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Regulation and Compliance > Federal Regulation > SEC

SEC Chairman eases violation policy, boosts enforcement

By Staff Writer

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SEC Chairman Mary Schapiro said Friday she will do away with a two-year “penalty pilot” policy requiring Enforcement staff to get commission approval before negotiating financial penalties against public companies for securities fraud.

“In speaking to our Enforcement staff, I’ve been told that these special procedures have introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed,” Schapiro said.

The policy previously sent the “wrong message,” Schapiro noted, and that the action to end it is part of the Commission’s efforts to “ensure that justice is swiftly served.”

Furthermore, Schapiro continued, the SEC will continue to bolster its enforcement program by providing more rapid approval of formal orders of investigation — the permission slips given out by the Commission that allow SEC staff to use the power of subpoenas to compel witness testimony and the production of documents.

Schapiro said she hopes to “reinvigorate” the SEC’s enforcement program by better handling tips and “whistleblower” complaints and by “focusing on areas where investors are most at risk.” Furthermore, the chairman said the Commission is planning to form an Investor Advisory Committee to hear firsthand investor concerns.

“In deciding upon regulatory priorities, it is vital that the SEC re-engage with the people we serve: investors. The investor community — from the largest pension fund to the family who has saved in their 401(k) or 529 plan — needs to feel that they have someone on their side — that they can go to the SEC to seek redress, or to have their opinions heard.”

Schapiro highlighted more initiatives she considers priorities:

  • Improving the quality of credit ratings by addressing the inherent conflicts of interest credit rating agencies face as a result of their compensation models and limiting the impact of credit ratings on capital requirements of regulated financial institutions.
  • Reducing systemic risk to investors and markets by promoting — and regulating appropriately — centralized clearinghouses for credit default swaps.
  • Strengthening risk-based oversight of broker-dealers and investment advisers.
  • Improving the quality of audits for nonpublic broker/dealers and promoting the safe and sound custody of customer assets by any broker-dealer or investment adviser.

The SEC announced today that Linda Chatman Thomsen, Director of the Division of Enforcement, will leave the SEC and plans to return to the private sector.

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