The Securities and Exchange Commission yesterday signaled a pivot away from the prosecutorial approach to enforcement that the agency pursued after the financial crisis, the Wall Street Journal reported today. Steven Peikin, co-director of the SEC’s enforcement division, indicated the regulator would drop the “broken windows” strategy of pursuing many cases over even the smallest legal violations, and may also pull back from trying to make some companies admit to wrongdoing as a condition of settling with the SEC. The SEC in recent years piled up record numbers of enforcement cases and corporate penalties as it pursued both major Wall Street frauds and scores of picayune filing violations. Now, under the direction of Clayton, and with its budget essentially frozen, the SEC is cueing that “broken windows” won’t continue. “It may be the case that we have to be selective and bring a few cases to send a broader message rather than sweep the entire field,” Peikin told a securities conference yesterday. He cast doubt about the future of a signature element of the SEC’s enforcement program over the past four years: admissions of wrongdoing. Under former Chairman Mary Jo White, an Obama appointee, the SEC sought admissions of fault by firms and individuals in select cases, rather than allowing defendants to resolve probes by paying penalties but neither admitting nor denying the allegations. Read more.(Subscription required.)
In related news, the U.S. Securities and Exchange Commission (SEC) said on Thursday it would grant Wall Street a 30 month-grace period that will allow them to comply with sweeping new European Union investment research rules without overhauling their operations, Reuters reported. The reprieve comes ahead of Europe’s MiFID II trading rules, which will overhaul how investment managers pay for research provided by banks beginning in January. Under MiFID II, brokers will have to charge separately for research, instead of bundling the fees together with other services, such as trading. The new rules aim to eliminate conflicts of interest by giving investors greater transparency over how much they pay banks for discrete services. Read more.