At the request of the chairman of the Senate Finance Committee, the General Accountability Office will review two divisions of the Securities and Exchange Commission—the enforcement unit and the office of compliance, inspections and examinations, The New York Times reports.

Specifically, the Senate wants to find out how those divisions handle referrals, particularly from the NASD and New York Stock Exchange, how it handles investigations and how many referrals translate into enforcement actions. Senate Finance Committee Chairman Charles S. Grassley (R-Iowa) is particularly interested in how the SEC handles insider-trading investigations.

This latest review comes on the heels of GAO investigations in 2004 and 2005 into how well the SEC oversees mutual funds, and another investigation last year into how it determines and collects fines and disgorgement.

The Senate Finance Committee and the Senate Judiciary Committee have recently been concerned over the SEC’s handling of an investigation into possible insider trading at hedge fund Pequot Capital Management ahead of mergers and other market-moving news. Former SEC attorney Gary J. Aguirre told the Senate that some of his superiors prevented him from interviewing Morgan Stanley CEO and Chairman John J. Mack, who is known to be a friend of Pequot Capital Chairman and CEO Arthur J. Samberg and who briefly served as chairman of Pequot himself in 2005. When Aguirre continued to protest against his superiors’ decision not to interview Mack, he was fired, but last summer, the SEC took Mack’s testimony anyway and finally closed the case earlier this month without bringing any charges against Pequot, Mack or Samberg.

“Congress needs an independent analysis of whether the institutions that are responsible for protecting investors are keeping up in a fast-changing marketplace,” Grassley said in a statement. “It’s been a long time since there’s been this kind of thorough review. The integrity of our financial markets and, in turn, the well-being of individual investors depends on checkpoints that stop insider trading and manipulation.”

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