The message coming from the SEC Speaks conference in Washington, D.C., was unmistakable—expect vigorous enforcement to restore investor trust and confidence in the U.S. financial markets. In her opening speech, U.S. Securities and Exchange Commission (SEC) Chairman Mary Schapiro emphasized the need for the SEC to move quickly and to decisively take actions against those "who break the law and take advantage of investors." She announced two actions to help jumpstart this focus on enforcement. First, Chairman Schapiro ended the SEC's two-year "penalty pilot," which had required the enforcement staff to obtain a special set of approvals from the commission in cases involving civil monetary penalties for public companies as punishment for securities fraud. The enforcement staff and members of the SEC defense bar agreed that these procedures make it difficult to negotiate the issue and penalty amounts and slow down the process of bringing investigations to conclusion. Second, Chairman Schapiro ended the practice of requiring the advanced calendaring of full meetings of the commissioners before authorizing formal orders of investigation, which arm the SEC staff with the power to issue subpoenas for testimony and documents. The SEC will now return to the practice of having formal orders timely reviewed and approved by seriatim approval (what staff members used to call "walking the memo around" for the commissioners' approval) or where appropriate, by a single commissioner acting as duty officer.
Chairman Schapiro also highlighted the following priorities: improving the quality of credit ratings by addressing conflicts of interest, reducing systemic risk to investors and markets by regulating centralized clearinghouses for credit default swaps, strengthening risk-based oversight of broker-dealers and investment advisers, and improving the quality of audits for nonpublic broker-dealers.
In addition, the SEC has announced the appointment of former federal prosecutor Robert Khuzami as the new director of the Division of Enforcement.