SEC Seeks Tougher Enforcement Options as it Stumbles on Settlements

December 2, 2011 – In The News
Westlaw News & Insight Securities Blog

Earlier this week, SEC Chairman Schapiro wrote to Senators Jack Reed and Michael Crapo to request that the agency be given greater enforcement powers. The timing of Schapiro's request is ironic to say the least. On the same day that Schapiro made the request, United States District Court Judge Rakoff rejected an SEC settlement of $285 million on a purported loss of $700 million because, according to Judge Rakoff, the settlement was "pocket change" and "short-changed" investors who suffered the loss. This was not Judge Rakoff's first rejection of a settlement between the SEC and a regulated entity. In 2009, Judge Rakoff similarly rejected a settlement until the SEC and the other party agreed to raise the settlement amount.

Understandably, the SEC has been on the defensive about the settlements it has reached. What one may consider as passing the buck for not obtaining heftier settlements or an effort to prove that it is not a paper tiger, Chairman Schapiro has asked for greater authority so that the SEC can impose tougher sanctions on offending parties. In her letter, Chairman Schapiro expressed the SEC's frustration that the law limits its authority to calculating fines to one of two methods: a penalty equal to the ill-gotten gains or a penalty for individuals up to $150,000 per violation and up to $750,000 per entity.

View entire article