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Friday, October 27, 2017

Is the Enforcement Pendulum Swinging Back at the SEC?

News summary by MFWire's editors

The top cops watching fundsters and others on Wall Street may soon be changing their enforcement tactics.

Steven Peikin, co-director of the SEC's enforcement division, said yesterday at a conference, reports the Wall Street Journal, that the regulatory agency may soon be pulling back on two enforcement initiatives: one, trying to get some companies to admit to wrongdoing as part of their SEC settlements, and two, taking a broken windows approach to pursuing even small violations.

The paper notes that the SEC has brought record numbers of enforcement cases in recent years thanks to the broken windows approach. Yet as the 1,400-person enforcement division potentially sees its investigatorial ranks shrink by 100, Peikin expects that record enforcement trend to reverse.

"It may be the case that we have to be selective and bring a few cases to send a broader message rather than sweep the entire field," Peikin reportedly said yesterday.

Admission of guilt was only involved in about two percent of cases filed from 2014 to 2017 according to research from Northern Illinois University College of Law professor David Rosenfeld, who is cited by the WSJ. Although limited, the practice is controversial, with some in the industry calling it unfair thanks to its extreme infrequency. Defenders of the practice like outspoken and high profile U.S. Senator Elizabeth Warren (D-Massachussetts) criticized Obama-era SEC chair Mary Jo White for not pursuing admissions of guilt more frequently.

Peikin worked at industry law firm Sullivan and Cromwell before Trump's SEC chairman, Jay Clayton, hired Peikin in June. Peikin serves alongside fellow enforcement division co-director Stephanie Avakian. Avakian also gave a speech yesterday, telling the Securities Enforcement Forum about two recent SEC creations, a retail strategy task force and a cyber security unit. 

Edited by: Neil Anderson, Managing Editor


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