In a recent public statement, SEC Commissioner, Luis A. Aguilar, argues that the SEC needs to make a greater effort in providing clarity and transparency in the orders it issues with respect to enforcement actions.
According to the Commissioner, the purpose of such orders is to not only publicize an enforcement action but also to send a clear message to others about what is acceptable and not acceptable behavior. In order to send a clear message, it is important that the SEC’s enforcement order be clear and as complete as possible to explain the requirements of the law or regulation that was violated and how the violator’s activities violated the law. An example given by the Commissioner is the recent enforcement actions taken by the SEC against chief compliance officers. Because the larger audience of chief compliance officers and their employers are taking note of such actions, it is imperative for the SEC to be as clear as possible in issuing such orders to define what the SEC and the law expects from chief compliance officers.
The Commissioner, in his statement, acknowledges that oftentimes the staff negotiates with the respondent about the language used in the enforcement order. However, the staff’s desire to resolve the matter should not take a backseat to the needed clarity within the order to most accurately describe the activity that resulted in the violation of the law and the penalties levied.