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Commission Integrity Program

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Commission Integrity Program

Audit Report No. 267
September 9, 1997

Executive Summary

The Securities and Exchange Commission’s Office of Inspector General (Office) conducted an ancillary study to a previous audit of the Commission’s integrity programs (i.e., ethics and staff conduct). In the original audit, successes, obstacles, recommendations, and effectiveness ratings related to the Commission’s integrity objectives were obtained through sixteen workshops involving approximately eight per cent of Commission employees. Audit workshops were conducted at headquarters and at five regional and district offices. The purpose of this analysis was to employ the same methodology at the remaining seven regional and district offices, and to therefore gain a more complete understanding of the degree to which the Commission’s integrity objectives are being implemented.

This study confirmed the conclusions drawn from the original audit that all supporting objectives are generally being implemented, although some obstacles are impairing full implementation. We believe that, taken as a whole, the Commission is achieving its primary objective to promote high individual and agency integrity.

Perhaps the most noteworthy finding was that, with almost no exceptions, the participants indicated that they felt a personal sense of responsibility for maintaining the integrity of the Commission. This is both critical and necessary for the primary integrity objective to be realized. Most of the participants also indicated that they felt a strong sense of an ethical tradition at the Commission and that the staff live up to the Commission’s integrity expectations. Workshop participants overwhelmingly reported that integrity is a high priority at, and an integral value of, the Commission. It is evident from all available evidence that Commission employees place a high premium on ethical integrity.

No significant differences among regional/district offices were evident from comparisons of their effectiveness ratings. The same holds true for comparisons between participants in this study (professional staff) and participants in the previous study (management, professional and support staff located in headquarters and the regions). The experience and values of Commission staff generally appear to be aligned.

The participants in the workshops also expressed a desire for better communication of policies from management; more frequent ethics training; readily accessible and understandable material concerning ethics and conduct issues; selective, responsive, and well-trained ethics advisors; and enhanced accountability for misconduct. The Office of Inspector General generally endorses these recommendations and made additional recommendations in audit report 250. Because of the congruity of the results of this analysis (267) with the previous audit (250), no additional recommendations were issued as a result of this study.

Neither review of the integrity program was prompted by complaints. Nor was either scheduled as part of a normal review cycle. In fact, a recent cyclical compliance audit by the Office of Government Ethics was extremely complimentary of the Commission’s Ethics Program. Integrity was chosen for evaluation because, as in most government agencies, staff integrity is critical and fundamental to achieving program goals (which, in the Commission’s case, aim to protect investors). It was not deemed necessary to wait for complaints to conduct the review.

The aim of the critique was to draw upon the knowledge and experience of staff and managers through a series of structured workshops. A recognized internal audit methodology (Control Self Assessment or CSA) was used to systematically collect this information. Using this technique, personal assessments of from Commission professional staff of how successfully the Commission achieves its integrity objectives were obtained.

Working with the Inspector General Office staff, management developed the primary objective of the programs:

Promote High Individual and Agency Integrity

Nine supporting objectives, reflecting the activities that make achievement of the primary objective more likely, were also developed by management.

Over 100 Commission staff participated in one of seven structured workshops. Workshops were conducted in each of seven selected district and regional offices and each group was comprised by a representative sample of professional staff. During the workshops, the participants:

Discussed the successes and obstacles for implementing each supporting objective,

Provided suggestions for improving accomplishment of each supporting objective, and

Rated how well the Commission achieved each supporting objective, as well as the level of attainment desired.

Successes, obstacles, recommendations, and ratings were recorded on worksheets and these were provided to participants to ensure that the worksheets accurately recorded the participants’ remarks. Both management and auditors analyzed the worksheets and identified trends and developed an action plan to enhance the program.

SCOPE AND OBJECTIVES

The primary objective of the audit was to determine the extent to which the Commission is achieving its integrity objectives. The review also sought to provide management with a better understanding of integrity objectives and recommend actions to increase the likelihood that their objectives would be achieved.

