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November 20, 2019

SEC’s Quantity Over Quality Enforcement Program

The SEC also recently released its FY2019 Enforcement Program statistics, and while the total number of completed enforcement cases remains high, it is concerning to note how the SEC has achieved these numbers.  As in past years, the SEC seems more interested in quantity more than quality.  For example, according to the report, of the 526 standalone enforcement actions, 95 were against mutual funds that self-reported violations of disclosure rules under SEC’s recent Mutual Fund Share Class Selection Disclosure Initiative. Over 36% of the standalone cases were against investment companies, and only 51 cases against broker-dealers and 30 cases for insider trading, which are 40% less than SEC’s similar actions in the prior year.

America’s investors depend on the SEC to detect, investigate, punish, and deter investment professionals’ or corporations’ misconduct and illegal activities.  Bragging about numbers that make the SEC look good may make them feel good, but only actual tough actions against even powerful financial interests will punish and deter wrongdoing and protect investors.  The SEC is supposed to be the cop on the Wall Street beat, not an organization more interested in its own PR, which may fool the public, but it won’t fool the securities crooks who will see it as a green light to prey on investors.

Better Markets has long advocated for an effective SEC enforcement program.  For example, Better Markets aggressively opposed the SEC’s weak, flawed sweetheart settlements with Wall Street’s largest banks, including, for example, Citigroup where we intervened in the District Court and filed briefs in the U.S. Court of Appeals for the Second Circuit.  We are also actively engaging FINRA, which is the front-line regulator of the broker-dealer profession, on investor protection to significantly revamp its approach towards recidivist brokers and firms that specialize in hiring recidivist brokers.  We will continue fighting for well-resourced and investor-oriented enforcement programs that hold unscrupulous financial professionals and executives accountable for cheating and harming investors.



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