WASHINGTON -- An official of the Securities and Exchange Commission yesterday defended the agency's actions amid criticism that it failed to uncover trading abuses in the mutual fund industry that cost investors billions of dollars.
The criticism has come in recent weeks from diverse quarters, including congressional investigators and lawmakers of both parties.
Massachusetts Secretary of State William Galvin, in scathing testimony before a House panel, added to the chorus yesterday.
Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations, told the lawmakers that the agency -- with a limited budget to police the sprawling $8 trillion fund industry -- had pursued issues that were believed to represent the biggest potential risks to investors.
Congress' Government Accountability Office, in a report released in April, said the SEC's inspectors should have detected the fund trading abuses before September 2003, when the agency began an industrywide crackdown after New York Attorney General Eliot Spitzer exposed the violations.
Galvin, who has prosecuted a number of high-profile fund cases, reopened a bitter dispute between federal and state securities regulators over enforcement turf in his remarks at the hearing.
''The SEC simply didn't do its job. It dropped the ball," he said, referring to the agency's inspection of fund companies. Only after state regulators exposed trading abuses did the SEC act, Galvin said.
He also accused the federal agency, which had sparred with Spitzer in the early days of the scandal, of trying to exercise a ''regulatory monopoly" rather than cooperating in enforcement efforts with state regulators.
Galvin noted President Bush's nomination last week of Representative Christopher Cox, a California Republican and a free-market conservative, as the new chairman of the SEC.
''Is the era of reform and vigorous enforcement over?" he asked.