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Thursday, July 09, 2009

SEC's First Top Compliance Inspector Departs For 'New Challenges'

Reported by Neil Anderson, Managing Editor

The SEC's first director of the Office of Compliance Inspections and Examinations is about to leave. On Wednesday the regulatory agency revealed that Lori Richards will step down on August 7 after 14 years at the helm of the OCIE. OCIE associate director and chief counsel John Walsh will step in as acting director of the unit, which runs the SEC's examination oversight programs for mutual funds, as well as for broker-dealers, clearing agencies, credit rating agencies, hedge fund managers, investment advisors, self-regulatory organizations, trading markets and transfer agents.

Richards, who previously spent nine years in SEC enforcement in the Los Angeles office and a year as a senior adviser to chairman Arthur Levitt, first took over the OCIE in 1995 upon its creation for Levitt. She is no stranger to the mutual fund world: In 2005 in response to a GAO report critical of the SEC's examination of mutual funds, Richards stated that it was "not possible for the SEC to conduct comprehensive, timely, routine examinations of every registrant."

Richards provided few hints as to her plans going forward.

"After 14 years leading the SEC's exam corps and more than two decades at the SEC, I've decided to take on new challenges," Richards stated.

In an interview with the Wall Street Journal's Kara Scannell, Richards said that she had been contemplating moving on "for some time" and that her choice was unrelated to the Bernie Madoff scandal (and the subsequent accusations of ball-dropping leveled at the SEC).

Yet, according to the WSJ, the SEC's inspector general is due next month to release a report on the Madoff scandal, and the WSJ expects the OCIE and the enforcement group to both catch official flak in the report.

Press Release

Washington, D.C., July 8, 2009 Ė The Securities and Exchange Commission announced today that Lori A. Richards, Director of the SECís Office of Compliance Inspections and Examinations (OCIE), plans to leave the agency after more than two decades of government service.

Ms. Richards has been the Director of OCIE since it was created by Chairman Arthur Levitt in May 1995. As its Director, Ms. Richards managed the SECís nationwide examination oversight programs for investment advisers, hedge fund managers, mutual funds, broker-dealers, clearing agencies, transfer agents, trading markets, self-regulatory organizations and credit rating agencies. She spearheaded numerous examination initiatives, including targeted examination sweeps focused on emerging compliance risks, as well as routine, cause, and other examination reviews of industry firms for compliance with the law.

Ms. Richards created a risk assessment function and program in OCIE, and led efforts to enhance the surveillance and oversight of SEC-registered firms. To foster stronger compliance in the securities industry, under her leadership OCIE created the CCOutreach program and issued ComplianceAlerts and numerous public reports describing compliance practices in the securities industry. She upgraded training for the SECís examiners and helped to improve the use of technology in the SECís oversight of the securities industry.

During her tenure, she helped the agency identify and address a wide range of compliance issues, including abusive trading by exchange specialists, shortcomings in credit rating agencies practices and disclosures, conflicts of interest by pension consultants, asset valuation problems, insider trading, sales of securities to seniors at ďfree lunchĒ seminars, soft dollars, gifts, gratuities and other undisclosed business arrangements, mutual fundsí payments for ďshelf spaceĒ and many more issues.

Prior to becoming the Director of OCIE, Ms. Richards was Executive Assistant and Senior Adviser to Chairman Arthur Levitt on policy and legal matters affecting the SEC. Prior to that, she was Associate Regional Administrator for Enforcement in the SECís Los Angeles Regional Office, and held other positions in the SECís Enforcement Program in Los Angeles from 1985 through 1994.

ďLori is known widely for her passionate and tireless service to the agency,Ē SEC Chairman Mary Schapiro said. ďIíve had the honor and privilege of knowing and working with Lori for many years, and have always appreciated her dedication, leadership and integrity. I respect her decision to leave the SEC and am grateful for her many years of public service.Ē

Ms. Richards said, ďIím honored to have been part of the SEC team, and to have had the opportunity to work for American investors. Iím enormously proud of the dedication and professionalism of the men and women in the SECís examination program across the country, and of the important work we did together. After 14 years leading the SECís exam corps and more than two decades at the SEC, Iíve decided to take on new challenges.Ē

Ms. Richards received Presidential Rank Award for Distinguished Service in 2001 (the highest civilian award in the federal government), and the Presidential Rank Award for Meritorious Service in 1997. She received the SECís Distinguished Service Award in 2008 (the SECís highest award), and the Irving Pollack Award in 1992. She has a J.D. from Washington College of Law, and a B.A. in Political Science from Northern Illinois University.

OCIE Associate Director-Chief Counsel John Walsh will serve as Acting Director of OCIE when Ms. Richards steps down on August 7. Mr. Walsh is a 20-year veteran of the SEC, including service in the Office of General Counsel, the Division of Enforcement, and as Special Counsel to Chairman Arthur Levitt. He has been a member of OCIEís staff since its creation in 1995. 

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