A Victory Lap for the SEC

Jordan Thomas -

Last month, a jury sided with the SEC in a closely watched case, finding two stockbrokers liable for insider trading in connection with a $1.2 billion IBM acquisition. Though prosecutors had previously dropped the criminal case against the brokers, the SEC charged on, ending in an impressive court victory.

The Commission is becoming expert at having—and winning—its day in court. This recent case follows a string of victories for the SEC's trial unit. In 2015, the team took 27 cases to court and was undefeated in federal court, and had just two losses in administrative proceedings.

Shoring up the SEC's Trial Unit was a critical focus for Chair White, whose reputed toughness was questioned when she first took the helm of the SEC in 2013 and saw a series of losses. In 2014, she restructured the unit by teaming trial lawyers with investigative experts to create more full-bodied teams primed from the onset of complex cases. The Commission also directed recruiting efforts to former federal prosecutors, who bring expert bench strength to the courtroom. The work began to pay off quickly.

Chair White has frequently spoken to the strengths of the SEC’s enforcement program, a system that looks to not only penalize wrongdoers, but also to prevent future misconduct. “In order for our SEC enforcement program—or any enforcement program—to be effective, the punishment must not only fit the crime, but the actions we bring must also send a strong message of deterrence to other would-be wrongdoers,” White said in a 2014 speech. “This is much easier said than done and very hard to measure, but this much is certain—our sanctions must have teeth and we must send a strong public message about our cases. The more serious the misconduct, the more aggressive we should be in seeking monetary penalties, industry bars, court injunctions and other remedies available to us.”

This most recent message should be heard loud and clear by those thinking twice before taking on the SEC, while it also reminds whistleblowers that as they navigate the tricky terrain of reporting misconduct, they have a formidable ally in the United States government.