What’s at stake in the SEC’s budget

“While five years sounds like a long time to complete an investigation, the complexity of securities fraud cases and problems with staffing an investigation when higher priorities demand attention makes it all too possible for a case to slip between the cracks,” says Peter Henning in The New York Time’s Dealbook. Henning, a law professor at Wayne State University, was writing about a fraud case that was dismissed by a federal judge in Texas because the Securities and Exchange Commission failed to file its suit within the statute of limitations. For some reason, the SEC let its investigation into the case go dark for a two-year period, and only came back to it after the company in question — Microtune — announced it was investigating itself in public filings. Henning says we can expect more of the same if the SEC’s budget is cut by Congress. “A budget cutback, or even a budget freeze, while the S.E.C. is in the midst of dealing with its new responsibilities for drafting and enforcing rules governing the securities derivative markets and hedge funds may mean the enforcement division will have to drop investigations, or at least slow some of them down, while it deals with other issues.”

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