Promote High Individual and Agency Integrity

Nine supporting objectives, reflecting the activities that make achievement of the primary objective more likely, were also developed by management. They were:

CONDUCT OF MANAGERS - Ensure that the behavior of executives and managers reflects the SEC’s integrity values and principles and that they acknowledge their critical role in reinforcing these values with their subordinates.

ORGANIZATIONAL CLIMATE - Foster an organizational climate that promotes high standards of ethical behavior.

SENSITIVITY TO UNINTENDED CONSEQUENCES - Promote staff objectivity in their official interactions with the private sector to prevent unfair impact on persons outside the Commission.

LINK INTEGRITY TO PERSONNEL DECISIONS - Ensure that managers consider employees’ ethical behavior when deciding on their performance ratings, awards, promotions, selection to supervisory positions, or other personnel actions to reward behavior that furthers SEC integrity.

FAIR NOTICE OF CONDUCT PARAMETERS - Provide staff with fair notice of the parameters of acceptable and prohibited behaviors, along with information on the consequences of non-compliance.

DISCIPLINARY PROCESS - Deal with staff misconduct in a fair, consistent, and timely manner.

STAFF COUNSELING - Provide employees with an opportunity to obtain authoritative answers to ethics and integrity questions in order to enable them to make ethical decisions.

DISCIPLINARY PROCESS - Deal with staff misconduct in a fair, consistent, and timely manner.

INTEGRITY TRAINING - Promote staff awareness and commitment to integrity.

INTERNAL MANAGEMENT CONTROLS - Administer effective financial, administrative, and program controls to deter misconduct.

The field work was performed in July 1997 in accordance with generally accepted government auditing standards.

AUDIT METHODOLOGY

A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. A version of a private sector, internal audit methodology (Control Self-Assessment or CSA) was adapted for this purpose. The Institute of Internal Auditors has promoted the concept internationally for the last several years with outstanding results reported.

The premises for using this approach are common to many applications that use a team approach to decision making (e.g., teams can process more and more diverse information than an individual, employees are closer to the information needed than anyone else, staff can make a good system fail or vice versa, etc.).

Primary data collection was accomplished through seven workshops (105 staff or approximately 4% of Commission personnel participated in the workshops) in which the supporting objectives were discussed and anonymously rated. No document reviews or other audit tests were performed. The methodology provided perceptions and judgments about the success of the integrity program objectives Commission-wide, but will not support conclusions regarding any particular sub-unit of the Commission.

The CSA methodology used in the audit consists of four primary tasks: identify management objectives, convene workshops to discuss and rate each objective, evaluate the workshop data, and prepare an audit report. These audit steps are described in further detail in Appendix A.

A number of issues were raised in the workshops that were only tangentially related to integrity. These matters were referred to appropriate management and may form the basis for future audit work or investigations.

AUDIT RESULTS

Overall Results

Workshop participants anonymously rated how well the Commission achieved each of its nine supporting objectives. The rating scale used by the participants ranged from 7 (full implementation) to 1 (not being implemented in a meaningful manner). The effectiveness scale used is included in Attachment B (page 22 of this report). The composite ratings for how well the Commission actually achieved its nine supporting objectives were as follows:

CONDUCT OF MANAGERS - 5.1
ORGANIZATIONAL CLIMATE - 5.3
SENSITIVITY TO UNINTENDED CONSEQUENCES - 5.2
LINK INTEGRITY TO PERSONNEL DECISIONS - 4.7
FAIR NOTICE OF CONDUCT PARAMETERS- 4.0
DISCIPLINARY PROCESS - 4.6
STAFF COUNSELING - 5.6
INTEGRITY TRAINING - 4.3
INTERNAL MANAGEMENT CONTROLS - 5.1

The composite ratings of actual achievement by the participating professional staff indicate that all supporting objectives are generally being implemented, although some obstacles are impairing full implementation. We believe that, taken as a whole, the Commission is achieving its primary objective to promote high individual and agency integrity.

