17 September 2005

GAO recommendations on SEC’s revised examination approach on the Mutual Fund Industry

The US Government Accountability Office (GAO) published a report on the SEC's Revised Examination Approach on the Mutual Fund Industry. The report assesses changes of the SEC on its mutual fund exam program, key aspects of SEC's quality control framework for routine fund exams, and the adequacy of SEC's oversight of NASD and the NYSE in protecting shareholders from mutual fund sales abuses.

The report makes four recommendations to the SEC:

first, the SEC should periodically assess the level of resources allocated to the various types of examinations in light of their regulatory benefits to help ensure that the agency is using its resources efficiently and effectively to oversee the mutual fund industry, including broker-dealers that offer mutual funds.

second, the agency should assess its methodology for conducting broker-dealer oversight examinations and whether some portion of the resources currently devoted to these examinations could be better utilized to perform mutual fund examinations.

third, the SEC should establish a policy or procedure for supervisory review of work papers prepared during routine examinations, a written plan for each routine examination, and consider reviewing them.

fourth, to track information about the full scope of work performed during broker-dealer oversight examinations.

Summary
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