Scope and Methodology

To evaluate how SEC’s report discussed the agency’s efforts to address the Year 2000 problem for its internal systems and identify any ways that future reports could be improved, we interviewed officials in SEC’s Office of Information Technology. We also reviewed documents SEC had collected from market participants to assess what type of information the agency had analyzed and thus could summarize in future reports. In addition, we assessed the extent to which SEC’s report contained information that related to the various criteria set out in our own guidance for addressing Year 2000 issues and in the OMB guidance for selected federal agencies reporting on their Year 2000 efforts. SEC’s report provided a high-level description of the status of Year 2000 remediation efforts for SEC internal systems, including detailed information on the status of SEC mission-critical systems. SEC’s Report Did Not Include Detailed Information on Major Systems Critical to the Continued Functioning of the U.S. Securities Markets

Although it provided an overview of the status of its own and securities industry participants’ efforts to address the Year 2000 problem, the report did not identify those systems that might be critical to the continued functioning of the U.S. securities markets. The officials said that they generally had not collected similar information from market participants such as broker-dealers or investment companies because they had concentrated on ensuring that these participants were aware of and beginning to focus on Year 2000 problems. However, this information was not included in the June 1997 report. Annual Reporting May Not Be Adequate as the Year 2000 Approaches

Monitoring an organization’s efforts to ensure that its computer systems are ready will become even more critical as the year 2000 draws nearer. Specifically, SEC reports should include information on the systems critical to the continued functioning of the U.S. securities markets; the progress made in moving critical systems through the various phases of achieving Year 2000 compliance; the time frames required to complete each phase of the process; the efforts necessary to address systems that are behind schedule; and the contingency plans for systems that may not be ready in time. Such systems likely include those related to trading, clearing, and other functions important to market operations, as well as those used by major market participants.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Securities and Exchange Commission's (SEC) report on the status of its efforts to ensure that its computer systems, as well as those used by participants in the securities industry, are ready for the date changeover in the year 2000, focusing on: (1) SEC's June 1997 report on the status of year 2000 compliance by SEC, the securities industry, and public companies to identify any ways that future reports might be improved; (2) the adequacy of SEC's oversight of the year 2000 remediation efforts directed at its internal systems, self-regulatory organizations (SRO), broker-dealers, and other regulated entities; and (3) the guidance SEC has provided to public companies for disclosing year 2000 remediation efforts.

What GAO Found

GAO noted that: (1) SEC's first report in June 1997 provided an overview of the efforts that SEC and various industry participants had made to address year 2000 issues, but did not contain the specific, detailed information that Congress will need to assess progress as the year 2000 approaches; (2) according to an agency official, SEC had collected more detailed information from some market participants, such as SROs; (3) the official said that SEC did not include this information in the report because SEC had been focused on assessing the extent to which market participants were aware of the year 2000 problem and had begun taking steps to address it; (4) the Office of Management and Budget's (OMB) reporting format offers guidance on the type of detailed information SEC might provide Congress in future reports; (5) such information includes: (a) the systems considered critical to the continued functioning of the U.S. securities markets; (b) the progress made in moving these systems through the various phases of achieving year 2000 compliance; (c) the timeframes required to complete each phase; (d) the efforts necessary to address systems that are behind schedule; and (e) the contingency plans for systems that may not be ready in time; and (6) also, as the year 2000 approaches and less time to make adjustments is available, SEC's yearly progress updates may be too infrequent for congressional needs.