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SEC Announces “Tough Cop” Approach to Enforcement

By Jessica Antoniades  of Shustak Reynolds & Partners, P.C. posted on Monday, October 14, 2013.

Securities and Exchange Commission Chair Mary Jo White recently announced plans to widen the scope of SEC enforcement to investigate, uncover and punish smaller violations of securities regulations. In her speech before the Securities Enforcement Forum last Wednesday, White emphasized the goal of SEC enforcement to be “everywhere, pursuing all types of violations of our federal securities laws, big and small.” She likened this approach to the “Broken Windows” theory: just as a broken window left unfixed “is a signal that no one cares, and so breaking more windows costs nothing,” overlooking or ignoring minor securities violations “can feed bigger ones, and, perhaps more importantly, can foster a culture where laws are increasingly treated as toothless guidelines.”

Although the SEC has declared small violations and infractions as new targets for its investigations, it certainly does not intend to ignore bigger cases. “Quite the opposite,” White said, “[i]t is critical that we continue to focus on the larger, tougher, and more complicated cases.” One might wonder, given its finite resources, how the SEC can maintain the same level of focus on bigger cases while also introducing a greater level of scrutiny in smaller cases. According to White, the SEC will stretch its resources by streamlining its investigations and making better use of resources, data tools, and other “force multipliers,” including collaboration with other law enforcement agencies and whistleblowers. To maximize its resources, the SEC intends to bring cases quickly, establish consistent approaches to penalties, and incentive parties to settle quickly. White explained that the SEC “will strive for settlements that have a deterrent effect” in all its cases.

These remarks are in line with White’s view that the SEC should be seen as a “tough cop,” protecting investors and the integrity of our markets by enforcing securities regulations. By living up to that role, the SEC hopes investors will feel more confident about participating in our markets.

Shustak Reynolds & Partners, P.C. handles a wide range of securities and FINRA related issues and has substantial expertise and experience in the securities and brokerage business. If you believe you have been the victim of fraudulent or negligent misrepresentations in connection with the sale of securities, please contact our firm’s managing partner, Erwin Shustak, at 619.696.9500 or [email protected].

A full copy of White’s speech is available on the SEC website. Mary Jo White, Chair, SEC, Remarks at the Securities Enforcement Forum (Oct. 9, 2013)

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