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The state agency designed to investigate securities fraud has been plagued with poor management and potential conflicts of interest in the recent past, according to a new Legislative audit released today at the Capitol.
The auditors say there have been legitimate concerns about both overzealous and lax enforcement at the Division of Securities. But according to those who work there, things are getting better.
The audit points out cases in which people were investigated, even charged, without knowing about it. Other cases were publicized before people were able to defend themselves. In the sensitive world of securities trading, that can be damaging.
The Division of Securities' mission is to protect investors and promote business in Utah. For example, the agency would investigate cases like that of VESCOR and its owner Val Southwick. Southwick was recently sentenced for defrauding investors to the tune of millions of dollars.
Critics of the division say the loss should never have gotten that big. That it's an example of how the agency can be too lax. Chuck Newton, with the Financial Planning Association of Utah, said, "The overall problem here is the division of securities. It is a mess. The wheels have come off the wagon." On the other hand, Newton says, the agency comes down too hard on other companies for relatively minor offenses.
Uneven enforcement is just one reason Legislator Jim Bird requested a Division of Securities audit. The findings, released today, do show problems, but also improvements, including the resignation of director Wayne Klein.
The audit also points to internal conflicts in the division and the Department of Commerce, headed by Francine Giani.
"You know, we do investigations, and sometimes people are not happy with those investigations. Having said that, we appreciate the audit. We believe that many of the suggestions have been implemented," Giani said.
Gianni said, "We believe taxpayers previously have been served well. We believe in the future they will be served better by the things we are implementing. And hey, is any agency 100 percent right on?"
In the age of multi-million dollar investment scams and a slew of shady investors, the audit recommends something simple: Clarify its policies and communicate better within the department.
The audit includes input from multiple sources, but not investors who have been victims of fraud. Giani says that input would have made the audit seem less scathing.
A new director started at the division Monday. Still, the audit claims some workers feel the atmosphere won't change. Giani says she hopes it will.
E-mail: mgiauque@ksl.com
E-mail: rpiatt@ksl.com
