Corporations and securities brief ~ GAO tells SEC to improve funds oversight

[JURIST] Leading Monday's corporations and securities law news, the US Government Accountability Office (GAO) [official website] has released a report urging the Securities and Exchange Commission [official website] (SEC) to improve its oversight of the mutual funds industry. The report [abstract, text] found that though the SEC commits substantial resources to regulating mutual funds, it does not effectively monitor the individual funds. It specifically said that the SEC focuses too much on perceived "high-risk" funds, has not improved on coordinating its investigations since 1991, does not adequately record examinations, and does not perform uniform, written examinations. The report also warned that the SEC does not have enough examiners devoted to mutual funds and that those examiners are likely to be strained further by the growing hedge fund industry. The report was presented by congressmen Paul Kanjorski (D-Pa.) and Barney Frank (D-Mass.), who urged that the SEC adopt the reports recommendations. MarketWatch has more.

In other corporations and securities law news...

  • Another employment practice trial for Wal-Mart [corporate website] has begun in California. The lawsuit alleges that over 100,000 Wal-Mart employees were forced to miss their lunch breaks or were not paid overtime for working through their breaks, in violation of California labor laws. A jury in Oregon returned a verdict of $2000 for each of 87 defendants in a similar trial last year. The plaintiffs' attorney began the trial by saying in his opening statement that "Wal-Mart is a huge company with staggering profits earned on the backs of the working class." Wal-Mart's attorney did not present an opening statement. The jury in the trial will consider the lunchtime claims and the judge will rule separately on overtime claims. Wal-Mart has dozens of similar lawsuits pending around the country. Bloomberg has more.

  • As reported earlier in JURIST's Paper Chase, SEC chairman Christopher Cox [Wikipedia profile] has said that the agency plans to increase its scrutiny of hedge funds. In an interview [subscription required] with the Wall Street Journal, Cox said that the SEC will implement a controversial rule [text] compelling hedge fund managers to register with the SEC by February 2006. The quickly growing hedge fund industry has come under greater scrutiny recently after the high-profile collapse of Bayou Management [JURIST coverage]. Reuters has more.

  • Also as reported earlier in JURIST's Paper Chase, two ex-Tyco International executives have been sentenced to lengthy prison terms for their roles in fleecing Tyco of hundreds of millions of dollars. Former CEO Dennis Kozlowski [Wikipedia profile], 58, and former CFO Mark Schwartz, 45, were each sentenced to 8 1/2 to 25 years in federal prison and ordered to pay restitution of $134.3 million to Tyco. Kozlowski was also ordered to pay a $70 million fine and Schwartz a $35 million fine. The judge also denied the men's request to be free until their appeal. The men were convicted of over twenty felonies [JURIST report] earlier this year after a judge initially declared a mistrial in 2004. Bloomberg has more.

 

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