In a landmark speech on September 26, 2013, SEC Chairperson Mary Jo White detailed the SEC’s new roadmap for “aggressive and creative” enforcement actions. Going forward, the SEC is going to target both companies and individuals, and is placing the investing and legal communities on notice that it is fully prepared to try cases to conclusion. Clearly stung by public criticism that it has been too soft on institutions that were at the center of the financial crisis by entering into “no-admit-no-deny” settlements with them, the SEC is now making it a priority to take a much more forceful stance in pursuing and punishing misconduct.
While the SEC was by no means asleep at the switch in connection with cases associated with the financial crisis, having since 2008 charged 161 entities and individuals and recovered $2.73 billion in total penalties, disgorgement, and other monetary relief, Chairperson White set forth a series of principles that will guide the SEC’s Enforcement Division in pursuing cases going forward. Those principles include:
- Bringing big and small cases, and pursuing claims that involve both intentional wronging and negligent conduct;
- Ensuring that settlements have “teeth” in order to deter future wrongdoing by others;
- Seeking new legislation to require penalties equal to the greater of three times the ill-gotten gains or the amount of investor losses, and additional penalties for recidivists;
- Making aggressive use of existing penalty authority;
- Using corporate penalties in appropriate cases and also requiring companies to implement mandatory structural undertakings as part of any settlements to ensure that the misconduct does not repeat in the future;
- Requiring public accountability and admissions of wrongdoing as part of any settlements in appropriate cases;
- Pursuing responsible individuals wherever possible and seeking as a penalty a bar in court against the target individuals from working in the securities industry or serving on the board of a public company;
- Expanding the SEC’s presence by bringing enforcement actions against violators in every market participant category and in every market strata;
- Aggressive use of all investigative tools, including tips from whistleblowers, quantitative data, conducting sweeps and other means of uncovering misconduct;
- Adapting to the high speed marketplace, with an emphasis on actions relating to sophisticated trading strategies, dark pools, and other trading platforms; and
- Demonstrating a willingness to take cases and trial and win—According to Chairperson White, “[W]e need to maintain and enhance our ability to win at trial. For us to be a truly potent regulatory force, we need to remain constantly focused on trial readiness.”