We lifted the
piece below from the following bloomberg.com website:
SEC Boosts Tally of Enforcement Successes with Routine Actions
By Joshua Gallu - Feb 22, 2013 4:00 AM CT
The U.S.
Securities and Exchange Commission has been trying for four years to convince
investors and critics that it’s back on the beat.
As part
of that effort, the agency has cited a record number of enforcement actions
over the past two years -- 734 in fiscal 2012 and 735 the year before -- as
evidence that an overhaul of its investigative forces has made the regulator
smarter, faster and more effective.
“The sustained high-level performance comes
two years after the division underwent its most significant reorganization
since it was established in the early 1970s,” the SEC said in a November statement when it released
the tally. “The results in 2012 were aided by many of the reforms and
innovations put in place in the past two years.”
However,
an analysis of that data by Bloomberg shows that the SEC filed fewer new actions last year compared to
2009, the year before it reorganized. The agency didn’t surpass those levels in
2011 either.
About
228, or 31 percent, of the 734 enforcement actions were so-called
administrative proceedings that institute penalties in cases that were already
brought, sometimes years earlier. Examples of administrative actions include
barring people who’ve already been found guilty of fraud from working in the
industry, or from temporarily suspending accountants practicing before the SEC.
Excluding
such follow-on proceedings, the SEC filed 506 original actions last year, fewer
than the 520 it filed in 2009, the year before the reorganization. In 2009,
144, or 22 percent, of the 664 total actions were follow-on proceedings.
‘Bad Actors’
“The SEC
is the only federal agency that can kick bad actors out of the securities
industry,” SEC spokesman John Nester said in an e-mail. “These proceedings are fiercely contested, but it’s hard to
see how investors would benefit if we won a fine in court but let the person go
on cheating customers.”
When the
SEC announced the results in November, then- Chairman Mary Schapiro cited the
“innovative reforms” for the results.
“We’ve
now brought more enforcement actions in each of the last two years than ever
before, including some of the most complex cases we’ve ever seen,” she said.
Penalties Rose
The
agency did order $3.1 billion in financial penalties and disgorgement
of illegal profits last year compared with $2.4 billion in fiscal 2009.
Investigators in specialized units set up under Schapiro also have brought
novel electronic trading cases.
On the
other hand, the number of actions was buoyed by the most so-called delinquent
filings cases since at least 2006. Those cases often entail sanctioning or
delisting companies that have stopped filing public statements. Typically, they
require little investigation compared to securities fraud cases and aren’t
related to the overhaul of the division.
Stock
manipulators have used securities with delinquent filings to hype the price
before selling the shares into the artificial demand they created, Nester said.
“Rather
than wait until investors lose their money, we take the securities off the
market before innocent investors are ripped off,” Nester said.
Nearly Half
Taken
together, follow-on administrative proceedings and delinquent filings cases
made up 48 percent of the enforcement division’s actions in fiscal 2012,
compared with 36 percent in 2009, before the enforcement division was
reorganized. At the same time, the SEC brought the fewest number of
accounting-fraud cases since at least 2003.
In
addition, the SEC issued 479 formal orders of investigation last year, down
from 496 in fiscal 2009. A formal order authorizes staff to compel testimony
and issue subpoenas.
The SEC
has struggled for more than four years to beat back criticism that isn’t up to
the job of policing markets. Lawmakers, investors and judges have faulted the
agency for missing Bernard Madoff's multibillion dollar fraud and for not being tough enough on Wall Street for misconduct
that helped fuel the financial market turmoil of 2008.
Schapiro,
who was succeeded as chairman by Elisse Walter in December, took over the
agency’s helm in 2009, just after Madoff’s multibillion dollar fraud was
exposed. To remake the enforcement division, she tapped Robert Khuzami, who
eliminated a layer of management and established specialized units in 2010 to
focus on areas such as hedge funds, market abuse and structured products. The SEC also established a program to
reward whistleblowers and set up a system to sort tips and referrals.
‘Increasing Complexity’
“It’s not
simply the numbers, but the increasing complexity and diversity of the cases we
file that shows how successful we’ve been,” Khuzami said in the November
statement. “The intelligence, dedication, and deep experience of our
enforcement staff are, more than any other factors, responsible for the
division’s success.”
Khuzami
stepped down earlier this month and was replaced on an interim basis by his
deputy George Canellos.
The 2012
numbers cited by the SEC include follow-on actions for cases filed last year
and in previous years, sometimes prior to Khuzami’s restructuring.
For
example, Zvi Goffer, a former trader, was sued by the SEC in October 2009 in connection with the
Galleon insider trading case. Goffer was convicted of criminal charges in 2011
and was later sentenced to 10 years in prison. In December 2011, the SEC
submitted a three-page follow-on action barring Goffer from association with
any broker or investment adviser. That was added to the division’s tally.
In
another matter, the SEC sued Preston L. Sjoblom in March 2012 over claims he
made false statements to investors about his company. In August, after the
court had entered a final judgment against Sjoblom, the SEC filed a follow-on
administrative order to bar him from associating with a broker. The SEC counted
both actions in the 2012 results.
