Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.
In this episode, David Slovick, partner at Kopecky Schumacher Rosenburg and former SEC and CFTC enforcement attorney, and Professor Phil Lieberman of Vanderbilt Law School, dig into one of the most overlooked — but impactful — problems in securities enforcement: the arbitrariness of civil penalties.
Lieberman and Slovick recently published a series of articles examining how the SEC calculates penalties — and what their research reveals is deeply concerning. Using a custom-built AI-assisted database pulling 20 years of SEC litigation releases, Lieberman uncovers troubling trends, including:
- A steady "walk-up" of corporate penalties that outpace statutory guidelines
- Little-to-no transparency in how penalty amounts are calculated
- Inconsistent treatment of similar violations across different cases
- End-of-year enforcement surges that suggest goal-chasing behavior within the commission
Slovick walks us through the statutory "three-tier" penalty framework, showing how easily it's manipulated. He explains how line-level SEC staff can multiply fines using vague definitions of "each violation" — turning one misstatement into dozens of six-figure penalties. He also shares reform ideas, from publishing penalty math to requiring real-time oversight by the commission.
If you've ever wondered why some enforcement actions seem disproportionately harsh — or suspiciously lenient — this episode is a must-listen. The data tell a story the SEC can no longer ignore.
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