The Gibson Dunn law firm has published its 2010 Mid Year Securities Enforcement Update, summarizing the activities of the SEC's Division of Enforcement, and highlighting areas where the Division is focusing its efforts. The firm also tracks trends in enforcement, noting that the Division "is filing cases against major financial institutions and senior executives -- and without negotiating settlements in advance of filing and without the "muscle" of parallel criminal cases." The Gibson Dunn memo also detects in the Division a "willingness to take on risk in litigation, particularly in cases related to the financial crisis and to extend jurisdiction and remedies," and expects "the SEC to continue to pursue an aggressive strategy of filing cases against prominent defendants to demonstrate its vigor in investor protection."
Among the highlights of the last half-year's enforcement cases are:
- Several major cases related to subprime loans and the financial crisis;
- Aggressive application of the Sarbanes Oxley "clawback" remedy;
- A victory in asserting jurisdiction over credit default swaps (while losing on the merits of an insider trading claim);
- Large dollar insider trading cases, some involving institutional investors; and
- Launch of the Division of Enforcement's cooperation initiative and internal reorganization.
In addition to more detailed analysis and statistics of the Division of Enforcement's activities thus far in 2010, the Gibson Dunn memorandum also makes some prognostications for the remainder of the year:
The SEC's focus on investigations related to the financial crisis will continue and thus we expect to see additional cases being filed in this area. In addition, previously filed cases in this area will work their way through litigation and approach trial or result in settlements.
Now that the reorganization of the Enforcement Division is complete, look for the specialized units to take investigative initiatives in an effort to demonstrate that specialization also yields results. And now that the cooperation initiative is underway, look for the SEC to take a step to demonstrate publicly that the program is motivating individuals to cooperate and that such cooperation is helping them make cases.
Finally, the United States Congress is close to passing the most sweeping overhaul of financial regulation since the Great Depression. With it will come significant changes for the SEC by broadening the scope of its oversight to previously unregulated entities and financial instruments. With this increased authority will come an increased budget, staffing and resources. The increased enforcement activity we have observed in the last year may pale in comparison to what the next several years hold.
The full text of Gibson Dunn's 2010 Mid Year Securities Enforcement Update is available at: http://www.gibsondunn.com/publications/pages/2010MidYearSecuritiesEnforcementUpdate.aspx