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SECURITIES AND EXCHANGE COMMISSION STATION PLACE

, 00 F STREET, N E

WASHINGTON, DC 20549·2736

Office of Freedom of Information & Privacy Act Operations

July 1, 2010

Ms. Anne Weismann CREW

1400 Eye Street, NW, Suite 450 Washington, DC 20005

Re: Freedom of Information Act (FOIA), 5 D.S.C. § 552 Request No. 10-04442-FOIA

Dear Ms. Weismann:

This letter is a partial response to your request, dated February 19, 2010, and received in this office on February 22, 2010, for the following information concerning post-Madoff reforms:

1. Documents sUfficient to show all steps the SEC has taken since December 11, 2008 to implement policies that require each investment advisor to hire an independent public accountant to conduct annual "surprise exams" of the investment adviser's books;

2. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to implement policies that require each investment advisor to hire an independent third party to assess the steps the adviser has taken to ensure his/her clients' investments are safe;

3. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to strengthen oversight of "back office" personnel at broker-dealer firms, and raise the professional standards required of such personnel;

4. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to improve communication and coordination between the Office of Compliance, Inspections and Examinations and the Enforcement Division;

5. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to improve communication and coordination between the central office and the regional offices;

Ms. Anne Weismann July 1, 2010

Page 2

10-04442-FOIA

6. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to establish procedures requiring supervisors to take action against firms that intimidate or interfere with the work of examiners;

7. Documents sufficient to show all steps the Enforcement Division has taken since December 11, 2008 to implement policies ensuring investigators understand what information provided by their targets needs to be corroborated by independent third parties such as the Financial Industry Regulatory Authority and the Depository Trust Company;

8. Documents sufficient to show all steps the SEC has taken since December 11, 2008 to implement procedures ensuring better communication and information sharing between the SEC and other financial regulators such as the Federal Reserve, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission, and the Office of the Comptroller of the Currency.

We note that you have not requested all documents regarding these changes, and we have endeavored to select the documents that best show the steps the Commission has taken in the areas you have identified.

In response to Nos. 1 and 2 of your request, we refer you to the publicly available information located at the following Commission websites:

• http://www.sec.gov/news/press/2009/2009-109.htm

• http://www.sec.gov/rules/proposed/2009/ia-2876.pdf

• ~~tp://www.sec.gov/news/speech/2009/spch051409mls.htm

• http://www.sec.gov/news/press/2009/2009-269.htm

• http://www.sec.gov/rules/final/2009/ia-2968.pdf

In response to No.3 of your request, access is granted to the attached correspondence between the Commission and FINRA dated April 24, and August 17, 2009. We also refer you to publicly available information located at http://www.finra.org/newsroom/newsreleases/2010/p121530, and http://sec.gov/news/speech/2009/spch102809drng.htm.

Ms. Anne Weismann July 1, 2010

Page 3

10-04442-FOIA

In response to Nos. 4 and 5 of your request, we refer you to publicly available information located at the following Commission websites:

• Speech by SEC Staff: Remarks at the 2009 NSCP Nationa] Meeting, by John Walsh, then Acting Director of OCIE, can be located at http://www.sec.gov/news/speech/2009/spch100S09jhw.htm

• Testimony Concerning the SEC's Failure to Identify the Bernard L. Madoff Ponzi Scheme and How to Improve SEC Performance, located at http://www.sec.gov/news/testimony/2009/ts091009rk-jw.htm. Section B in this testimony addresses improving conununication and coordination between the exam program and the Division of Enforcement and with other SEC offices and divisions.

• Speech by SEC Chairman: 'Looking Ahead and Moving Forward'," SEC Speaks, February 5, 2010, which can be found at http://www.sec.gov/ncws/speech/2010/spch020510mis.htrn and

• Chairman Schapiro's speech at the October 27, 2009, SIFMA Annual Conference entitled, "The Road to Investor Confidence," which can be located at http://www.sec.gov/news/speech/2009/spchl02709mls.htm

In response to No. 7 of your request access is granted to the attached notice. The Division of Enforcement conducted training on this SUbject on March 31, 2010, and April 21, 2010. The training was mandatory for all Enforcement attorneys, accountants and paralegals.

In response to No.8 of your request we refer you to a Memorandum of Understanding located at htlp://www.sec.gov/info/municipal/sec-irs-mou030210.pdf. There is additional publicly available information located at the following Commission websites:

• http://www.sec.gov/news/press/2009/2009-190.pdf - press release concerning first ever joint meetings of the SEC and CFTC concerning harmonization of securities and futures regulation; and

Ms. Anne Weismann July 1, 2010

Page 4

10-04442-FOIA

• http://www.sec.gov/news/press/2009/20Q9-218.htm - press release announcing the joint sec/cftc report concerning harmonization of regulation.

With respect to the records provided in response to No.7, certain personal information is being withheld pursuant to 5 U.S.C. § 552(b) (6), 17 CFR § 200.80(b) (6). Under Exemption 6 the release of the redacted information would constitute a clearly unwarranted invasion of personal privacy.

You have the right to appeal our decision to our General Counsel under 5 U.S.C. § 552(a) (6), 17 CFR § 200.80(d) (5) and (6). Your appeal must be in writing, clearly marked "Freedom of Information Act Appeal," and should identify the requested records. The appeal may include facts and authorities you consider appropriate.

