SEC chairman promotes securities enforcement

More cooperation, aggressiveness leading to uptick in criminal cases

Mar 31, 2014 @ 10:47 am

By Mark Schoeff Jr.

The Securities and Exchange Commission increasingly is working with other law enforcement agencies to catch criminals, including investment advisers, who are violating securities laws, the SEC's chairman, Mary Jo White, said Monday.

“[A] robust combination of criminal and regulatory enforcement of the securities laws is not only appropriate, but also critical to deterring securities violators, punishing misconduct and protecting investors,” she said in prepared remarks at the Securities Industry and Financial Markets Association Compliance and Legal Society annual seminar in Orlando, Fla.

Ms. White, a former U.S. attorney for the Southern District of New York, said that in 1993, when she took that office, 67 criminal cases related to SEC investigations were prosecuted.

The average for the most recent five fiscal years is 136. The SEC also is granting law enforcement authorities more access to its files.

The SEC itself doesn't have the authority to bring criminal charges.

But the information it uncovers in its investigations and the cooperation it provides to the Justice Department, the FBI and state and local officials can be crucial in building cases involving federal securities violations, Ms. White said.

The teamwork extends beyond investigations into traditional insider trading, offering frauds and Ponzi schemes.

“More recently, our parallel efforts have also yielded a significant increase in criminal actions in the [Foreign Corrupt Practices Act] space and in other areas, including actions against investment advisers for false valuations, overcharging and hiding fees,” Ms. White said.

“Although the SEC is certainly not the source of, or involved in, every securities fraud prosecution, my sense is that many criminal authorities across the country are more willing and better able to pursue these prosecutions because the SEC devotes significant resources to uncovering and building these complex cases, and then working in parallel with the prosecutors to bring our respective cases,” she said.

Ms. White, who put mobsters and terrorists in jail as a U.S. attorney, has made enforcement a signature of her tenure. She will mark one year in office next month.

As an example of enforcement cooperation, Ms. White cited a case that the SEC filed last week against a registered representative and a managing clerk at an international law firm in a $5.6 million insider trading scheme.

The SEC, the U.S. Attorney's Office for the District of New Jersey and the FBI worked on the case. The trader and his source were arrested on the same day that the SEC filed its case.

“Working together, investigators uncovered illegal tips that allegedly were conveyed, as if from a movie scene, through a middleman who met with the trader at Grand Central Station [in New York], showed him handwritten notes of the stocks he should trade and then ate the notes to cover his trail,” Ms. White said.


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