Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, September 26, 2013

SEC Chair discusses enforcement priorities at CII conference

By Jacquelyn Lumb

SEC Chair Mary Jo White today told the Council of Institutional Investors that she supports legislation that would allow the SEC to seek penalties based on either three times one’s ill-gotten gains or the amount of investor losses, whichever is greater, to help ensure that its enforcement proceedings have teeth. White also offered her view on corporate penalties and the SEC’s 2006 release on the factors the commissioners would consider when deciding whether to impose corporate penalties. That release is not binding, she said. It is based on the thinking of the five commissioners at that time. Each commissioner has the authority to reach his or her own judgment on whether to impose a corporate penalty, and her view is that corporate penalties will be considered in all appropriate cases.

Enforcement remedies. White said the SEC should bring both the tough cases and the smaller ones. If the SEC lacks sufficient evidence to charge intentional wrongdoing, it should bring a negligence case that does not require intent, in her view. When the SEC resolves cases, the settlements should send a strong message of deterrence, she added. White said she has encouraged the enforcement staff to think hard about whether the remedies they are seeking would sufficiently address the wrongdoing and lead potential offenders to think twice.

The SEC must use its existing penalty authority aggressively, in White’s view. With respect to corporate penalties, she said the staff still considers the factors outlined in the 2006 release, but whether to seek a corporate penalty is based on all of the facts and circumstances of each case. In her view, when the SEC sues a company for wrongdoing, it should also consider whether to require the company to adopt measures to make it less likely that the wrongdoing will occur again. The SEC already does this in most cases, she added. White said to expect more mandatory undertakings in future cases to help prevent future wrongdoing.

Neither admit nor deny. In 2012, the SEC changed its “neither admit nor deny” language as it applies to settlements with parties that have pleaded guilty in a related criminal action. White sees this as a good first step toward greater accountability. She added that her thinking on this issue was shaped by the time she spent in the criminal arena, where courts cannot accept a guilty plea without the defendant first admitting to the unlawful conduct. A guilty plea creates an unambiguous record of the conduct and reflects the defendant’s responsibility for his or her acts, White said.

White reiterated that the “neither admit nor deny” settlements are still an important enforcement tool but that, in some cases, the SEC will require admissions. These decisions are for the SEC to make in its discretion and not decisions for a court to make, in her view.

Pursuing individuals. White also shared her view on pursuing individuals in enforcement proceedings. When the SEC can identify the people involved, she said, settling with the company may not be sufficient. She has directed the staff to see whether a case against individuals can be brought and to look first at the individual conduct before working out to the entity. This is a subtle shift, she said, but one that could bring more individuals into enforcement cases.

Whole market enforcement. White said it is important for the SEC to cover the whole market and to be perceived to be everywhere bringing enforcement actions against violators in all categories and market strata. For instance, she said, the SEC must be prepared to bring actions in the new markets and regulatory regimes that the Dodd-Frank and JOBS Act rules have created. The SEC also must continue to adapt to the complex, diverse, and high-speed marketplace, she said. The SEC has brought a number of significant actions in these areas, and White said there will be more actions related to sophisticated trading strategies, dark pools, and other trading platforms.

Trial-ready. The SEC also must remain trial-ready. With its increased demands for admissions, she said, more financial firms may take cases to court. Consistent wins at trial will give the SEC the credibility to obtain strong and meaningful settlements in the areas it pursues in the coming years, she explained. The more success that SEC has, the more confidence investors will have in the markets, she said.

MainStory: TopStory Enforcement SECNewsSpeeches

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.