Under President Donald J. Trump, a top financial regulator isn't embarrassing Wall Street as much as it used to.
Take TPG Capital LP — the private equity behemoth co-founded by billionaire David Bonderman. For years, the U.S. Securities and Exchange Commission had been investigating TPG and its competitors over concerns they were pocketing tens of millions of dollars in fees that were largely hidden from investors.
When the agency started punishing firms over the expenses in 2015, it trumpeted enforcement actions against Blackstone Group LP, KKR & Co. and Apollo Global Management LLC as examples of the government holding big financial companies accountable. All three paid at least $28 million, and each time the regulator filed a case it shined a spotlight on their alleged misconduct by issuing press releases with stern admonishments from SEC officials.
But TPG's penalty wasn't wrapped up until Trump took office, and the company was treated much differently. Instead of publishing a crowing press release, the SEC disclosed the sanction in a dense legal document that was quietly posted on the agency's website after U.S. stock markets had closed. When the $13 million settlement popped on Dec. 21, many on Wall Street were already out of the office for Christmas break.
TPG isn't the only one. In recent months, the SEC has opted not to hype some hedge-fund and big-bank cases that its Trump-appointed chairman, former Wall Street lawyer Jay Clayton, inherited from the agency's previous leadership.
The muted sanctions include a December enforcement action in which Bank of America Corp.'s Merrill Lynch unit agreed to pay $13 million for failing to adequately monitor millions of customer accounts for money laundering and other suspicious activity.
That same month, the regulator decided not to publicize an enforcement action against Nehal Chopra -- a hedge fund manager known for appearing at industry conferences and securing an investment from famed trader Julian Robertson. The SEC's order, posted discreetly on its website, said Chopra misled her investors by telling them her trades were based on researching stocks. In reality, a lot of her ideas came from her husband, the regulator said.
Merrill was also tied to another case that got the silent treatment: A September settlement with William Tirrell, a former Merrill executive who the SEC said played a key role in the firm misusing billions of dollars in customer funds.
The agency did issue a press release in June 2016 when it announced it had filed a complaint against Tirrell, and that Merrill would pay $415 million over the firm's alleged misconduct. But when the SEC reached a deal with Tirrell about five months ago the accord wasn't announced and his penalty was significantly lower than Merrill's: $0.
Just last month, the SEC sanctioned Industrial and Commercial Bank of China Financial Services LLC without issuing a formal press release. The company is a unit of Industrial & Commercial Bank of China Ltd., the world's largest lender and also the biggest commercial tenant in Manhattan's Trump Tower. It was accused of violating securities rules when closing out some clients' short sales on stocks.
Chris Carofine, a spokesman for Clayton, declined to comment.
The firms and individuals sanctioned by the SEC declined to comment or didn't respond to requests for comment. They all settled the agency's enforcement actions without admitting or denying any misconduct, except for Merrill, which did admit wrongdoing following the investigation into its misuse of customers' money.
Since Trump became president, he's made clear he wants to drop the contentious tone that often flared up between Washington and Wall Street in the years after the 2008 financial crisis, when bankers bristled at being hit with billions of dollars in fines and former President Barack Obama calling them "fat cats."
Clayton, the SEC chairman, has said his priority is protecting "Mr. and Ms. 401K." In the more than nine months he's led the agency, it hasn't hesitated to highlight enforcement actions involving small-time scammers, ponzi schemes, penny-stock frauds and, increasingly, wrongdoing tied to cryptocurrencies.
Ex-SEC officials say they've noticed a shift.
"You used to make your name at the agency by trying to get a bigger penalty, a splashy headline," said Tom Sporkin, a former SEC enforcement lawyer who is now a partner at BuckleySandler LLP. "The environment is changing. Now they're looking for opportunities to point to cooperation more so than bad conduct."
While many SEC investigators historically liked it when the media reported on their work, there's perhaps a more important reason why the agency has long touted its cases in press releases. When a company is shamed in a news article it can deter others from engaging in wrongdoing. That leverages the power of the SEC's enforcement division, which can't realistically police all the securities frauds taking place across the country with its roughly 1,400 lawyers and investigators.
Under Clayton, it's not just the number of press releases that are dropping, as his tenure has also seen fewer enforcement actions and penalties. Cases fell 13 percent to 754 for the fiscal year that ended in September, while fines against companies and individuals slipped 34 percent to $832 million.
Concerns that the SEC is going soft on big financial firms were raised at a Feb. 6 hearing when Senator Sherrod Brown questioned Clayton about the agency's willingness to hold Wall Street accountable. Brown, an Ohio Democrat, said things appear to be going "the wrong way."
Clayton rejected the notion that the SEC has pulled punches, telling Brown the regulator is "vigorously" pursuing violations of securities laws. The SEC chairman added that it's too early to draw conclusions about the agency's approach to enforcement because cases take about two years to develop.
The SEC is still hyping some investigations into Wall Street. This week, the agency issued a press release announcing that Deutsche Bank AG had agreed to pay about $4.5 million to settle allegations that it inflated its earnings after misleading clients about how much bonds backed by commercial mortgages were worth.
Under Clayton's predecessor, former federal prosecutor Mary Jo White, financial executives frequently took umbrage with the SEC calling them out over what they considered minor infractions.
The private equity cases involving TPG and other firms are good examples. They centered on so-called monitoring fees that PE firms charge the companies they own for consulting and legal work. The fees are ultimately paid by a PE firm's investors because it's their money that's used to buy the companies in the first place.
The SEC said disclosures tied to monitoring fees were misleading, especially the fact that PE firms often accelerated the expenses when portfolio companies were sold or taken public. In other words, fees that were supposed to be paid out over 10 years were paid out all at once for work that was never performed.
Still, for firms that manage billions of dollars, the amount of money at stake was trivial. In a statement, TPG pointed out that the SEC's enforcement action pertained to fees charged at least eight years ago that were disclosed to investors. It seems like the regulator now wants to turn the page too.