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Joint Hearing to Delve Into SEC’s Handling Of Conflicts Of Interest


Washington, Sep 20 -

Two congressional subcommittees will hold a joint hearing on Thursday to examine how the Securities and Exchange Commission (SEC) handled potential conflicts of interest involving David Becker, a former SEC general counsel who financially benefited from the Madoff Ponzi scheme.

The joint hearing will be held by the Financial Services Committee’s Oversight and Investigations Subcommittee and the Oversight and Government Reform Committee’s TARP, Financial Services, and Bailouts of the Public and Private Programs Subcommittee.

Earlier this year, press reports revealed that Becker was a beneficiary of his mother’s estate which included an investment account with Bernard Madoff’s investment company. Becker and other members of his family liquidated the account and realized a gain of approximately $1.5 million in fake profits before the Madoff Ponzi scheme collapsed in 2008. Upon joining the SEC as General Counsel in 2009, Becker played a role in developing the SEC’s position regarding how much compensation Madoff investors were entitled to under the Securities Investor Protection Act.  Becker’s work potentially affected how much money investors who realized gains—like himself—would have to give back to compensate those who lost their deposits.  The SEC’s Ethics Counsel authorized Becker to advise the SEC in spite of the potential conflict.

The hearing, entitled “Potential Conflicts of Interest at the SEC: The Becker Case,” will  also review what safeguards are in place at the SEC to avoid conflicts of interest. 

“While there are certainly questions about whether Mr. Becker should have been involved with these decisions in the first place because of his financial interest, this case is ultimately about the integrity of the decision-making process at the SEC,” said Financial Services Committee Chairman Spencer Bachus.  “A government official shouldn’t make decisions on behalf of the U.S. government when he or she has a financial incentive to act one way or the other.  The American people need to be able to trust that SEC officials are making decisions for the public good and not for personal gain.”

Oversight and Investigations Subcommittee Chairman Randy Neugebauer said, “The Becker matter raises serious questions about the decision making by senior management at the S.E.C.  The Commission holds companies and individuals to high standards of honesty, integrity, impartiality and conduct. This Committee expects the Commission to hold itself and its employees to those same high standards. This hearing will shed light on S.E.C. decision making related to the Becker matter and examine whether there needs to be process improvements at the Commission to vet conflicts of interest in a way that gives the public confidence.”

TARP, Financial Services Subcommittee Chairman Patrick McHenry said, “The SEC’s apparent inability to identify and address blatant conflicts of interest from one of its highest positions of authority – in the highest of profile cases – raises concerns about its management and capability to protect investors and maintain fair and orderly markets.”

The joint subcommittee hearing will take place on Thursday, September 22nd at 2 pm in room 2128 Rayburn.

Scheduled to testify:

Panel I:

Mary Schapiro, Chairman, Securities and Exchange Commission

H. David Kotz, Inspector General, Securities and Exchange Commission

Panel II:

David Becker, former SEC General Counsel