You Could Learn A Lot about SEC Enforcement Listening to Mary Jo White…

Securities and Exchange Commission Chair Mary Jo White is certainly keeping busy. In recent weeks she’s spoken to the Council of Institutional Investors, the National Association of Corporate Directors, and the Securities Enforcement Forum, among others. From lawyers writing on JD Supra, here’s what she had to say:

The SEC wants more guilty pleas:

  • “In recent public statements, White indicated the Enforcement Division would seek admissions where the conduct was ‘egregious’ or where it posed ‘significant risk’ to investors, or where necessary to send ‘an important message.’” (Terence Healy at Reed Smith)
  • “According to Chair White, candidates potentially requiring admissions include … cases where admissions would aid investors deciding whether to deal with a particular party in the future.” (Jill Radloff at Leonard, Street and Deinard)

The agency’s new “broken windows” strategy means minor violations of securities laws will not go unpunished:

  • “Ms. White likened the SEC’s current enforcement strategy to the ‘Broken Windows’ approach employed by former New York City Mayor Rudolph Guiliani and Police Commissioner Bill Bratton to combat crime in the 1990s. Guiliani and Bratton ‘essentially declared that no infraction was too small to be uncovered and punished,’ said Ms. White.” (Hillary Profita and Michael Rivera at Venable)
  • “The Chair stated that … ‘Investors do not want someone who ignores minor violations, and waits for the big one that brings media attention. Instead, they want someone who understands that even the smallest infractions have victims, and that the smallest infractions are very often just the first step toward bigger ones down the road.’” (Jay Baris and Daniel Nathan at Morrison & Foerster)

Investors need corporate data, but they may not be getting the right information:

  • “During her speech White talked about the need for disclosure, stating that without it, investors would be unable to make informed decisions, and could unwittingly be putting themselves at risk. Among the information companies must disclose to the SEC, White mentions the inclusion of the company’s current, future, and occasionally past business model; recent past and present profit history, as well as future profit estimations; details about large shareholders, loan history and future loans; and a detailed descriptions of company officers and directors, how much they are paid, and why.” (Felix Shipkevich at Shipkevich)
  • “Ms. White raised the question as to whether investors need and are optimally served by the detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are required to prepare and file with us.” (Stephen Quinlivan at Leonard, Street and Deinard)
  • “Chairwoman White discussed potential changes to the disclosure scheme in general, such as more principles-based (rather than specific line-item) disclosure, disclosure requirements tailored to the industry in which an issuer operates and/or the creation of a ‘core document’ or ‘company profile’ filing with the SEC that would contain information that changes infrequently.” (Andrew Halbert and Mark Wood at Katten Muchin Rosenman)

The SEC is also monitoring auditors, investment managers, and other service providers:

  • “Auditors of public companies, who have never been far beyond the gaze of the SEC, will now receive increased attention through a program dubbed ‘Operation Broken Gate.’ The SEC has also shown a desire to pursue other ‘gatekeepers’ in the financial services industry, including attorneys and transfer agents.” (Terence Healy at Reed Smith)
  • “White reported that, since the passing of the Dodd-Frank Act and the JOBS Act, private funds and their advisers have moved ‘from what some would say was a secretive industry, to a widely recognized and influential group of investment managers.’ She said that transparency into private funds’ operations will benefit investors, the public and regulators and suggested that it would also ‘significantly redound’ to the benefit of private funds and their advisers.” (Kelley Howes at Morrison & Foerster)

The updates:

Read additional commentary and analysis on the SEC at JD Supra Law News>>