Broken Windows and Broken Gates: SEC’s White Vows to Repair and Clean Up the Securities Market


At last week’s renowned Securities Enforcement Forum 2013 in Washington, DC, SEC Chairwoman Mary Jo White and her senior Enforcement Division colleagues continued a now familiar drumbeat of aggressive enforcement. These officials reiterated recent warnings that the SEC will seek to deter misconduct by punishing companies, as well as individuals, for major and minor violations of the securities laws that occur across all corners of the securities market.

In the conference’s keynote speech, Ms. White said investors want the SEC to patrol the markets like a “strong cop on the beat.” Ms. White likened the SEC’s current enforcement strategy to the “Broken Windows” approach employed by former New York City Mayor Rudolph Guiliani and Police Commissioner Bill Bratton to combat crime in the 1990s. (“Broken Windows” refers to the theory that when a window is broken and later fixed, this signals that disorder will not be tolerated. When a broken window is not fixed, it sends a signal that breaking windows will bear no consequences.) Guiliani and Bratton “essentially declared that no infraction was too small to be uncovered and punished,” said Ms. White. She explained that the “same theory can be applied to our securities markets – minor violations that are overlooked or ignored can feed bigger ones, and, perhaps more importantly, can foster a culture where laws are increasingly treated as toothless guidelines.”

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