Shivaram Rajgopal is the Roy Bernard Kester and T.W. Byrnes Professor of Accounting and Auditing at Columbia Business School; Roger M. White is an Assistant Professor of accounting at Arizona State University W.P. Carey School of Business. This post is based on a recent article by Professor Rajgopal and Professor White, forthcoming in the Journal of Law and Economics.
In March 2009, H. David Kotz, then Inspector General (IG) of the SEC, released a report outlining the questionable trading activity of two lawyers employed by the SEC’s enforcement division. IG Kotz admitted in subsequent testimony before Congress that the SEC lacked a compliance system capable of tracking and auditing employees’ trades [1]. This report and testimony, as well as the accompanying public outrage, spurred Mary Shapiro, then SEC Chairman, to impose new, stricter internal rules, beginning in August of 2010, whereby SEC employees must (i) refrain from buying or selling stocks of firms under SEC investigation; (ii) have their transactions pre-approved, and; (iii) order their brokers to provide transaction-level information to the SEC. [2]
