Another GAO report heaps criticism on the SEC's way of doing business. According to a GAO report released by Democratic representatives Paul Kanjorski (Pennsylvania) and Barney Frank (Massachusetts), the SEC's system of examining high-risk mutual funds leaves much wanting, reports MarketWatch.

The SEC high-risk system may mean that low risk companies are not examined for 10 years or more, according to Reuters.

"More can be done and more should be done to protect American investors," said Kanjorski in a statement.

The GAO report also said that the new hedge fund advisor registration rule could take away resources from the SEC.

"Given the size and growth of the industry, it is not possible for the SEC to conduct comprehensive, timely, routine examinations of every registrant," Lori Richards, director of the SEC's office of compliance inspections and examinations, responded in a letter.

"The benefits of risk-targeted reviews in promptly identifying emerging trends and compliance problems have already been demonstrated. For example, as a results of coordinated reviews of both mutual funds an the broker-dealers that distribute their shares, we found that fund assets were increasingly being used to pay broker-dealers for 'shelf space' with related disclosure weaknesses," wrote Richards.  

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