WASHINGTON -- The number of new enforcement cases brought by the Securities and Exchange Commission fell by 9 percent last year as the agency grappled with staff cuts brought on by a recent budget crunch, according to figures released Thursday.
SEC Chairman Christopher Cox said in a statement that the agency's work in the fiscal year that ended Sept. 30 had produced "solid results for investors," including settlements of $800 million with insurance giant American International Group Inc. and $400 million with mortgage giant Fannie Mae.
The agency's reduced tally of 574 enforcement actions included 91 cases against shell companies that failed to file regular financial reports. That issue has become an SEC priority of late, but pursuing those cases takes less time and fewer resources than most other actions. Former agency lawyers said such cases amount to going after low-hanging fruit. Without those cases in the mix, the enforcement figures would have dipped by nearly one-quarter in 2006.
In recent years the SEC has faced criticism for failing to uncover widespread accounting fraud at such companies as Enron Corp. and WorldCom Inc., as well as trading abuses at mutual funds. Those scandals prompted Congress to pour hundreds of millions of dollars into the agency's coffers.
But more recent financial difficulties, including construction overruns on its new headquarters here, led to a budget shortfall last year and a hiring freeze that only recently has been lifted, officials said.
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"Given the budget cutbacks in the number of people in the SEC's enforcement arm, and the ongoing corporate scandals, all investors should be worried," said Lynn Turner, a former chief accountant at the agency who now is director of research at the proxy advisory firm Glass, Lewis & Co.
