It pays to listen when regulators signal their intentions. Back in October we addressed some of the new focus and arsenal that the U.S. Securities and Exchange Commission (SEC) announced, but it’s been a few months, and it’s a new year, and things can change. Or not.
On January 27th, at a securities and corporate law conference at the Securities Regulation Institute the Chair of the SEC, MaryJo White, told attendees that 2014 would be a year of “vigorous enforcement” by the nation’s federal security regulator and enforcement body.
She repeated the theme that the Commission would seek admissions of wrongdoing “in an expanded category of settlements.”
Why? Because admissions can achieve a greater measure of public accountability, which can be important to the public’s confidence in the strength and credibility of law enforcement and the safety of our markets.
Where Admissions of Guilt Were Sought in 2013
We began to see this strategy play out in the second half of 2013. Importantly, the new policy of requiring admissions of wrongdoing was applied to the inventory of existing matters at the SEC and not just to new cases. For example:
- Three brokerage firms repeatedly deceived customers about their compensation on securities transactions and in some instances provided false trading data to customers in an effort to avoid detection. “The conduct was egregious and harmed many investors, thereby justifying admissions.”
- A bank’s internal controls failed to detect and prevent massive trading losses, “thereby putting millions of shareholders at risk and resulting in inaccurate public filings.”
- A hedge fund adviser who misused over one hundred million dollars of fund assets (used to pay personal taxes), “through a personal loan that was not timely disclosed to investors.”
Keep Listening, Evolution is Likely to Occur
Lest one feel complacent in understanding where the Commission will require admissions of guilt to end continued investigations or litigation, we are told that this area will continue to evolve and there will be possible further changes (expansion?) of this category of cases. So stay tuned for further public announcements of when and where the SEC will be effectively lowering the boom on individuals or institutions.