Nasdaq has taken significant steps to address the problems SEC found in its Listing Department, while noting that it disagrees with some of SEC's findings and recommendations. GAO reports that SEC did not inspect Nasdaq's troubled Listing Department for 11 years because of limited resources. However, SEC testified at Congressional reauthorization hearings during this period that it had sufficient resources overall. SEC had no inspection cycle for listing departments until 1996.

These problems occurred against the background of a larger failure of the self-regulatory system and SEC's oversight of Nasdaq.

In August 1996, the SEC announced the institution of administrative proceedings against the NASD and issued a Report of Investigation regarding the NASD and the Nasdaq market. According to the 1996 SEC report, NASD, during the period covered by the report, did not comply with certain of its rules or satisfy its obligations under the Exchange Act to enforce its rules and the federal securities laws.

Copies of the GAO report may be obtained by calling GAO at 512-6000. There are a limited number of copies available for the press at the Commerce Committee Democratic staff offices; press may call 225-3641 to obtain a copy there.

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