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News January 17, 2011 Issue

Sending A Message At The SEC

In the variety of actions large and small being announced by the SEC, one common thread has been noticeable.

Whether in open meetings, litigation announcements, settled actions or rulemaking efforts, the SEC has conspicuously raised the profile of its teamworking efforts. Public statements and press releases go out of their way to acknowledge the joint efforts of divisions and offices. Matters arising from inspections and examinations stress the participation of multiple units.

Acknowledging and praising collaborative, cross-agency efforts is nothing new at the SEC. Chairmen and commissioners alike have long lauded staff efforts across the agency as part of rulemaking efforts, for example.

The difference now seems to be the focus of the accolades. The SEC is touting its collaborative efforts as evidence it is tearing down the information "silos" of its former operations. In its ongoing mission as the investorís advocate, and to show it has learned the lessons of the past, announcements of litigation, administrative actions and other enforcement measures increasingly have acknowledged the assistance of other divisions and offices of the SEC, rather than only other agencies or departments of government, or foreign or state counterparts.

For example, in a litigation release last week describing charges against an adviser and broker-dealer controlled by Warren Nadel, Warren D. Nadel & Co. and Registered Investment Advisers (original, huh?), the press release noted that the SECís case was investigated by Enforcement staff after a joint examination by the broker-dealer examination staff and the investment adviser examination staff, naming the names of all the joint team members.

The SEC is letting registrants and others know that it has implemented collaborative efforts internally and externally in an effort to close identified gaps and weaknesses in its programs.

Shortly after her arrival at the SEC, Chairman Mary Schapiro launched an agency-wide self-examination in the wake of the Bernard Madoff scandal. A year later, she summarized some of the outcomes. "We brought in new leaders across the agency. We streamlined our procedures. We sought to reform the ways we operate."

Inside the SEC, she said, "we have also been spending a great deal of time promoting a culture of collaboration ó stressing the importance of sharing information and sharing ideas."

The birth of the Division of Risk, Strategy & Financial Innovation on her watch "to bore through the silos that for too long have compartmentalized, and thereby limited the impact of our institutional expertise" stands as a testament to her commitment to the SECís cultural shift. "Fresh, interdisciplinary insights are vital to good decision-making," said Schapiro. At the time, she also specifically acknowledged that the SEC had begun integrating broker-dealer and adviser expertise in examinations.

Fast forward to today, when the SEC is offering up evidence of its success. As the SEC continues to improve its operation, rehabilitate its image, and recharge a zest for its mission, part of that effort appears to be marketing the change. It may be easy to miss, but it is important to note, the SEC is spreading the word that its collaborative efforts are bearing fruit.

Besides serving perhaps to boost morale on the inside, these disclosures can be informative for registrants on the outside. Touting the success of new agency practices or the implementation of new tools can help compliance managers be better prepared the next time the SEC shows up at their door.

Further self-examination at the SEC has been mandated by the Dodd-Frank Act.

Valuable messages are out there, and more are on the way.