Under TOP,  FMS identifies federal payments, such as tax refunds, that are owed to  individuals and applies the payments to their outstanding debt. SEC and CFTC Have Taken Steps to Improve Their Collection Programs, but SEC Has Not Ensured That All Eligible Cases Are Referred to FMS and TOP

SEC and CFTC have taken actions to improve their collection programs,  addressing the three recommendations in our 2001 fines report. In contrast, SEC did not have a formal  strategy for referring pre-guidelines cases and, further impeding its  collection efforts, it did not have a reliable agencywide system for tracking  monies owed in these cases. However, it  has not established a time frame for fully implementing the computer  system for the second phase of the plan. According to an agency official, the  guidelines went into effect agencywide on September 2, 2002. It was too early to fully assess the effectiveness of SEC’s strategy for  tracking, collecting, and referring post-guidelines cases, because most of  these cases were not yet 180 days delinquent. Recognizing that the agency did not have a system that provided an  accurate assessment of levied amounts and payments (among other  things), SEC developed a draft action plan for implementing a new system  to replace DPTS. The collection rates for closed cases (cases with a final  judgment order for which all collection actions were completed) for SEC,CFTC, and the SROs from January 1997 to August 2002 showed that the  regulators collected most of the fines imposed. Broadening the analysis to  include open cases (cases with a final judgment order that remained open  while collection efforts continued) had the greatest impact on SEC’s and  CFTC’s collection rates because of a few large uncollected fines. Collection Rates Can Be Influenced by Factors That Are Beyond Regulators’ Control

Collection rates are the most widely available—and in some cases the  only—measure of regulators’ success in collecting fines for violations of  securities and futures laws. Additional GAO contacts and staff acknowledgments are listed in appendix  V.

Scope and Methodology

To evaluate SEC’s and CFTC’s actions to improve their collection programs,  we assessed their responses to our 2001 recommendations that (1) SEC  take steps to ensure that regulations allowing SEC fines to be submitted to  TOP are adopted; (2) SEC continue to work with FMS to ensure that  compromise offers presented by FMS are approved in a timely manner; and  (3) CFTC take steps to ensure that delinquent fines are referred promptly to  FMS, including creating formal procedures that address both sending debts  to FMS within the required time frames and requiring all of the necessary  information from the Division of Enforcement on these debts.
Why GAO Did This Study

Collecting fines ordered for violations of securities and futures laws helps ensure that violators are held accountable for their offenses and may also deter future violations. The requesters asked GAO to evaluate the actions the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have taken to address earlier recommendations for improving their collection programs. The committees also asked GAO to update the fines collection rates from previous reports.

What GAO Found

SEC and CFTC have improved their collection programs since GAO issued its 2001 fines report. While it was too early to fully assess the effectiveness of their actions, SEC could be doing more to maximize its use of Treasury's collection services. SEC has implemented regulations, procedures, collections guidelines, and controls for using the Treasury Offset Program (TOP), which applies payments the federal government owes to debtors to their outstanding debts. However, SEC has been focusing on referring to TOP those delinquent cases with amounts levied after its new collections guidelines went into effect. The agency has not developed a formal strategy for referring older cases, reducing the likelihood of collecting monies on what could be more than a billion dollars of delinquent debt. Further impeding collection efforts, SEC does not have a reliable system for tracking monies owed on these older cases and therefore could not determine which cases were not being referred to TOP. SEC has drafted an action plan for a new system to track all cases with a monetary judgment. Once the system is in place, the agency should have a tool for identifying all cases, including older delinquent cases that can be referred to TOP. However, SEC has not established a time frame for fully implementing the plan. GAO's calculations for closed cases (collection actions completed) showed that regulators' collection rates on fines imposed between 1997 and August 2002 equaled or exceeded those from 1992 to 1996. Recalculating the rates to include closed and open cases (collection actions ongoing) affected SEC's and CFTC's collection rates, primarily because of a few large uncollected fines.