Send your appeal to the FOIA/Privacy Act Office of the Securities and Exchange Corrunission located at Station Place, 100 F Street NE, Mail Stop 2736, Washington, D.C. 20549, or deliver it to Room 1120 at that address. Also, send a copy to the SEC Office of the General Counsel, Mail Stop 9612, or deliver it to Room 1120 at the Station Place address.

We are still consulting with other Commission staff regarding additional information that may be responsive to your request. We will advise you of our findings as soon as we receive a response.

In the interim, if you have any questions, please contact me by email at sifordm@sec.gov or by telephone at (202) 551- 7201. If you cannot reach me please contact Ms. Celia Winter by calling (202) 551-7900 or by sending an e-mail to foiapa@sec.gov.

Sincerely,

Mark P. Siford

FOIA/Privacy Act Attorney Advisor

Enclosure

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

DIVISION OF TRADING AND ... AIlKETS

April 24, 2009

Richard G. Ketchum

Chairman and Chief Executive Officer FINRA

1735 K Street, NW Washington, DC 20006

Re: Regulation of Back-Office Personnel

Dear Mr. Ketchum:

As you know, the regulation of associated persons historically has focused on "frontoffice" personnel who have contact with.customers or are otherwise directly involved in effecting securities transactions. Persons who perform so-called "back-office" functions, including recordkeeping, trade confirmation, trade settlement, internal audit and similar responsibilities, however, also play an important role in the business of a registered brokerdealer. Given the growing complexity of the industry and the importance of the services provided by back-office personnel, we are concerned about the potential for regulatory gaps in this area. We believe a substantial first step in the effort to avoid such gaps would be for FlNRA to review the licensing and education requirements for back-office employees who have a meaningful touch on a client's funds or account or securities transactions, with a view to possible enhancements of regulation as appropriate.

We look forward to working with you On this important initiative.

Sincerely,

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Erik R. Sirri

Director

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Financial Industry Regulatory Authority

Marc Menchel Executive Vice President and General Counsel

August 17, 2009

Daniel Gallagher Acting Co-Director

Division of Trading and Markets Securities and Exchange Commission 100 F Street, NE

Washington, DC 20549

Re: Registration of Back-Office Associated Persons of Broker-Dealers

Dear Mr. Gallagher:

This is in response to Former Director Sirri's letter of April 24, 2009 in which he requested that FINRA consider the registration of associated persons of broker-dealers conducting back-office functions.

Subsequent to that letter, and in intervening conversations with Commission Staff, we proposed to have associated persons who manage the following functions register in either a principal or other supervisory capacity for the following functions:

Quasi-revenue producing areas (i.e., trade and sales support roles)

Software development (Trading systems)

Account Management

Posting entries to the books and records of the firm

Handling physical securities/cash or move securities/cash into special reserve bank account

Securities movement between depositories

Securities Pricing

Product development

Operation of a business unit (where compensation is tied directly to the unit's revenue)

Investor protection. Market integrity.

1735 K Street. NW Washington. DC 20006-1506

t 202.728.8410

f 202.728.8264- marc.menchel@finra.org www.finra.org

In further conversations with Commission Staff, it was requested that FlNRA consider registration beyond the level of supervisory capacity and submit a letter outlining our intended action plan towards development of the registration of associated persons. We are pleased to submit this letter in response to that further request.

FINRA. believes the following steps should be taken in consultation with industry groups, other interested constituencies and our Board Committees to determine:

1. that the scope of activities set forth above presents the correct area of coverage for back-office activities (and modify the scope as further consultation may warrant);

2. beyond the supervisory function, at what level, and in which circumstances, examination/registration should be extended;

3. in consultation with industry expertise, the subject matter for appropriate examination protocols and whether an omnibus examination would be possible or more tailored examinations by function would be necessary;

4. the manner in which FINRA would fund any additional expense in implementing this expanded examination/registration requirement;

5. the degree to which the burden on competition that may be caused by this proposed additional level of examination/registration comports with the purposes of the Securities Exchange Act of 1934; and

6. a proposed timeline to complete execution of all necessary technology changes to the Central Registration Depository, development of examinations, and notices and rule filings to complete implementation of this extension of the examination and registration regulatory scheme.

We trust this letter comports with your request. Please feel free to contact the undersigned with any further questions. FINRA will keep Commission Staff informed as the matter develops.

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Monday, March 22,20103:17 PM #ENF • HO & Regions

Training and Question and Answer The Enforcement Manual, March 31, 2010

Training and Question and Answer

The Enforcement Manual

Wednesday, March 31, 2010 at 1:00p.m, (ET)

CLOSED COM:MISSION MEETING Room, Station Place I

Broadcast to all Regional Offices

Presenters:

OFFICE OFCIllEF COUNSEL

TOPICS TO INCLUDE:

• Procedures relating to termination notices

• New procedures in settlements - Affirmation of Compliance

• Guidelines regarding SEC regulations for obtaining information from media sources

• Information which should be validated during investigations with independent parties

.• Staff responsibilities regarding impartiality and Enforcement's policy regarding external communications

• Waiver guidance and checklist

• Supplemental Policy for Safeguarding Non-Public Information

• Case closing procedures

We are encouraging staff to Submit questions in Advance of the Training. Please submit questions to.

[~J <c h' J

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Senior Counsel, Division of Enforcement

1

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