I thought I was finished with the SEC’s Office of Risk Assessment after writing this post about the ORA’s “Army of One,” but as Michael Corleone said in Godfather III, “Just when I think I’m out, they pull me back in.”

I wrote the “Army of One” piece following the Congressional testimony in early October of former SEC Chief Accountant Lynn Turner.  Mr. Turner testified that some of the blame for the current financial crisis is due to regulation failing to keep pace, including that “at the Securities and Exchange Commission (”SEC”), the Office of Risk management had been reduced to an office of one by February of this year.” He memorably added that “when that [one] person would go home at night he could turn the lights out.”

But then Chairman Cox got me thinking about the ORA again in his October 23 Congressional testimony (transcript here), when he responded to attacks from Rep. Elijah Cummings that he had failed to support the work of a certain task force at the SEC that had been created to look at issues related to the market derivatives task force: “In fact, you basically defunded the whole Office of Risk Assessment that had been assembled for the task force,” Cummings claimed.

Not true, Cox shot back. He said that the Office of Risk Assessment was not ever responsible for specifically looking at derivatives and that “the Office of Risk Assessment when I came to the SEC had seven people. It has seven people now. But what we have done is increased throughout the agency the number of people that are focused on risk assessment.”

Wait - what? It had 7 people when Cox came to the SEC in 2005 and it has 7 now? This seemed to contradict what Lynn Turner had testified to just a few weeks earlier. Confused, I reached out to the Director of ORA, Jonathan Sokobin, who was nice enough to clarify this point as well as provide some details on the work of the ORA.

First of all, despite the apparent contradiction, both Lynn Turner and Chairman Cox are at least technically correct in their testimony. According to Mr. Sokobin, when Chairman Cox arrived at the SEC in 2005, the ORA did employ 7 people. By the time then-Director Charles Fishkin left ORA in early 2007, however, that number had fallen below 7, and those who did remain were gradually moved out of ORA and integrated into risk assessment functions elsewhere in the agency in the over one year it took for the SEC to replace Mr. Fishkin with Mr. Sokobin. As a result, Mr. Sokobin acknowledges that as Mr. Turner testified, he “inherited an office of one” when he was appointed to the Director position in March 2008.

Mr. Sokobin further explained that since taking over as ORA Director in March 2008, he has been able to quickly rebuild his staff back up to 7 people, so Chairman Cox’s statement that “when I came to the SEC [ORA] had seven people. It has seven people now” is correct. Chairman Cox’s statement does, of course, ignore the fact that ORA dropped down to just one person along the way.

So that’s the explanation on the ORA headcount issue. Later this week I will provide more substantive details from my interview with Mr. Sokobin, including his view of the role of ORA; ORA’s evolution since its inception in 2003; what ORA is responsible for and, importantly, not responsible for; and Mr. Sokobin’s goals for the office.