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SEC's most fearsome prosecutorial weapon lies in shame

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By The Washington Post
Saturday, Jan. 26, 2013, 4:58 p.m.
 

WASHINGTON — If the Senate confirms Mary Jo White as head of the Securities and Exchange Commission, she'll be missing a lot of the enforcement tools readily available to her during her near-decade as U.S. Attorney in Manhattan.

The threat of long-term prison sentences won't be an option because the SEC handles only civil cases. Wiretaps, search warrants, undercover operations and grand jury investigations are also out of the question.

In other words, without some help from the Justice Department, even a hot-shot prosecutor like White simply cannot deliver if the public wants to see Wall Street barons behind bars.

That doesn't mean that the agency lacks plenty of muscle to flex.

One of the most effective tools at the SEC's disposal is also one of the most basic: shame. The agency has the power to carry out an investigation and issue a tell-all story about an individual, even if it finds no violation, said James Cox, a professor of corporate and securities law at Duke University.

The goal of federal securities law is not necessarily retribution but deterrence. That's why the longest-standing remedy at the SEC's disposal has been injunctive relief, basically barring a person from engaging in a particular conduct.

Although those penalties are key, some securities experts say the SEC's power to bar individuals from serving as officers or directors of a public company can be far more damaging. Fines may not mean much to a person of wealth, but taking away a person's livelihood can be the ultimate punishment.

 

 
 


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