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SEC Improves Internal Controls

According to a recent Government Accountability Office (“GAO”) report, the Securities and Exchange Commission’s (“SEC”) internal controls are improving. In fiscal 2015, only six of the SEC’s 58 internal supervisory controls tested had deficiencies. Comparative to the GAO’s 2013 review, the six deficiencies mark a significant reduction from the 27 flaws identified in fiscal 2011.

The GAO noted that none of the flaws are likely to inhibit the SEC from ensuring their divisions and offices carry out actions accordingly. Specifically, the watchdog agency found two flaws without clear control activities, three that showed a major element did not align with current policy and practice, and one with documentation shortcomings. The GAO also recommended that the market regulator develop a working group for its internal control reviews to increase cross-division compliance.

Mandated by the Dodd-Frank Act, the GAO’s study of the SEC’s internal controls is required every three years. This year’s report is the second of its kind, and included a review of the of SEC’s Division of Corporation Finance, Division of Enforcement, Office of Compliance Inspections and Examinations, and Office of Credit Ratings.

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