April 4, 2014
I believe the Commission has missed a great opportunity to develop a much more proactive strategy to protect customers with the funds established by the Dodd-Frank Act. I would like to see the Commission develop a more comprehensive and technologically-savvy customer protection program as part of its pending strategic plan.
Congress tasked the Commission with the responsibility to help protect customers from fraud and abuse in our markets by establishing a Customer Protection Fund, which now has a balance—nearly $275 million dollars—that exceeds the entire Commission budget. In fiscal year 2013, the Commission only spent approximately $1 million on the whistleblower program and customer education initiatives.
If permitted, this source of non-appropriated funding would allow the Commission the opportunity to make meaningful investments in technology and other initiatives that will have a real impact for customer protection and the future.
The Commission’s Office of the Inspector General (OIG) reiterated two years in a row that the most significant management challenges facing the Commission were (1) the efficient deployment of information technology resources and (2) expanding delivery of customer protection resources and consumer education.1 Accordingly, I have called upon the Commission to correct its mission priorities by tackling glaring shortcomings in Commission oversight and surveillance programs, which rely heavily on data and technology to be effective.2
For example, a better use of these funds would be automating the Commission’s tips and complaints intake function or investing in enhanced market surveillance and risk analytics that would help the Commission to identify and prevent outright fraud and abuse affecting customers, like the misappropriation of customer funds and subsequent failures of MF Global and Peregrine.
Moving forward, the Commission must take action to finally become a 21st century regulator that can keep up with market innovation and utilize technology to implement a more specific and targeted customer protection program. Given the unprecedented number of Ponzi schemes and other scams affecting consumers today, a more meaningful customer protection initiative—one that that properly leverages technology investments and the resources in the Customer Protection Fund—will better protect the American public from fraud and other abuses in our markets.
Last Updated: April 8, 2014