The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness recently released a report entitled Examining U.S. Securities and Exchange Commission Enforcement: Recommendations on Current Processes and Practices that offers 28 recommendations to improve the SEC’s Enforcement program. The report argues that “SEC Enforcement should have a fair process for all to ensure that the rights of the accused are preserved while allowing the process to achieve its goals of finding the truth, punishing the wrong-doers, and preventing future harm.”
In drafting the report, the Center surveyed more than 75 companies and “conducted extensive interviews with a wide range of more than 30 former SEC officials, legal experts, and corporate counsels.” The report notes that the Center was “very careful to propose changes that will both further enable tough-as-nails efforts to punish and deter fraud while ensuring that honest market participants benefit from a clear and predictable process.”
With respect to enforcement policies, the report suggests that the SEC should provide a structure and consistent policy related to its choice to direct an action to in-house administrative courts or to the federal court system. According to the Chamber, such clear guidelines would help resolve potential questions of due process. Additionally, the report offers suggestions related to requiring admissions of wrongdoing, reducing duplicative enforcement actions, and rethinking the “broken windows” approach.
Next, the report offers suggestions related to the Commission’s oversight of the enforcement program. The Center argues that “[m]acro-level Commission oversight of the overall Enforcement Program, in terms of priorities and areas of emphasis, allocation of resources, and periodic assessment of effectiveness has traditionally been extremely limited.” As a result, the report offers recommendations to improve oversight as well as public transparency and dialogue.
Lastly, the report recommends several ways for the SEC to improve the SEC’s investigation process, which it calls “opaque.” The report argues that the process is “often long and costly,” and “[b]ecause the great majority of SEC investigations are closed without any action taken, these substantial costs are incurred by significant numbers of persons and entities that are never charged with committing violations.”