Mary Jo White. (Photo: Diego M. Radzinschi/NLJ.)
In a speech today before the Consumer Federation of America, U.S. Securities and Exchange Commission head Mary Jo White touted the agency’s efforts to protect individual investors, describing the mission as “a constant focus of the SEC.”
In fiscal year 2013, she said, the SEC returned $3.4 billion in disgorgement and penalties to harmed investors, an agency record. She also said the agency is considering new rules that would establish a uniform fiduciary standard for broker-dealers and investment advisers and is reviewing mandatory predispute arbitration agreements.
“If we fail to serve and safeguard the retail investor, we have not fulfilled our mission,” White said, according to a written copy of her remarks, delivered at the federation’s annual Consumer Assembly in downtown Washington.
White said the SEC is currently looking at the “appropriate role and legal duty for investment advisers and broker-dealers, especially when they are both giving advice on securities to retail investors.” Investment advisers are fiduciaries to their clients, while broker-dealers may not be, although they are subject to regulation under the Securities Exchange Act of 1934 and other rules.
“Whenever you have substantially similar services regulated differently, I believe it is necessary to consider carefully whether the regulatory distinctions make sense,” White said. “I have asked the staff to make the evaluation of potential options an immediate and high priority.” The SEC was given authority under the Dodd-Frank Act to impose such a uniform standard.
Another “top priority for me in 2014,” White said, is finishing rules connected to the Jumpstart Our Business Startups, or JOBS, Act, which lifted the ban on advertising certain securities offerings.
“Some are concerned that the general public could be exposed to more fraudulent activity and riskier investments. I share those concerns,” she said. Our ultimate goal is to craft rules that provide effective, workable paths for companies to raise capital that also protect investors.”
White also said the SEC is considering whether to “exercise the authority provided under Section 921 of the Dodd Frank Act to limit or eliminate mandatory predispute arbitration agreements,” calling it “an important issue.”
In addition, White touted the SEC’s enforcement efforts, pointing to the agency’s new policy requiring some defendants to admit wrongdoing as part of a settlement.
“My years as the United States Attorney for the Southern District of New York, when I prosecuted terrorists, organized crime figures, insider traders and other securities fraudsters, taught me the importance of defendants admitting that they broke the law,” she said. “The facts are clear and the message of deterrence is strong—if you break the law, you will be punished and publicly required to admit what you did.”
She also laid out the circumstances where the SEC will seek such admissions: “where the violation of our securities laws includes particularly egregious conduct, where large numbers of investors were harmed, where the markets or investors were placed at significant risk, where the conduct obstructs our investigation, where an admission can send a particularly important message to the markets or where the wrongdoer poses a particular future threat to investors or the markets.”
Last month, Credit Suisse agreed to pay $196 million and admit wrongdoing to settle SEC charges that it provided cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC. It was the fifth such admission since White announced the new policy last summer.
“I expect more such cases as the new settlement protocol evolves,” White said.
Contact Jenna Greene at email@example.com.