More SEC Enforcement Actions on the Horizon

At a luncheon put on by the D.C. Bar, former SEC Commissioner Roel Campos and current SEC Commissioner Luis Aguilar gave their insight to some changes on the horizon for the SEC. One of the more interesting perspectives concerned the expected increase in enforcement actions. ..

Prior to undertaking an action against a corporation, the staff of the SEC makes a case to the five commissioners. The commissioners then vote on whether to proceed. Although a majority vote allows for the SEC to move forward, according to Mr. Campos, former SEC Chairman Christopher Cox often was reluctant to prosecute on 3 to 2 votes, and moved forward only when there were 4 to 1 or 5 to 0 votes by the commissioners. Because of the political split of the five commissioners, this greatly reduced the number of enforcement actions.

The appointment by the Obama administration of Mary Shapiro as Chairman of the SEC should change the political composition of the board. The 3 to 2 votes against enforcement may often switch to a 3 to 2 vote in favor of enforcement. Furthermore, both Campos and Aguilar do not expect Ms. Shapiro to move forward only on super majority votes – a 3 to 2 vote may now be sufficient. The business community is now on notice and should expect a significant uptick in prosecutions.

Tags: Aguilar, Campos, Cox, enforcement, enforcement actions, SEC, Shapiro