The Trump administration has prided itself on efforts to reduce the burden of regulation but has not deflected the Securities and Exchange Commission from its policing role.
The SEC has continued to take action against those who have hurt investors through illegal actions. It has acted as the tough cop on the investment markets beat.
In its report for the fiscal year ended Sept. 30, the SEC showed it obtained a total of $3.95 billion in penalties and assets returned to investors, up from $3.79 billion the previous year.
The number of enforcement options also was up from the previous fiscal year, and of the SEC's 490 stand-alone cases, about 63% concerned investment advisory issues, securities offerings issues, and issuer reporting, accounting and auditing.
An old saying is: "In every town of 5,000 people there is a jail," meaning that in that population there will be lawbreakers and a police force is needed. So it is with the investment community, which has a population greatly exceeding 5,000. There are those who break the law or flout the regulations, and the SEC is a major part of the police force. It is assisted by other organizations such as the Commodities Futures Trading Commission and the Financial Industry Regulatory Authority, but the SEC does most of the policing of institutional investors.
In just the past four months the SEC has fined Merrill Lynch $42 million for misleading institutional customers, and settled with Citigroup over charges it misled institutional investors in dark pool trades and with Moody's over charges that it used erroneous models to rate residential mortgage-backed securities from 2010 to 2013.
The increased number of enforcement actions suggests the SEC is doing more patrolling on its beats and paying closer attention to evidence of slipping standards of behavior, much as beat cops pay closer attention to broken windows and step up their patrols.
"Broken windows" policing worked in major cities. It will work in the financial community also.
