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Failure to Oversee a 55 Million Dollar Investor Education Fund

  Sanjiv Gupta CPA  Published 
Failure to Oversee a 55 Million Dollar Investor Education Fund

Failure to oversee a 55 million dollar investor education fund by U.S. securities regulator got them strong criticism by the federal judge William Pauley. This fund is a part of about 1.5 billion regulatory accords with Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and with other banks. Pauley has stated that the SEC has proved to be indifferent in overseeing how the nonprofit organization is handling the distribution of money.

The settlement of this fund which took place in 2003 was governed by Eliot Spitzer who was the attorney general of New York of the time. The settlement was geared to put an end to the scandal dealing with the publication of biased analyst research. Being responsible for overseeing the implementation of the settlement, judge Pauley has time and again raised his concern about whether the goals of the settlement are being met.

In Wednesday’s hearing he expressed that while some parts of the fund are being channelized properly, he enquired the regulators for putting up vague expenditure and auditing by the nonprofit organization and the FINRA Investor Education Foundation. He pointed out a number of instances where the expenditure is not transparent enough. One such instance is a 91, 500 dollar grant to Genesee District Library in Flint, Michigan which resulted into two events one of which included an investor education for children aging 2 to 5 years. Pauley pointed out that while an early start to investor education is surely beneficial but giving toddlers this education seems pointless. He also gave another example of irresponsible expenditure, citing the instance of a full-day seminar of 130 attendees in West Virginia that cost $ 57,000. He also said that it was also not sensible to host a financial fraud conference in 2011 where the SEC chairman gave an address of a five-star hotel instead of the SEC’s headquarters or FINRA’s office.

In Wednesday’s order, Pauley demanded that the SEC, as well as the foundation, should put an end to their noncompliance with his 2005 directive which included the submission of annual audits along with a detailed report of the receipts and expenses. In relation to this order, the spokesperson of FINRA objected to many of the claims of the judge but both FINRA, as well as SEC, has agreed to provide the court with all the necessary information. The Genesse library system refrained from commenting on this issue.