing organizational issues facing the Commission." While he was careful to call only for the SEC to consider the matter, his view seemed clear: OCIE should be disbanded. Rule-writers, he said, need to hear from examiners, and examiners "need to check with the rule-writers to make sure that their messages are consistent with the purposes of the rules."

Atkins noted that OCIE has been referring a "record number" of matters to the Division of Enforcement. "Has it become more advantageous for the examinersí own careers for them to refer matters to Enforcement without a filter as to importance?" he asked. Firms, he said, have begun treating OCIE requests "as if they had been subpoenaed."

With Atkins beating the drum yet again, is the idea of a wholesale reorganization of OCIE going to gain traction? A number of prominent industry lawyers have publicly called for disbanding OCIE. Moreover, several SEC Commissioners are believed to support the move.

The final decision, however, is up to Chairman Christopher Cox. Last May, Cox testified before the House Financial Services committee on a number of internal SEC initiatives designed to implement aspects of the Fossella bill, such as a new policy whereby OCIE will notify the Commission of upcoming sweep exams (IM Insight, May 8, 2006). Cox did not, however, signal that he would be inclined to disband OCIE.

Since then, the Fossella bill has been dormant, and no future legislative action is expected. However, in the intervening months, Andrew Donohue has settled in as head of the Division of Investment Management, and Erik Sirri has taken over the helm of the Division of Market Regulation. With two new Division directors in place, the OCIE issue may be viewed as ripe for more rigourous discussion and debate within the agency.