At the request of the chairman of the Senate Finance Committee, the Government Accountability Office will review two divisions of the Securities and Exchange Commission-the enforcement unit and the office of compliance, inspections and examinations.

Specifically, the Senate wants to find out how those divisions handle referrals, particularly from the NASD and the New York Stock Exchange, how they handle 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.

The Senate Finance Committee and the Senate Judiciary Committee have recently been concerned with the SEC's handling of an investigation into possible insider trading at hedge fund Pequot Capital Management. 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. 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 last month without bringing any charges.

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