SEC Director of Enforcement Division Speaks About Priorities (with Bondi Comment)

At the American Bar Association's Business Law Section Fall Meeting, SEC Director of the Division of Enforcement Andrew Ceresney, spoke about the state of the SEC's enforcement priorities and tools.

Mr. Ceresney stated that the SEC had "a banner year last year" by pursuing "ground-breaking" cases ranging from market structure to financial reporting, asset management to insider trading, municipal securities, FCPA, and others. Last year, Mr. Ceresney noted, the Division also brought cases involving pyramid schemes that targeted low income and minority communities, as the SEC increased its number of cases by one-half.

Mr. Ceresney said he expects the Division to continue this trend of enforcement success. He covered a number of areas where he expects to see the SEC bring more cases, which included:

• market structure cases against exchanges;
• important financial reporting and audit cases (including fraud cases, cases against auditors, and violations of the internal controls requirements);
• microcap fraud cases against repeat players (including promoters who have spearheaded many schemes and attorneys who have facilitated them);
• cases relating to complex products and credit ratings from the Complex Financial Instruments Unit; and
• new areas of prosecution under the MCDC initiative.

Mr. Ceresney defended the use of certain SEC enforcement tools, stating that administrative proceedings: (i) produce prompt decisions; (ii) have the benefit of specialized "factfinders"; and (iii) are guided by the Federal Rules of Evidence. He also highlighted requiring admissions in settlements and using big data to detect and investigate violations as tools the SEC will continue to use to prosecute wrongdoing.

See: Mr. Ceresney's Remarks.

Bondi Comment: Mr. Ceresney echoed to the ABA the comments he made in October at Securities Docket's Securities Enforcement Forum in Washington, namely that the SEC would utilize "big data" and analytics in its investigations and would pursue cases in strategic areas such as financial and accounting fraud and against the exchanges. The SEC's Division of Enforcement finds itself at a crossroad. The enforcement actions relating to the financial crisis are coming to an end, and the SEC is now back to business as usual but with rising goals and expectations when it comes to number of cases brought and the size of penalties. The difficulty with pointing to specific areas and predicting certain enforcement actions is that sometimes those areas do not pan out as predicted. Then you have a hammer searching for a specific nail to hit.