An important theme, expressed overwhelmingly by the participants, is the personal commitment of Commission employees to maintain the Commission’s high standards of integrity. Most of the participants also indicated that they felt a strong sense of an ethical tradition at the Commission and that the staff live up to the Commission’s integrity expectations. These factors are crucial to an effective integrity program and their existence is a powerful argument that management’s objectives are being achieved.

The participants in the workshops also expressed a desire for better communication from management; more frequent ethics training; readily accessible and understandable material concerning ethics and conduct issues; selective, responsive, and well-trained ethics advisors; and enhanced accountability for misconduct.

No significant differences among regional/district offices were evident from comparisons of their effectiveness ratings. The same holds true for comparisons between participants in this study (professional staff) and participants in the previous study (management, professional and support staff located in headquarters and the regions). The experience and values of Commission staff generally appear to be aligned.

Conduct of Managers

As in the original study, participants rated the conduct of managers as the most important of the nine supporting objectives. The bulk of the observations of managers’ behavior cited were positive (e.g., one participant felt managers tend to take the ethical "high road" to remove any doubt of unethical behavior in close calls). These observations support the Commission’s goal that managers should act as role models for their staff.

There was an overwhelming indication that, in spite of pressure to increase output, managers accurately reported workload and other management information. Overall, the bulk of the participants reported that integrity is a high priority at, and an integral value of, the Commission.

The participants generally believed that managers are strongly committed to the highest ethical standards and exhibit a high level of integrity. They also found that managers generally make appropriate, ethical decisions on a day-to-day basis.

The participants stressed the importance of communicating integrity goals, as well as policies and their rationale, to the staff and recommended that managers put forth their best efforts to do so. As in many large organizations, some participants inferred that some management decisions may have been based on favoritism or other non-meritorious reasons. Lack of communication was advanced by some as an explanation of why some personnel decisions (e.g., appraisals, promotions) appeared arbitrary. The need for a procedure to allow staff to voice disagreement with management was noted as an opportunity for improvement with relative frequency. There is also a need for management to improve communication with the staff and explain why one course of action was chosen over another, when appropriate.

There were also observations of managers who were selected as managers for reasons other than management skill (e.g., their legal skills) and who failed to deal effectively, or at all in some cases, with their supervisory responsibilities.

Organizational Climate

Overall, participants almost universally reported that the organizational climate of the Commission was very supportive of integrity. There was a strong perception among most participants that the staff live up to the Commission’s ethical expectations and that the ethical tone from the top is high. Additionally, participants generally agreed that Commission staff readily recuse themselves from matters in which they have a personal connection.

Several participants suggested that prestigious firms and former employees tend to receive faster service than small firms and people who have no previous association with the Commission. However, the participants raised several explanations, other than favoritism, to explain the phenomenon (e.g., better understanding of Commission rules and procedures allows some to profit from this knowledge). Significantly, there was general agreement that the ultimate outcome of a matter is not substantially changed by the status of the industry participant, rather that faster service received is the only benefit.

The participants strongly expressed their impression that there were double standards relating to time and attendance, dress codes, and travel policies. They also perceived that, based on their experience, the Commission had unwritten policies for promotions, bonuses, and performance criteria. There was limited discussion (and no conclusion) of whether decentralized administration of these policies could contribute to the appearance of arbitrariness to the staff affected.

Only a relatively small number of participants indicated that they had witnessed what they felt was "inappropriate" interference in their work by superiors. Many of these staff agreed that management did not explain their actions and that lack of communication could have been a factor.

Sensitivity to Unintended Consequences

The intent of this objective was to promote staff objectivity in their official interactions with the private sector to prevent unfair impact on persons outside the Commission.

External Impacts

Participants generally seemed well aware of the impact that their actions could have on the public. However, they also acknowledged that some consequences of their actions are unavoidable. For example, the Commission has a policy of giving no comments about on-going investigations to protect parties who are innocent of the allegations being investigated. However, the policy has the unintended consequence of allowing some investors, who call the Commission to check on the integrity of an investment’s management, to invest in ventures that the staff has evidence are fraudulent.

