SEC’s White: ‘Unnoticed’ Enforcement Actions Can Have Big Impact

Securities and Exchange Commission Chairwoman Mary Jo White told securities lawyers Wednesday that while the “headline-grabbing” cases against large firms and high-profile CEOs are important, it is often the “less sensational” actions taken by the agency that best embody the regulator’s “unrelenting efforts” to protect investors.

White told securities lawyers at the Practicing Law Institute’s 45th Annual Securities Regulation Institute in New York that in the financial crisis arena alone, the SEC brought actions against more than 160 individuals and corporate entities, resulting in more than $2.7 billion in disgorgement and penalties, nearly all of which she said would be returned to harmed investors.

Of the individuals charged, more than 60 were CEOs, CFOs or other senior corporate executives, with more than 30 of them being barred from the securities industry or from serving as directors or officers of public companies.

While these cases were being brought, White said, “we were filing literally thousands of other cases in other areas,” cases and settlements that didn’t make “a big splash” or include “impressive statistics.”

Many of the SEC’s cases, White continued, “you never hear about, but they are no less meaningful and not just to the parties involved, but also to the functioning of our markets.”

White highlighted three such cases.

First was a case involving the Sisters of Charity, a Catholic organization located in the Bronx, “not far from Yankee Stadium, my home away from home,” White said, in which an SEC examiner noticed suspicious trading in the account by a Florida broker-dealer during a regular exam.

While these accounts held by the Sisters of Charity “were not huge accounts,” White said, “they were important to many people,” providing, among other things, “funding to help children and families in some of New York’s toughest neighborhoods.”

After noticing the unusual trading in the accounts, the SEC examiner reached out to a colleague in the SEC’s Enforcement Division “who had substantial expertise on the type of securities held and the type of trading that would be expected in such accounts,” White said. “Immediately, the attorney knew the matter was worth looking into to determine if the broker had been trading excessively in the accounts simply to generate fees, an unlawful practice that long ago was given the name ‘churning.’”

After further investigation, the SEC filed an action against the broker who had managed the account, and after several months of litigation, he agreed to settle, White said. “As a result, on Christmas Eve, an SEC staff attorney was able to place a call to the nun in charge of the Sisters of Charity to tell her that she would be receiving a very special present: the return of $350,000 to their account.”

The enforcement team also obtained an order permanently barring the broker from associating with other firms, a crucial action White said “helps protect against future harm.”

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