SEC Chair Mary Jo White gave a speech in which she highlighted the SEC’s relationship with international regulators. Focusing on the SEC’s cooperative efforts with and reliance on the regulators, she described the key “enforcement tools” in their shared “arsenal.”
Chair White urged regulators to use the following “enforcement tools”:
- Strong Remedies: Chair White emphasized that tough sanctions capture the attention of boards and shareholders who are in a position to bring about constructive corrective action that can range from changes in management and compensation to an overhaul of corporate culture.
- Individual Liability: Chair White stressed that individual accountability, particularly at the most senior levels, is a core part of the SEC’s enforcement program because “firms can only act through their people and it is people to whom we are trying to send our strong message of deterrence.”
- Whistleblowers: Chair White stated that in Fiscal Year 2015, the SEC received over 4,000 tips. Additionally, the agency has paid out more than $50 million in whistleblower awards since the program began.
- Data and Technology: Chair White described the SEC’s development of the Advanced Relational Trading Enforcement Metrics Investigation System, which “analyzes suspicious trading patterns and relationships among multiple traders and uses the Division’s electronic database of over 6 billion electronic equities and options trading records.”
Chair White delivered her opening remarks at the 21st Annual International Institute for Securities Enforcement and Market Oversight.
Lofchie Comment: Perhaps because it is driven partly by politics, the culture of financial regulation has become so hostile to businesses that the Chair’s description makes “regulatory cooperation” sound as though financial regulators were banding together to crack down on international drug cartels. In fact, most people in the financial industry try to comply with the law, though, like people in other industries, not all do. Financial industries also provide significant benefits to society as a whole, such as allocating capital, affording opportunities for savings and contributing to the possibility of economic growth. Even at a conference that is focused on enforcement, there ought to be some acknowledgment of the fact that the regulated entities are businesses without which the country likely would not succeed (unless one believes that the government would be more successful than businesses at allocating capital and running enterprises). If the regulators ever let loose with their full arsenals without any restraint, they will soon discover that their weapons are pointed in the wrong direction.