Many workshop participants were able to cite overt actions taken by the staff to avoid unintended consequences where mitigating actions were possible (e.g., taking testimony on Saturday to minimize cost to witnesses; narrowing document requests rather than making global requests for all documents; traveling to the witness location). Also, staff can now notify subjects named in the Action Memorandum that an investigation is being closed with no action.

Internal Impacts

Many Commission administrative policies were cited by participants as having an unintended impact on Commission staff. For example, several participants indicated that the number of cases brought was the only measure used for performance appraisals and promotion decisions. (Later discussions with management indicated that this is not the program policy.) The participants pointed to their perception of the policy as to why some staff are reluctant to take on cases that take a long time (i.e., are complex) and look for easy sanctions that will settle (as litigation takes too long and no "STATS " are given). Also, some participants felt that pressure to finish cases within in a given fiscal year in order to show higher workload numbers can result in hastiness and the overlooking of certain areas of an examinations that ordinarily would be more heavily scrutinized. However, most participants felt that the ultimate quality of examinations/investigations is not compromised. Lack of information about policies and their rationale were cited as a major part of the unintended impact of administrative policies on the staff.

Link Integrity to Personnel Decisions

Most participants felt that, although there is no specific performance standard for integrity, it is inherent in existing standards and is informally factored into performance appraisals. With regard to adding an explicit integrity performance standard, participants were divided on the issue. Many felt it would not be feasible since integrity is unremarkable and measuring it would be too subjective. Others felt that an explicit performance standard on integrity should be created, or at least that integrity should be discussed during performance appraisals.

Generally, participants felt that although no credit is given for ethical behavior, unethical persons would be removed from the Commission. Ethical behavior is a minimum expectation of staff conduct. Like coming to work on time, it is recognized but usually not explicitly rewarded.

Fair Notice of Conduct Parameters

With the exception of one office, all participants had received the Commission’s ethics manual. The ensuing discussions produced numerous constructive suggestions for improving the utility of the manual to the staff. Among these suggestions were: put it on the LAN with a key word search capability, put out a pamphlet summarizing the ethics manual, and better communicate changes in the Ethics Manual (perhaps via hard copy and InterNet/e-mail notice).

Most participants were not familiar with the Personnel Operating Policies and Procedures (POPPS) manual. The POPPS manual is the compilation of some of the administrative policies of the Commission. One participant was told by his/her supervisor that the manual was for management only and not available to staff. Although restrictions on the distribution of the POPPS manual are contrary to management’s stated objectives, most participants felt that they did have fair notice of acceptable and prohibited behaviors. In addition, almost none of the participants were aware of the existence of the Table of Penalties or its content. Together, these findings indicate that staff do not have "information on the consequences of non-compliance," which is part of the supporting objective.

Disciplinary Process

Participants generally agreed that they had a duty to report misconduct and they would make such referrals up the "chain of command". Moreover, they universally agreed on certain characteristics of a "fair" disciplinary process which included: due process, fair notice, impartiality, timeliness, confidentiality, and proportionality and consistency with regards to punishment.

Most participants had no knowledge of any Commission disciplinary actions. Recommendations included providing more information on the disciplinary process and its results to staff; tightening controls with regard to confidentiality; and creating a better system for taking action on small things in which the "whistleblower" is kept anonymous.

Staff Counseling

Staff counseling received the highest composite rating for actual effectiveness of all the supporting objectives evaluated by the participants. This was largely attributed to the effectiveness of ethics liaisons.

Ethics liaisons in the divisions and offices were the primary source of ethics advice for most participants and were generally held in high regard by the participants. Many participants had dealt with their ethics liaisons and experienced positive results. However, there were isolated comments regarding failure of an ethics liaison to respond to requests for information and discomfort of participants to discuss confidential matters with their ethics officer. Alternative sources of ethics advise included, Branch Chiefs, Assistant Regional Directors, the Office of Ethics Counsel, and other members of management staff.

