GAO Report: SEC Staff Procedure Assessments Need Improvement

GAO-26-107823 Published: Mar 27, 2026. Publicly Released: Mar 27, 2026.

Fast Facts

The Securities and Exchange Commission oversees financial markets. SEC must annually assess the effectiveness of its controls for supervising staff, as well as the procedures that staff must follow to conduct investigations, examinations, and filing reviews.

But we found that these assessments could be improved. For instance, SEC did not always apply specific, measurable testing standards—which would reduce the need for evaluators to use professional judgment to interpret ambiguous evidence. Such standards would help SEC staff draw clearer and more objective conclusions.

We made 6 recommendations to improve these assessments.

Highlights

What GAO Found

Section 961 of the Dodd-Frank Wall Street Reform and Consumer Protection Act directs the Securities and Exchange Commission (SEC) to annually assess and report on (1) internal supervisory controls to oversee the work SEC staff perform and (2) procedures staff must follow in performing examinations, investigations, and securities filing reviews. Effective supervisory controls and staff procedures help ensure that SEC’s Divisions of Corporation Finance, Enforcement, and Examinations, and Office of Credit Ratings conduct their work with competence and integrity.

GAO determined that SEC’s framework for assessing the effectiveness of internal supervisory controls aligned with federal internal control standards. GAO also found that in fiscal year 2024, SEC’s three divisions and one office implemented processes generally consistent with this framework.

However, GAO identified needed improvements:

• The Division of Enforcement did not always apply specific, measurable testing standards to evaluate whether controls were operating effectively. Using such standards would reduce the need for evaluators to use professional judgment to interpret ambiguous evidence, enabling them to draw clearer and more objective conclusions.
• The Division of Corporation Finance did not have documented controls for supervisors to verify how staff conducted filing reviews. Instead, supervisors used undocumented oversight protocols. Establishing and using documented supervisory controls is important for ensuring consistent application of guidance and improving the quality of information available to investors. GAO found that the divisions’ and office’s assessments of staff procedures generally were consistent with applicable SEC guidance. However, the Division of Enforcement and the Office of Credit Ratings did not document several assessment steps in their plans, as SEC guidance recommends. Doing so would help communicate responsibility for the assessment and retain organizational knowledge.

SEC’s section 961 Working Group—a staff-level coordination group for section 961 compliance—updated its guidance to encourage the divisions and office to adopt a framework for monitoring and revising staff procedures and to evaluate that framework. Adopting and evaluating such frameworks would help the divisions and office better identify and revise ineffective staff procedures.

As encouraged by the 961 Working Group, the Division of Examinations performed an evaluation for the fiscal year 2024 assessment, but the other divisions and office did not. As a result, they missed opportunities to help ensure that SEC carries out its examinations, investigations, and filing reviews consistently.

Why GAO Did This Study

Section 961 of the Dodd-Frank Wall Street Reform and Consumer Protection Act contains a provision for GAO to report on SEC's internal supervisory control structure and staff procedures at least every 3 years.

Among its objectives, this report examines the extent to which SEC in fiscal year 2024 (1) assessed the design and operating effectiveness of its internal supervisory controls, and (2) assessed the effectiveness of its staff procedures.

GAO analyzed SEC’s policies and guidance for conducting section 961 assessments and developing and monitoring staff procedures, reviewed records supporting the fiscal year 2024 assessment processes, and interviewed SEC officials.

Recommendations

GAO is making six recommendations to SEC, including to improve testing of controls, require documented supervisory controls to verify how staff conduct filing reviews, and update staff procedure assessment plans to reflect the latest guidance of the SEC working group. SEC agreed with the recommendations and plans to implement them.

Recommendations for Executive Action

| Agency Affected | Recommendation | Status |
| --- | --- | --- |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Director of the Division of Enforcement test the operating effectiveness of internal supervisory controls using specific, measurable testing standards. (Recommendation 1) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Director of the Division of Corporation Finance document policies for delegating control activities to second-level reviewers and provide guidance for second-level reviewers to perform their responsibilities during filing reviews. (Recommendation 2) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Director of the Division of Corporation Finance establish and document one or more controls for supervisors to check how staff conduct filing reviews and test the design and operating effectiveness of the control(s) for the section 961 assessment. (Recommendation 3) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Directors of the Division of Enforcement and Office of Credit Ratings update their respective written plans for assessing staff procedures to include all recommended elements of the Reference Guide for Compliance with Section 961 of the Dodd-Frank Act. (Recommendation 4) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Directors of the Division of Enforcement, Division of Corporation Finance, and Office of Credit Ratings update their written plans for assessing staff procedures to include an evaluation of their respective staff procedure development frameworks. (Recommendation 5) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
| United States Securities and Exchange Commission | The Chairman of SEC should ensure that the Directors of the Division of Enforcement, Division of Corporation Finance, and Office of Credit Ratings evaluate their respective staff procedure development frameworks for the section 961 assessment. (Recommendation 6) | Open When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |

Full Report

View Full Report Online

Highlights Page (1 page)

Full Report (37 pages)

GAO Contacts

Michael Clements Director Financial Markets and Community Investment clementsm@gao.gov

Media Inquiries

Sarah Kaczmarek Managing Director Office of Public Affairs media@gao.gov

Public Inquiries

Contact Us

Topics

Government Operations Financial instruments Internal controls Compliance oversight Criminal investigations Credit ratings Agency evaluations Risk assessment Consumer protection Policies and procedures Federal agency accounting systems