FBI Director James B. Comey speaks at the New York City Bar Association on Monday.
FBI Director James B. Comey speaks at the New York City Bar Association on Monday. (NYLJ/Rick Kopstein)

The heads of the Securities and Exchange Commission and the Federal Bureau of Investigation both pushed back against the idea that some financial companies are “too big to jail” during speeches at the New York City Bar Association on Monday.

SEC chairwoman Mary Jo White and FBI director James Comey both spoke as part of the city bar’s third annual White Collar Institute, which also brought together several panels on current topics in white-collar crime.

White’s keynote speech, which opened the event, set forth a broad outline of the challenges facing the SEC and the tools it uses to deal with them.

White put the cases the SEC investigates into three categories: those in which individuals or companies failed to obey relevant regulations, but without knowing wrongdoing; “egregious” frauds, with a clear evidentiary trail; and cases that are “on the line.” Much of the SEC’s work, she said, consists of figuring out how best to deal with these different kinds of cases.

The SEC has multiple “pressure points” available to it, White said.

It can bring cases against individuals involved in wrongdoing, and White said that it very often does. She highlighted a relatively new tool in the SEC’s arsenal— Section 20(b) of the Exchange Act, which creates primary liability for a person who induces another person to commit misconduct. That law, she said, is useful in cases where the person making false statements in public does not do so with scienter, making it impossible to bring aiding and abetting claims against others within a company based on those statements.

The SEC also “does not shy away” from targeting companies, rather than individuals, when that is the best way to get results. Targeting companies has the advantage that the agency need not prove scienter, but only that the company failed to comply with applicable law.

Finally, she said, the SEC can obtain non-monetary forms of relief, like injunctions, that “respond to seriousness of the misconduct” in a particular case.

White also addressed the need for the SEC to work with law enforcement authorities to help bring criminal cases when necessary, though she said that the SEC and law enforcement must avoid unfair, duplicative enforcement. She emphatically rejected the idea that any large companies are “too big to jail”—that is, that the SEC holds back in targeting major financial institutions.

Comey gave the afternoon keynote address. He began by saying that counterterrorism efforts have been the FBI’s top priority since 2001, and still are, but said that the agency also devotes considerable resources to white-collar crime investigations.

The FBI, Comey said, has kept abreast of emerging forms of white-collar crime. Now, he said, it is particularly focused on mortgage fraud, foreclosure rescue companies preying on distressed homeowners and money laundering. In all of its investigations, he said,the FBI works closely with other law enforcement officials and, when appropriate, with the SEC.

“We don’t do anything alone,” he said.

Comey, too, dismissed the idea that his agency had not been aggressive enough in going after frauds connected to the financial crisis. The high burden of proof in criminal cases makes it inherently difficult to put people in prison for whatever role they may have played in the crisis, he said.

“You don’t want to live in a country where I can lock someone up because ‘he must have’ done something wrong,” Comey said. “Stupidity is not a crime. Risky behavior is not a crime no matter how many people get hurt.”

Comey ended his speech by talking about the limits of law enforcement, stressing the need for corporate culture that does not tolerate misconduct. Such a culture, he said, must ultimately come from within companies.

“I don’t think we can deter our way to a healthy market and corporate culture,” he said.