It's been five years since Congress first authorized the SEC
to send fines and restitution money back to those people scammed by securities fraud, and the agency appears to have decided that current progress is inadequate.
A small chunk of the Fair Funds includes restitution and fines to be returned to the victims of market timing and late-trading in mutual funds. However, the bulk of the funds come from fines for other types of securities fraud.
In testimony Wednesday before the Senate subcommittee on financial services and general government, SEC chairman Christopher Cox
announced the creation of a new agency office to return financial fraud victims' money, specifically the Fair Funds. He also unveiled Phoenix
, a new information system to support the new office.
According to Cox, returning all the money "will require a sustained effort within the commission to train professionals ... to develop consistent practices and to routinize the execution of the Fair Funds function." He even admits that the SEC has done a sub-par job so far.
"Too much money is still undisbursed," Cox told the subcommittee, "because of the complexities of the process, leaving investors uncompensated."
Cox also revealed that the SEC is working with the Bureau of the Public Debt to invest the money so as to earn interest while it is waiting to be distributed.
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