In a hearing which exposed failures by the government's financial police, Congressman Stephen Lynch (D-Massachusetts) highlighted the existence of a "hotline," which he said could be used by Wall Street firms to call off government inspectors. The existence of a "hotline" has been confirmed by the Securities and Exchange Commission (SEC), though its purpose has been disputed.
[...]
During the hearing, Congressman Lynch said that current and former SEC employees complained to him about the existence of a "hotline" used by Wall Street firms to call directly to top SEC officials to "stop an investigation or slow it down."
"The other thing that I keep hearing from some current SEC and former SEC is that there is a hotline. I was told that senior SEC management had actually gone to a financial services industry conference and basically said to the firms out there 'If you feel that you are being too aggressively investigated, then I want you to call this office,'" Lynch said.
The piece goes on:
A February 2005 speech by then director of the SEC Office of Compliance Inspections and Examinations (OCIE) Lori A. Richards before an industry conference appears to back up Lynch's statement.
"One unrelated final note I want to mention, we've implemented what we call the 'Exam Hotline.' The Exam Hotline will be dedicated to receiving calls from members of the regulated community who have a complaint or a concern about an SEC examination," Richards said to the Investment Adviser Compliance Best Practices Summit, adding "if a member of the regulated community has a complaint or a concern about an examination, they should know where to call for immediate attention."
Lynch said the existence of the hotline sent a message to SEC officials. "And I know that these employees took that message as meaning 'we've gotta back off a little bit' and that senior management at the SEC was actually captured by the industry and that it wasn't doing the intense investigating that we would expect from them," he said.
This would explain a lot.
