SEC Chair Delivers Lecture on the Importance of Trials to the Law and Public Accountability

SEC Chair Mary Jo White spoke at the Fifth Annual Judge Thomas A. Flannery Lecture about the importance of trials, their unique place in the American justice system, and about the role they play at the SEC. Chair White explained that trials play a vital role in the administration of justice. She stated that trials are a true measure of America's democracy because trials foster the development of law and more importantly to Chair White, they create public accountability for defendants and the government through the public airing of charges and evidence.

Chair White discussed ways in which trials foster the development of law. She referenced U.S. v. O'Hagan, which established the "misappropriation" theory of insider trading, where the wrongdoer misappropriates confidential information in violation of a fiduciary duty even if the wrongdoer owes no such duty to the company in whose stock he traded. She explained that this theory became supported by the law on a fully developed trials record, and the SEC continues to use this theory in insider trading cases today.

Chair White went on to explain ways that trials provide accountability to the public by providing a record and a fair trial under the law. She mentioned one way in which accountability can also be achieved is through admissions. Under a private or regulatory settlement, Chair White explained that it is not required by law to include an admission of wrongdoing. She noted that as a result, especially at the SEC, accountability through settlement can be even more elusive because it involves filing detailed civil complaints or detailed finding of facts in an administrative case. In many cases, Chair White also explained that settling cases on a no-admit/no deny basis works well, as the involved parties are able to eliminate all litigation risk, return money to victims more quickly, and preserve enforcement resources for other investigations. However, Chair White stated her belief that forcing defendants to admit wrongdoing will achieve greater accountability and sends a strong message of deterrence.

In closing, Chair White acknowledged that her new policy might create more cases on the docket, but explained that it is not such a bad thing. Trials will lead to more accountability and a more complete factual record of wrongdoing that will foster better development of the law. She stated that while the SEC may not win every case, the clear winner will always be the administration of justice.

See: SEC Chair White's Speech.