Securities and Exchange Commission Chairwoman Mary Jo White, who announced this week she will resign at the end of President Barack Obama’s term, warned in a speech Friday the agency must not retreat from tougher regulation and enforcement.
White, speaking at New York University School of Law on the SEC’s changing enforcement model, urged the commission to continue to be an “aggressive” enforcement and regulatory agency.
“I would hope—and expect—that the significant enhancements we have made will be continued in future years, with the SEC acting as an aggressive and strong regulator of the federal securities laws, consistently looking to broaden our impact and strengthen deterrence of wrongdoing,” White said. “That is our duty and the SEC should continue to use every tool at its disposal to fulfill it. It would be a serious mistake for investors and our markets to do otherwise.”
White didn’t mention President-elect Donald Trump or his presidential transition team.
Still, her comments stand in contrast to statements from the Trump campaign. Trump has said that he wants to dismantle Dodd-Frank, a law that White’s SEC has spent significant time making rules to enforce. Former SEC Commissioner Paul Atkins, long a critic of the Dodd-Frank financial reform regulations, is leading Trump’s review of independent financial agencies.
White’s insight Friday on how the commission can strengthen white-collar enforcement contrasted with views expressed by the Trump campaign and transition team.
White, formerly head of litigation at Debevoise & Plimpton in New York, touted the enforcement progress the SEC has made in several areas. She praised the commission’s whistleblower program, its ability to use in-house data analytics systems to spot and investigate misconduct, and its policy since 2013 of requiring admissions of guilt as part of settlements in certain types of cases.
White addressed frustrations that senior executives and officers are often not held responsible for misconduct, saying the SEC has made strides in this area amid evidentiary challenges. The “fingerprints” of corporate officials might not be found directly on the conduct, White said, noting the high burden to hold an individual criminally liable.
U.S. regulators, White said, must “think outside the box of our current laws” to find ways to hold more senior executives responsible. She pointed to a potential example of a solution in the United Kingdom, called the “Senior Management Regime,” a set of regulations that went into effect in March that make it easier for executives to be held accountable for misconduct at their firms if they don’t take reasonable steps to prevent such misdeeds.
White also expressed hope Congress will give the SEC authority to bring higher penalties. “Although I often wish it were otherwise, the SEC does not have the authority to send anyone to jail,” she said. She said she misses that power, which she used to have as a federal prosecutor and U.S. attorney.
On the civil side, White said she supports allowing the commission to seek penalties that are based on either three times the defendants’ ill-gotten gains or the amount of investor losses—whichever is higher.
Pending legislation in Congress, the Financial Choice Act, allows SEC fines to be tripled, but also seeks to undo much of the Dodd-Frank Act. While supporting increased SEC penalty authority, White called the Dodd-Frank rollback part of the bill a “very worrisome broad-based proposal.”
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