Integrity Training

Most of the participants that joined the Commission within the last several years did not recall receiving integrity training at their first day orientation; only that they received the Ethics Manual. The last integrity (ethics) training most of the participants remember receiving was a video on negotiating employment. However, many participants felt that on the job training in integrity issues was received as needed and that integrity is generally fostered by the organizational climate at the Commission.

Most participants had favorable impressions of articles in the Employee News and memoranda on various integrity related topics.

During workshop discussions, the participants had numerous suggestions for improving integrity training. Suggested training methods included: more and higher quality video training; administering an ethics test to prospective employees; periodic lunches/meetings on integrity issues (e.g., outside employment, travel, staff securities trading, etc.); an ethical issues forum utilizing the workshop method; sexual harassment workshops; separate integrity training for regulation and enforcement; and a one day seminar on POPPS manual contents.

Internal Management Controls

Though no substantive control weaknesses were identified in the workshops, participants noted some minor areas where controls could be improved. For example, controls regarding the use of frequent flyer miles could be structured in a way that provides incentives to Commission staff to utilize the earned mileage rather than simply ignoring it.

Several controls were identified by some participants as being excessive or duplicative (e.g., securities holdings requirements, the extension of holding requirements to family members, duplication of the time-keeping process, workpaper rules, requiring transactions to be reported after getting permission from CRST, and financial reporting in both May and October).

At the request of the auditors, participants identified many risks that are inherent to Commission operations. Participants suggested several ways to increase the effectiveness and efficiency of financial reporting controls. There was also a criticism of the CRST system used to check on the allowability of proposed staff securities transactions.

[APPENDIX A]
CONTROL SELF ASSESSMENT METHODOLOGY

The Control Self Assessment (CSA) methodology used consists of four primary tasks: identify management objectives, convene workshops to discuss and rate each objective, evaluate the workshop data, and prepare an audit report.

Management Objectives

At the beginning of the audit, the OIG audit staff worked closely with management to develop concise objectives for the conduct and ethics programs. Examples of possible objectives were initially discussed in several joint meetings of management and auditors.

The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. For example, although financial disclosure is important, the Office of Government Ethics had recently conducted a compliance audit of the matter and so it was not selected. Management revised their objectives further based on experience gained in the pilot workshop, which consisted of staff from the ethics and staff conduct programs.

The primary integrity objective developed by management was:

Promote High Individual and Agency Integrity

Nine supporting objectives were also developed that reflect the activities that make achievement of the primary objective (i.e., to promote high individual and agency integrity) more likely.

CONDUCT OF MANAGERS - Ensure that the behavior of executives and managers reflects the SEC’s integrity values and principles and that they acknowledge their critical role in reinforcing these values with their subordinates.

ORGANIZATIONAL CLIMATE - Foster an organizational climate that promotes high standards of ethical behavior.

SENSITIVITY TO UNINTENDED CONSEQUENCES - Promote staff objectivity in their official interactions with the private sector to prevent unfair impact on persons outside the Commission.

LINK INTEGRITY TO PERSONNEL DECISIONS - Ensure that managers consider employees’ ethical behavior when deciding on their performance ratings, awards, promotions, selection to supervisory positions, or other personnel actions to reward behavior that furthers SEC integrity.

FAIR NOTICE OF CONDUCT PARAMETERS - Provide staff with fair notice of the parameters of acceptable and prohibited behaviors, along with information on the consequences of non-compliance.

DISCIPLINARY PROCESS - Deal with staff misconduct in a fair, consistent, and timely manner.

STAFF COUNSELING - Provide employees with an opportunity to obtain authoritative answers to ethics and integrity questions in order to enable them to make ethical decisions.

INTEGRITY TRAINING - Promote staff awareness and commitment to integrity.

