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Regulation and Compliance > Federal Regulation > SEC

Facing No Urgent Crises, SEC ‘Spreads Its Wings’

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As the big-name enforcement cases from the financial crisis draw to a close, the Securities and Exchange Commission has the “luxury” of freedom to tackle a wide variety of enforcement issues, its enforcement chief says.

While the SEC is expected to announce the enforcement results for fiscal 2014 soon, SEC’s Enforcement Division director, Andrew Ceresney, discussed continued and increased enforcement efforts in insider trading, financial reporting and pyramid schemes Friday morning in New York.

Ceresney called insider trading a “perennial focus” for the enforcement division, which over the past five years he said has brought about 580 cases against individuals.

“That’s a pretty significant number when you think about it,” he said, expanding on some of the tools and opportunities that have helped them reach that number, most significantly “big data.”

“We now have massive amounts of data that we’re able to analyze,” he said.

The SEC is developing analytical tools that use blue sheet data, essentially trading data.

“[We can] use that data to find patterns of trading that might indicate insider trading,” Ceresney said. “What that does is give us the ability to detect insider trading in ways we haven’t been able to do before.”

Already a number of cases have been developed and brought forward because of those tools, he added, with “many more in the pipeline.”

Another traditional focus of the enforcement division has been financial reporting, which Ceresney said has lagged over the past few years.

“If you look at our numbers over the last 4-5 years, our number of financial reporting actions have actually been decreasing,” he said, adding this could be the result of their focus being elsewhere or improvements that were made in 2002.

To combat this, the enforcement division created a task force of 12 attorneys and accountants to look for financial reporting issues that may not be automatically apparent.

“We decided recently that we need to refocus on financial reporting,” Ceresney said. “We increased our focus there, and I’m happy to say that in the last year our number of cases has increased as well as number of investigations.”

Another hot focus as of late for the enforcement division has been pyramid schemes, or micro-cap fraud. “This is not new, but we’ve seen an influx of these sorts of schemes now that social media and other types of Internet and other things are available to promote these sorts of schemes,” Ceresney said.

These are schemes that largely affect retail investors and are often focused on lower income, immigrant or ethnic communities.

“We’ve brought up five cases over the last year with pyramid schemes,” Ceresney said, adding that the SEC has created a task force to address this, with specific focus on repeat players.

The spread of issues that the enforcement division is looking at today Ceresney calls “something of a luxury.”

“When I look back at the last 15-20 years, in each of those periods, there has been some looming large issue that has occupied the attention of the SEC enforcement division pretty extensively,” he said.

The 2000s were occupied with Enron and nearly a dozen other companies with major accounting frauds, and the last five years have been occupied by the financial crisis.

“The good news is for us, and I think the country in general, is that there isn’t that burning crisis, and what that allows us to do is spread our wings and focus on many different areas,” Ceresney said.

Ceresney was joined at St. John’s School of Law by Robert E. Rice, chief counsel to SEC Chair Mary Jo White, to talk to a crowd of mostly current and former St. John’s students about “A New Era of SEC Enforcement.”

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