SEC Ramping up Their Defences Against Misconduct

Posted by Stephanie Mau

on June 23, 2014

graphic logo securities and exchange commission united statesSEC’s Enforcement Division Cracking Down on Misconduct

In a recent interview with the director of the Securities and Exchange Commission’s enforcement division, Andrew Ceresney, he noted that the biggest challenge they face is keeping up with the “increased complexity of […] misconduct.”

As time goes by, the illegal schemes that the SEC deal with have become more and more complex, and in order to adequately face these challenges, they’ve started hiring more industry experts and using technology to their advantage.

In their last fiscal year, the SEC’s enforcement division dealt with almost 700 cases and doled out penalties for cases that totaled $3.4 billion worth of fraud. So, it seems like their strategies are working pretty well.

Insider-Trading Cases Dealt With Through Administrative Proceedings

In addition to their advanced strategies, Ceresney also recently told attendees of a D.C. Bar luncheon that the SEC has started using administrative proceedings to deal with their cases more often.

According to Ceresney, administrative proceedings are more “sophisticated” and “streamlined” than bringing a civil action to District Court. In an administrative proceeding, cases are heard by an administrative law judge that considers the evidence brought forth by the SEC, and then has the power to dole out punishments, such as cease and desist orders, suspension or revocation of registrations, civil monetary penalties, and so on.

Ceresney says that the decision to take cases through administrative proceedings will vary on a case-by-case basis, but that we will “see more of these insider trading cases go through the administrative proceedings.”

What Are the SEC’s Biggest Concerns Right Now?

Currently, one major case that the SEC is cracking down on is Wedbush Securities Inc., where the company was charged with market access violations. According to Ceresney, the firm failed to preauthorize their traders, allowing unknown users access into their trading system and exposing themselves to potential schemes by the traders.

In addition, over the past year, the enforcement division has also been “drilling down” on firms’ ethics and compliance programs.

The SEC knows what they’re talking about – having a strong ethics reporting program is crucial for fending off potential schemes and fraud in your workplace. Furthermore, having an accessible whistleblower hotline gives your employees an outlet to voice their concerns about perceived wrongdoing.

WhistleBlower Security prides itself as Canada’s independent certified ethics reporting provider for businesses, and is committed to promoting a culture of integrity, collaboration and transparency for all our employees and clients. This includes working with our clients to establish a strong Code of Ethics. With a 24/7/365 whistleblower hotline, employees can be assured that all of their ethical concerns will be heard and addressed.

WhitePaper: The Role of Due Diligence in Anti-Corruption Compliance

Source: http://www.thinkadvisor.com/2014/06/11/sec-drilling-down-on-compliance-programs-wedbush-a, http://www.thinkadvisor.com/2014/04/29/andrew-ceresney-secs-enforcer-the-2014-ia-25-profi