SEC to say numerous improvements have been made
* Republicans expected to question SEC competence
* SEC near recommendation on SIPC coverage for victims
U.S. securities regulators will argue they have mended their ways at a congressional hearing Friday into the decade-long failure to investigate Texas financier Allen Stanford's alleged Ponzi scheme.
Republicans are expected to demand answers as to why it took the Securities and Exchange Commission so long to probe Stanford despite repeated attempts by SEC examiners to bring the matter to the enforcement division's attention.
The hearing before the House Financial Services oversight subcommittee could fuel Republican calls to take an ax to the SEC's 2012 budget request.
The SEC says it needs a 16 percent budget increase to boost enforcement efforts and to carry out its new responsibilities under the Dodd-Frank law.
The SEC filed civil charges against Stanford in February 2009. He was then arrested in June 2009 and criminally charged with fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.
Stanford, who has denied any wrongdoing, is scheduled to go on trial in September.
His arrest came the same month as the sentencing of epic swindler Bernard Madoff, whose Ponzi scheme went undetected for years by the SEC despite tips and the suspicions of some agency staffers.
A Ponzi scheme is one in which money from new investors is used to pay out early investors.
Witnesses at Friday's hearing will include SEC Enforcement Director Robert Khuzami, examinations and inspections director Carlo di Florio, and an SEC employee who repeatedly warned about Stanford and was punished after she complained about watered-down examinations.
Also due to appear is SEC Inspector General David Kotz, who issued a report in 2010 faulting the SEC's enforcement staff for repeatedly failing to investigate Stanford.
He laid out numerous recommendations to improve SEC enforcement and examinations, all of which Kotz will tell lawmakers on Friday "have been implemented and closed to our satisfaction," according to prepared testimony posted on the House panel's website.
Khuzami and di Florio will express deep regret that the SEC failed to act more quickly. "More remains to be done, but...we have made great strides to put in place the people and structures to prevent another occurrence of Stanford-type problems."
Republicans are expected to ask why no one has been disciplined at the SEC over the Stanford matter, and why the victims of the alleged scheme are still fighting to get the Securities Investor Protection Corp to cover their claims.
Khuzami and di Florio's prepared testimony says the SEC is close to finalizing a recommendation to SIPC on whether the victims' claims should be covered.
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