INTERNAL MANAGEMENT CONTROLS - Administer effective financial, administrative, and program controls to deter misconduct.

The Workshops

This audit is intended as a supplement to a recently concluded audit of the Commission’s integrity program. In the original audit, sixteen workshops were convened by OIG personnel. The workshops were set up to be roughly representative of staff allocation within the Commission. For example, because about one-third of Commission staff work in the regions, five of the workshops were conducted with regional staff (the remaining eleven workshops at Commission headquarters). Accordingly, this audit sought to achieve a more representative sample by conducting workshops at the seven regional and district offices that were not subject to the original audit.

Prior to the workshops, each participant received a handbook which described what was expected and encouraged them to think about the management objectives in advance.

Three of seven workshops (those not previously visited) began with a 45-60 minute presentation on the work of the OIG. The workshops took from 4 to 6 hours to complete.

Two flip charts were used to summarize and record the 1) strengths and 2) weaknesses identified by participants for each objective. Participant recommendations were also solicited and recorded. Prior to the workshops, the auditors developed sets of questions that related to each objective. The questions gave structure to the discussions and facilitated the conduct of the workshops.

At the end of the discussion on each objective, participants were asked to use 4x6 inch cards to anonymously rate how well the management objective was achieved using a scale of 1 to 7. [Appendix B contains the rating criteria used by the participants.] The cards were passed down to one of the participants who read them out loud. Each anonymous rating was recorded on the flipchart. The average was then calculated by OIG staff using an Excel spreadsheet. This rating procedure was then repeated to rate how important (or desirable) the participants thought the objective was. Two ratings (i.e., actual and desired) were collected for each of the objectives.

During each workshop, the auditors typed the summary successes, obstacles, and recommendations from the flipcharts to a formatted word-processing document (one page per objective). Copies of the comment summaries were then mailed to each of the participants who were then asked to review the comments and verify their accuracy.

Data Evaluation

Quantitative Analysis

The anonymous assessment ratings of the workshop participants were keyed into an Excel spreadsheet for quantitative comparison and graphical presentation. Several comparisons (e.g., how well ratings aligned) were performed. These included analysis of actual versus desired performance and opportunities for improvement. The detailed graphs from the Excel software were shared and discussed with program management. Some of the graphs are also included in this audit report for illustrative purposes.

Qualitative Analysis

All of the successes, obstacles, and recommendations ("comments") from the workshop participants were recorded on worksheets and subsequently verified by the participants. Seventy-five "resulting issues" were identified by the audit staff by reading through all of the comments. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. Each comment retained a cross-reference code to its original workshop so that the context of the comment could be obtained, if required.

The seventy-five resulting issue worksheets were reviewed by both management and the auditors. Several meetings were held to discuss the issues and identify what actions could be taken to enhance the integrity program. These analyses were the basis for this audit report.

Although the scope of the audit was Commission-wide, the workshops also provided information with respect to individual organizational units. The worksheets (which did not associate individuals with their comments or ratings) were shared with the management of those units. Although many of the issues raised were outside of the scope of the audit, management indicated that they found the information extremely useful and had taken corrective actions in many instances. This information is also being used in the OIG’s risk assessments, used to select future audit topics.

Audit Report

Although the OIG drafted the audit report, discussions with management and their written comments were used to prepare it. This departure from the traditional comment process provided input at an earlier stage in the writing process. It also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets.

Participant ideas, expressed during the discussions preceding the preparation of the audit report, exceeded the expectations of the OIG. We believe that the content of the final report is superior to what it would have been if only comments on the report itself were received from management. We estimate that the process took about the same amount of time as the traditional comment approach.

[APPENDIX B]
RATING SCALES

Actual Effectiveness

7   The Commission is successfully implementing the supporting objective. Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective.

6   Midway between 5 and 7.

5   The Commission is generally implementing the supporting objective. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective.

4   Midpoint of the scale.

3   The Commission is generally not implementing the supporting objective. Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective .

