The SEC’s 2003 settlement with 10 investment banks over their research analysts’ conflicts of interest included a $55 million fund for a foundation to make grants to advance investor education. In an order dated yesterday, Judge Pauley, upon reviewing the foundation’s most recent report to the Court, severely criticized the foundation for its apparent waste, and ordered the SEC to provide further details. For example, Judge Pauley observed:

[T]he Genesee District Library in Michigan received a twenty-four month, $91,500 grant to establish a “family financial freedom” education initiative and host “Ask the Expert” financial literacy events. However, the Genesee library’s online event calendar reveals only a single event for adults made possible by the Foundation’s grant: a program titled “Is Your Money Making You Crazy?” scheduled for September 20, 2012. The program is a one and a half hour session with a personal finance columnist offering “tips on how to deal with tough financial times when anxiety threatens to overwhelm you.” The only other investor education event attributed to the grant is a program about spending, sharing, and saving for children ages two through five. While there may be benefits to starting investor education early, toddlers seem beyond the pale. . . . . The Fourth Quarter 2011 Report provides no reasonable details about the cost of any of the Foundation’s Investor Protection Campaign activities. The only new activity reported is a conference titled “The State and Future of Financial Fraud” and held at the Sofitel in Washington, D.C. on November 3 and 4, 2011 (the “Conference”). . . . . The Conference was designed to share research about financial fraud and connect researchers with professionals trained in detecting and preventing financial fraud. But it is concerning that an entity selected to disburse millions of dollars for investor education recovered by an agency of the United States Government would choose to hold a conference at a luxury hotel in Washington, D.C., rather than at the SEC’s headquarters or FINRA’s offices in the same city. . . .The Foundation’s performance in this regard is ironic. Its mission is to educate the investing public-to teach investors what to look for in their financial professionals and help investors ensure that the information they receive from those professionals is fulsome and transparent. Given this mission, the Foundation should be a paragon of transparency and disclosure. The same is true of the SEC — the federal agency responsible for enforcing disclosure requirements.