The Securities and Exchange Commission (SEC) must re-evaluate the strength of its initial settlements and “specifically design” a program to combat repeat fraudsters, SEC Commissioner Luis Aguilar said Thursday.
Aguilar, speaking at the Securities Enforcement Forum in Washington, said that he’s noticed that recidivism was an issue at the SEC. “Many offenders, particularly Ponzi scheme offenders, have long track records of similar fraud schemes,” he said, which shows that the first time that many of these defendants were prosecuted, “the remedies and penalties did not effectively deter them from engaging in egregious fraud again.”
Since the vast majority of the Commission’s civil enforcement actions result in settlements, Aguilar said the SEC “should insist that every recidivist be subject to more robust sanctions, including potential post-sanction monitoring.” For example, he said, the agency could consider instituting “post-sanction monitoring for individuals that engage in egregious misconduct and/or commit a violation on multiple occasions.” Post-sanction monitoring might include unscheduled office visits; access to phone records, bank records, and state and federal income tax returns; and submission of periodic self-reports by the defendant, he said.
While this type of program admittedly entails “ongoing costs,” Aguilar (left) said, “a limited and targeted monitoring regime on the most dangerous recidivists would provide effective deterrence to defendants who would now be put on notice of the Commission’s continuing interest in their activities.”