2   Midway between 1 and 3.

1   The Commission is not implementing the supporting objective in a meaningful manner. Very limited successful actions for implementation exist and obstacles are so prevalent that the unit is significantly impaired from implementing the supporting objective.

Importance

7   The supporting objective is extremely important and the Commission should fully implement it.

6   Midway between 5 and 7.

5   The supporting objective is relatively important and it should be generally implemented at the Commission.

4   Midpoint of the scale.

3   The supporting objective is relatively unimportant and its general implementation should not be a high priority at the Commission.

2   Midway between 1 and 3.

1   The supporting objective is not important and should not be implemented at the Commission.

[APPENDIX C]

Recommendations Issued in Audit 250

Conduct of Managers

Recommendation A

The Office of Administrative and Personnel Management (OAPM) should modify management courses to instruct managers how to better communicate policies and the rationale for decisions to their subordinates, so that staff will be less likely to misconstrue their motives. Basic management techniques (e.g., how to motivate and relate to diverse staff) should also be included. OAPM should also consider ways in which sound communication can be made a performance standard for managers. Required management training courses should be expanded, if necessary.

Recommendation B

The Office of General Counsel, in conjunction with OAPM, should implement and publicize a two part procedure that allows staff to raise professional responsibility questions and other concerns to management’s attention without reprisal. First, staff should be strongly encouraged to direct their concerns or recommendations to their supervisors for discussion and resolution. Secondly, there should be a legitimate option for staff (before or after contacting their supervisors) to raise the issue directly to the Office of General Counsel (or Office of Chief Accountant if appropriate) without reprisal. The procedure should also recognize the existing laws and regulations that require staff to report instances of fraud, waste, or corruption (again without fear of reprisal) to management or the Office of Inspector General.

Recommendation C

The OAPM should publicize that the Suggestion Program will accept recommendations for general management improvements.

Recommendation D

OAPM should recommend that managers hold meetings, at least quarterly, with their staff to explain the rationale for major decisions and changes in policies and priorities.

Recommendation E

OAPM should work with selecting officials to place greater emphasis in rating plans on managerial skill (including the ability to communicate, delegate, and review work) and leadership. Management and leadership skills are more critical to managerial job success than technical and legal/accounting skills.

Organizational Climate

Recommendation F

The Office of General Counsel, in consultation with appropriate divisions and offices, should widely distribute an analysis of policies related to matters of concern expressed by workshop participants. Among the topics that should be included are:

Why defensive charges against Enforcement staff are settled separately from the securities violations,

The role of attorneys at the Commission (i.e., are they advocates for management’s positions or furnishing independent legal opinions)

Why there is no "representation section" in Action Memoranda to indicate who is representing whom, and

Considerations relating to recusal.

Recommendation G

In management training sessions, OAPM should address complaints of inconsistent interpretation and enforcement of administrative policies and reported poor communication of policy rationale by managers.

Recommendation H

The Division of Enforcement should establish a program in which Commissioners and senior Commission managers periodically visit regional and district offices to reinforce integrity policies.

Sensitivity to Unintended Consequences

Recommendation I

OAPM, in consultation with the Office of Investor Education and Assistance, should include the phone numbers of the Commission’s Office of Investor Education and Assistance, other consumer affairs offices, state securities commissions, and self-regulatory organizations prominently in the staff phone book (or on a sticker for the phone instrument) so staff can quickly refer calls from investors. There should also be a short list of rules on where to refer certain kinds of calls (e.g., inquiries about auditing rules) or what can be said (e.g., prohibition on referring investors to private law firms).

Recommendation J

The Office of Public Affairs should disseminate the Commission policy on dealing with press inquiries to the staff. It should also coordinate with the training programs in the Commission to include dealing with the press as a topic, where appropriate.

Recommendation K

The Division of Enforcement and Regional Directors should establish an instructional program in which young enforcement attorneys would tour the operations of cooperating broker-dealers and investment companies. The tours should focus on day-to-day operations and issues relevant to current enforcement priorities. Enforcement attorneys should be encouraged to participate in these sessions to get a broader understanding of the securities industry and referrals from OCIE.

