Last week the US Chamber of Commerce, through its Center for Capital Markets Competitiveness, issued a white paper proposing wide-ranging changes to the SEC's enforcement process. Most of the 28 recommendations were refinements of existing processes or prior recommendations, but some likely would require congressional mandate. The report called for changes to five categories of enforcement policy, to Commissioners' oversight of the enforcement process and improvements to SEC investigations. The Center's objective is to ensure "vigorous, effective enforcement coupled with a clear and fair process." The Chamber recommended: Enforcement Policy - Choice of Forum
Enforcement Policy - Refining the Wells Process
- A formal policy that the administrative forum will be used in matters involving well-established legal principles, not having an extensive investigative record (so procedural timing is fair) and relief specific to administrative proceedings.
- A procedure for respondents to challenge the SEC's forum choice.
- A process for "removal" of administrative actions to federal courts for jury trial.
- A review of the SEC's Rules of Practice for fairness, including pretrial discovery and depositions.
Enforcement Policy - Admissions
- Requiring simultaneous Commission consideration of Respondents'' Wells submissions with Enforcement Staff prosecution memos.
- Ensuring Respondents have adequate access to investigative materials before their Wells submission deadline
- Requiring "reverse proffers" in which the Staff gives Respondents' counsel a preview of Enforcement's case.
- Requiring the Staff to give Respondents 3 business days' notice before filing actions.
Enforcement Policy - Parallel Proceedings
- Requiring regular review of the Commission's evolving "admissions" policy.
- Providing a clear statement of the policy
- Providing meaningful guidance on its implementation.
- Publishing guidance on the policy's interaction with settlement discussions.
Enforcement Policy - "Broken Windows"
- Asking the SEC to take the lead in eliminating duplicative regulatory enforcement responses, through inter-agency MOU's and other mechanisms.
Commission Oversight of Enforcement
- Using ADR for minor, non-systemic infractions (e.g. deficiency letters, desk injunctions, and investigative reports).
- Requiring quarterly reports on Enforcement.
- Conducting quarterly industry briefing on Enforcement issues.
- Providing emerging-trends notices to registrants and ensuring new standards of conduct are implemented through rule-making.
- Providing an annual public report and roundtable on Enforcement.
- Requiring the Staff to adhere to ABA Code of Professional Conduct 3.6 and 3.8 on pretrial publicity in issuing notices / releases of new actions (with independent review).
- Providing targets, subjects and witnesses early notice of "investigative interest" and litigation holds.
- Engaging in earlier communication with subpoena recipients.
- Greater discovery and document production cooperation.
- Requiring Formal Order requests to include resource and completion date discussions.
- Ensuring staff evaluation metrics include "closure credit."
- Requiring staff departure memos on open matters (to ease transitions).
- Requiring prompt closure notices.
- Training program improvements, including autopsies of litigated matters.
- Ensuring greater trial-counsel involvement at investigative stages.
The Chamber's July 15 release is here
. Thomas K. Potter, III
) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Resident in the Nashville office, Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile
. © 2015 by Thomas K. Potter, III (all rights reserved).