White softens stance on minor securities violations

“It's not a game of gotcha,” SEC chairman tells compliance officers

Oct 22, 2013 @ 12:59 pm

By Mark Schoeff Jr.

Securities and Exchange Commission Chairman Mary Jo White told compliance officers Tuesday that the agency will work with them to address regulatory lapses before resorting to enforcement.

“The balance is critical,” Ms. White told a meeting of the National Society of Compliance Professionals in Washington. “We're not seeking for every minor violation to bring an enforcement action by any means. It's not a game of gotcha at all.”

Ms. White's comments softened the tone she took this month when she announced that the SEC would crack down on minor violations to create a culture of compliance in the financial markets.

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“The industry and the SEC work best in partnership,” Ms. White said.

On Tuesday, she stressed that compliance officials are a “critical line of defense” against violations of securities laws and regulations and that they must be supported by a firmwide focus on operating within the rules. She highlighted recent SEC guidance stating that the agency generally does not target compliance personnel who are doing the jobs properly.

Last year, the five SEC commissioners split on a case centering on whether a general counsel at a brokerage firm had authority over sales personnel who were committing regulatory violations.

“We do not want you to be concerned that by engaging, you will somehow be arbitrarily construed to be a supervisor, and expose yourselves to potential supervisory liability,” Ms. White said.

She also noted that the SEC recently filed its first case involving the obstruction of a compliance officer at an investment advisory firm.

“We want your firms to know, at every level, how important your work is to investors and to us,” Ms. White said. “And we will be looking for more cases to bring to drive that message home.”

Her appearance was the first by an SEC chairman before the compliance group.

Lee Augsburger, senior vice president and chief compliance officer at Prudential Financial, said that while the SEC has elevated its enforcement activities, Ms. White's remarks were reassuring.

“I'll take her at face value on what she says about the importance of compliance and the SEC's desire to work with us,” Mr. Augsburger said. “That message was gratifying. Compliance officers are critical to making the whole system work and re-establishing trust between Wall Street and Main Street.”


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