SEC enforcement practices could be improved by making them more clear and predictable, the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness said in a report Wednesday.
The report's recommendations, which address Securities and Exchange Commission enforcement policies, commissioners' oversight and investigation processes, are based on a yearlong survey of 75 corporate executives and interviews with former SEC officials, corporate counsels and legal experts.
At the top of the list of 38 recommendations is scrutinizing the SEC's use of administrative proceedings instead of filing civil enforcement actions through the courts. Chamber officials called for a more formal structure for deciding the proper forum, and for incorporating more due process protections along the way.
Hedge fund manager Nelson Obus, founding partner and chief investment officer of Wynnefield Capital, which spent $12 million and 12 years successfully defending itself against insider-trading charges, said at a Chamber of Commerce briefing on the report Wednesday that his firm would not have succeeded in an administrative proceeding, which has less discovery. Hedge funds “are an easy target,” for enforcement actions, Mr. Obus said in an interview.
The report also called for streamlining investigations, changing the Wells notice process, clarifying the agency's policy on admissions of guilt in enforcement actions, and less duplication among federal regulators.
In a statement, SEC Enforcement Division Director Andrew Ceresney said the recommendations “would significantly weaken the commission's ability to protect investors through strong and effective enforcement of the federal securities laws.”
Chamber officials said after the briefing on the report that they will meet with SEC commissioners and staff and members of Congress to seek the changes. “For us, this is a long-term process. The due process parts are the most important,” said Thomas Quaadman, the center's vice president, in an interview.