Recommendation N

The Division of Enforcement should develop case studies and train staff in what can and cannot be disclosed to the public, other agencies, etc.

Recommendation L

The Division of Enforcement should issue a memorandum to all enforcement staff (division and regional) explaining the criteria that are used in judging staff performance. It should also review the performance standards of attorneys in the division and regions to ensure they recognize the quality of investigative work, and not just on the result of the investigation, as many staff believe.

Link Integrity to Personnel Decisions

Recommendation M

In consultation with the OAPM, OGC, EEO, and OIG, the Executive Director should periodically (e.g., annually) publish an analysis of disciplinary penalties imposed for staff misconduct for Commission staff. The analysis should include a rough outline of the charges and associated penalties, but carefully avoid disclosing the identity of the subject or reveal identifying details.

Fair Notice of Conduct Parameters

Recommendation N

The Office of Ethics Counsel should notify staff and management of the ethics bulletin board and its goals. Division and office management should be contacted to solicit their involvement in using the bulletin board to transmit ethics information tailored to their staff.

Recommendation O

OAPM should notify managers and staff that staff have full access to the POPPS by all staff members is permitted.

Recommendation P

The Office of Executive Director, in conjunction with OAPM and the Comptroller should develop and implement an effective means of timely answering administrative questions from the staff and managers. Workshop participants suggested several approaches to the problem including a neutral person who would act as a staff representative to answer question about administrative rules, establishing an administrative duty officer of the day, or an administrative hotline that staff could call for interpretation of administrative matters. Another approach may be to use an E-Mail address to which staff could write administrative questions or seek interpretations of rules; an assigned person would forward each question daily to the appropriate official for a timely response.

Recommendation Q

The Office of Ethics Counsel should consider the revisions to the Ethics Manual suggested by workshop participants discussed above. The Office of Ethics Counsel should also assist divisions and offices to document any ethics standards tailored to their specific organization.

Recommendation R

OAPM should complete its restructuring and improvement of the POPPS manual to simplify its style and make it easier to locate information.

Recommendation S

OAPM should complete its restructuring of the POPPS manual to simplify its style and make it easier to locate information.

Recommendation T

In conjunction with the Office of Ethics Counsel, OAPM should complete its plans to reconsider the orientation program for new employees, with the intention of following up with a more in-depth ethics/integrity presentation within a few months. This effort should be coordinated with the development of the Employee Handbook.

Recommendation U

OAPM and the Office of the Comptroller, in conjunction with the Office of Information Technology, should make the POPPS, Time and Attendance, and Travel manuals available on the Commission’s LAN to ensure staff access. When these manuals are available on the LAN, the staff should be notified.

Disciplinary Process

Recommendation V

OAPM should prepare sample supervisory performance standards for various grade levels and encourage their use throughout the Commission. The sample standards should emphasize that managers are held accountable for their supervisory performance, as well as the performance of their programs.

Staff Counseling

Recommendation W

In order to provide more consistency, the Ethics Office should provide regular formal training for ethics liaisons and their deputies.

Recommendation X

The Office of Ethics Counsel should provide staff with an explanation of the extent to which conversations with liaisons are confidential and the extent to which their advice can be relied upon.

Integrity Training

Recommendation Y

The Office of Ethics Counsel, in conjunction with OAPM, should develop periodic (e.g., annual) integrity training for Commission staff. The offices should consider incorporating the topics and methods suggested by workshop participants, noted above.

Recommendation Z

The Office of Ethics Counsel should approach each division and office and urge them to include customized integrity training as a part of their program training sessions. This might also entail The Office of Ethics Counsel providing technical assistance to the division or office in preparing the content of the integrity portions.

Recommendation AA

OIT and the Office of Ethics Counsel should implement the ethics library on the LAN, as soon as possible.