Dan Brecher
Counsel
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The Securities and Exchange Commission (SEC) will likely undergo a number of significant changes with Mary Jo White at the helm. She has promised to step up enforcement if confirmed as the agency’s new chairwoman.
Changes could also be coming to how the SEC punishes securities violations. The agency is reportedly exploring the use of more customized injunctions in which the punishment truly fits the “crime.”
As Reuters reports, the SEC plans to move away from broad injunctions that largely enjoin defendants from further violating securities laws, arguing that they are often ineffective and difficult to enforce. “We want to use all of the tools available to us to specifically discourage repeat misconduct and go beyond the injunctions we traditionally obtain,” George Canellos, the SEC’s acting enforcement director, told the news outlet. “We are actively exploring ways to invoke that authority more creatively toward the goal of creating remedies tailored to the misconduct at issue,” he added.
The new conduct-based injunctions are concerning for the securities industry because they go beyond simply “obeying the law” and, in many cases, prohibit otherwise legal activity. For example, defendants may be barred from offering mortgage-backed securities, soliciting investors to purchase or sell securities, or serving as an officer or a director of a registered entity.
Under statutes like the Sarbanes-Oxley Act and the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (Remedies Act), the SEC has broad discretion to obtain injunctions in certain situations. However, it is unclear if these new bans have the same legal footing. Therefore, should the SEC step up its use of these “creative” punishments, there will also likely be a rise in legal challenges.
If you have any questions about this new SEC initiative or would like to discuss how it may impact your NY or NJ business, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.
- Practices: Corporate Transactions & Business, Financial Services & Regulatory Practice
- Locations: New York City, Red Bank, NJ, Little Falls, NJ
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No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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