Mary Jo White promised Congress she would pursue a “bold and unrelenting” enforcement program as chairman of the Securities and Exchange Commission (“SEC”). Six months into her tenure, we should take her at her word. In public remarks this week, White reiterated her desire for the Enforcement Division “to be everywhere” and to be “felt and feared” in areas beyond where its resources can reach.
Perhaps the best example of this more-is-better approach to enforcement is the move away from the Commission’s traditional “neither admit nor deny” settlement policy. This practice – born out of a 1972 rulemaking – had been consistently followed by the Commission (and other federal agencies) for decades. But in 2012, responding to criticism from at least one federal judge, the Commission changed this policy as it applied to parties that had admitted or been found guilty in related criminal proceedings. In September, White announced she would seek admissions of wrongdoing in certain cases even where there had been no findings of guilt in related proceedings.
Recent settlements with financial institutions such as Harbinger Capital Partners, in which the parties made limited admission of wrongdoing, demonstrate the Commission means what it says in seeking admissions in certain cases. But the standard for when the Commission may seek such admissions remains unclear. In recent public statements, White indicated she would seek admissions where the conduct was “egregious” or where it posed “significant risk” to investors, or where necessary to send “an important message.” These stated reasons, though sound, hardly provide a clear standard to apply to future matters.
Only time will tell whether this new policy – with all its impractical consequences – can be applied in any but the most rare of cases. Then we will know more about the true meaning of “bold and unrelenting” from the new SEC.