The SEC is gearing up to use new powers from the Dodd-Frank law to crack down on Wall Street after being faulted for not pursuing executives' misconduct, Robert Khuzami, the SEC's director of enforcement, testified Wednesday at a Senate committee hearing.
The Dodd-Frank law “will help address some of the practical challenges that we face in policing the securities markets,” Mr. Khuzami said in a prepared testimony before the Senate Judiciary Committee. “We recognize that there is more work to be done.”
Lawmakers, investors and judges have faulted the SEC for not pursuing corporate executives at the firms it sued for misconduct related to the financial crisis. The Dodd-Frank regulatory act, which lowers the bar for suing individuals, will help the SEC punish executives who had only indirect or supervisory responsibility linked to misconduct, Mr. Khuzami said.
The SEC, which has opened 487 formal investigations this year, will close about 32% more cases this fiscal year than in 2009, Mr. Khuzami said. The agency has filed 634 enforcement actions and returned nearly $2 billion to harmed investors this fiscal year, he said.
The enforcement division has this year put into place five specialized units and launched initiatives including a risk-based approach to identify suspicious investment advisers and a program to analyze mutual fund fees. Mr. Khuzami said he expects the programs to result in investigations of investment advisers and mutual funds' boards of directors.
Mr. Khuzami said the agency has stepped up coordination with other law enforcement forces and has embedded an FBI agent in its market-intelligence unit, which analyzes data and tips to identify emerging trends in securities fraud. The agency is working with the FBI and Justice Department on a number of active investigations, he said.