In remarks given at a recent conference, SEC Chair Mary Jo White emphasized how she believes a strong enforcement program is critical to the SEC’s mission. Most Americans, she noted, “do not see how well our experts examine a financial firm, review a regulatory filing, or conduct economic analysis on a complex rule.” However, “they do pay attention when we bring a major enforcement action against a major financial institution.”
The speech was an unequivocal insistence on strengthening the SEC’s enforcement program. Chair White said the agency must be “aggressive and creative” in using every enforcement tool option available, by pursuing all legal avenues when any wrongdoing is detected regardless of the size or difficulty of the case.
In addition to being more aggressive and creative, Chair White spoke to the need for public accountability in cases where monetary penalties and increased compliance are not enough. She noted the criteria under which the SEC would require an admission of wrong-doing, rather than merely allowing defendants to “neither admit nor deny” allegations. The criteria include:
• Cases where a large number of investors have been harmed or the conduct was otherwise egregious.
• Cases where the conduct posed a significant risk to the market or investors.
• Cases where admissions would aid investors deciding whether to deal with a particular party in the future.
• Cases where reciting unambiguous facts would send an important message to the market about a particular case.
Chair White stressed that the SEC “need[s] to continue to direct our attention to protecting investors from misconduct by investment advisers at hedge funds, private equity funds, and mutual funds.” In the speech she noted that the agency would look first to see if a case can be brought against individuals, and then broaden the inquiry to entities. She noted that this is a shift in emphasis from the past, where the agency had previously begun with actions against entities.
A full copy of Chair White’s speech is available here.