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SEC ‘Drilling Down’ on Compliance Programs; Wedbush a ‘Critical Case’

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The Securities and Exchange Commission’s Enforcement Director Andrew Ceresney said Wednesday that the division’s asset management unit and broker-dealer task force has been “drilling down” over the past year on firms’ compliance programs as well as being “very focused” on investment advisory fraud and making sure advisors are fulfilling their fiduciary duties.

During a question and answer session at the D.C. Bar in Washington, Ceresney also said that the case of Wedbush Securities Inc., in which the firm and two officials were charged with market access violations, is a “critical case.”

Wedbush’s failure to preauthorize traders, thus opening its trading system to unknown users, “allowed for the potential of schemes by the traders,” including high-frequency traders, Ceresney said.

Ceresney also told attendees of the D.C. Bar luncheon that the agency has been using adminstrative proceedings more frequently in recent years, calling the process “sophisticated” and “more streamlined” than bringing a civil action to District Court (in an administrative proceeding, an adminstrative law judge hears the case and levies any penalties).

“I think you’ll see use of [the administrative proceedings] more often by the agency,” he said, adding that “we will bring insider trading cases in the administrative proceedings.”

This determination, he said, “will be on a case-by-case” basis, “but you’ll see more of these insider trading cases go through the administrative proceedings.”

Ceresney also said that during his 13 months on the job, he has been impressed with how “smart, committed and experienced” the SEC staff is and is surprised by how “incredibly rigorous” the process is by which an enforcement action is brought. A “tremendous number of people and expertise,” he said, “are brought to bear on every single case.”

Said Ceresney: “Our actions are well thought out. It’s definitely the most rigorous process out there. It brings a lot of discipline on ‘are we getting the law right.’”

Revisiting recent remarks that he made to ThinkAdvisor on the division’s biggest challenges, Ceresney said that “keeping up with the complexity of the markets, [and] the complexity of criminal activity” remains a top challenge for the division.

“It’s pretty amazing that we’ve been able to uncover some of the things that we have,” Ceresney said, adding that the agency is using technology to help catch more wrongdoing, including insider trading.

Check out SEC Charges Wedbush Securities With Violating Market Access Rule on ThinkAdvisor.


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