Emphasis On Enforcement

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Explore:  Compliance Enforcement SEC

In back-to-back keynote addresses Monday to the Securities & Financial Markets Association’s annual Compliance & Legal meeting, SEC-Chair Mary Jo White and Southern District of New York US Attorney Preet Bharara renewed the federal government’s emphasis on securities enforcement actions.

White emphasized the complimentary effect of the SEC’s civil-enforcement abilities in parallel proceedings with Department of Justice criminal prosecutions, noting that parallel proceedings and criminal referrals have doubled over the past few years.  The Commission continues to emphasize FCPA, insider-trading and Ponzi-scheme prosecutions.  White pointed to various tools in the Commission’s arsenal that aren’t routinely available to criminal prosecutors that can work in tandem with criminal prosecutions to move faster or deal more appropriately with non-central figures, e.g.:  negligence or strict liability offenses; lower civil burdens of proof; disgorgement and fair fund victim restitution; disgorgement; industry bars; and others.  Addressing three central enforcement areas, White pointed out that Bharara’s SDNY unit had  100% success rate in insider-trading cases over the past 5 years and the SEC has brought 570 actions (some notably not successful, e.g. Mark Cuban).  Most were touched off by trade-data surveillance.  The Commission is using more trader-based (peer-to-peer) surveillance to detect outlier circumstances, such as those that led to last week’s prosecution of an insider-trading ring involving tips from a rogue employee at a white-shoe international law-firm.   White said that asset-freezes and strict-liability registration offenses had proven especially useful in dealing with pump-n-dump schemes.  Finally, White noted the Commission’s unit of over 100 specialized accountants, including those having worked alongside the FBI in the recent spate of indictments stemming from the collapse of the Dewey firm.

Bharara began by admitting his concern and fear for the safety of federal subpoenas, after the dismissive treatment given one by Jonah Hill’s character in the Oscar-nominated Wolf of Wall Street;  Bharara felt relieved, he said, when he realized that subpoena had issued from the Eastern District of New York.  On to serious matters, Bharara raised four points about white-collar financial crime.  First, he said there are circumstances when it is appropriate to bring criminal charges against institutions – especially when they arise from institutional (rather than merely personal) failures.  Second, he rejected the notion (suggested by some) that some institutions are “too big to jail.”  Third, he warned the largely-defense-oriented group against overstating the societal costs of institutional prosecution:  The “repeated Chicken Little routine is wearing a little thin,” he said.  Finally, he noted that “results matter” and suggested that measurable, repeatable compliance failures might justify harsher results in a given matter – including, perhaps, consideration of profit or compensation claw-backs.

Later in the morning, SEC Director of Enforcement Ceresny emphasized the agency’s seven cases to date involving the settling parties’ admissions of wrongdoing – a departure from the Commission’s venerable “neither admit not deny” policy that had come under increasing criticism in some quarters.

Topics:  Compliance, Enforcement, SEC

Published In: General Business Updates, Criminal Law Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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