Did Regulatory Operational Risk Lead to Madoff? – The SEC’s porn addiction
A recent report shows the Securities and Exchange Commission has a problem – they are addicted to Internet pornography. No I am not joking.
The SEC recently admitted that in the last five years, 33 members of staff have been investigated for surfing the internet for porn. 31 of these incidents occurred in the last two-and-a-half years when incidents like the Bernard Madoff scandal and the financial crisis hit.
These revelations came to light in a new report, David Kotz, the SEC’s inspector general. The report details that more than half of those found to have been looking for explicit internet images were senior staff – on salaries of between $99,356-$222,418.
In one of the worst examples, an accountant working in one of the SEC’s regional offices tried to access porn – she was blocked by the regulator’s internet firewall – almost 1,800 times in a two-week period. The same woman had almost 600 explicit pictures saved on her company laptop.
In another, a senior lawyer working at the regulator’s head office in Washington DC admitted that on some days he spent eight hours looking for porn. In fact, he downloaded so much that he ran out of space on the hard drive on his work computer, and began downloading images to disks he kept in boxes in his office.
The report was prepared for Senator Charles Grassley, following an earlier inquiry into how widespread this problem was at the regulator. Congressman Darrell Issa meanwhile said it was “disturbing that high-ranking officials within the
SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse.”
Reputational risk, information security, employee productivity – all types of operational risk (not to mention the potential for sexual harrasment charges). During the course of a due diligence review such items should be covered. Yet, it seems the questions remains who performs due diligence on the SEC? Is it Congress? Or are they being misled by the SEC”s self-investigative efforts of the inspector general….
An SEC spokesman said all “of the offending employees” had been disciplined: “We will not tolerate the transgressions of the very few who bring discredit to their thousands of hardworking colleagues.”
Here is a clip for Fox Business News discussing the controversy:
And from CBS News:
The SEC is countering that this is old news and reforms have been implemented to repair the problem….
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