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Ex-Commissioner Calls on SEC to Focus Enforcement Attention on Culpability, Harm

Tuesday, October 15, 2013
By Yin Wilczek

Oct. 10 --Former Securities and Exchange Commissioner Troy Paredes Oct. 9 urged the agency to focus its enforcement attention on activities involving the most culpable individuals and firms, and the most harm to investors.

“In my view, it is particularly important that” the SEC base its enforcement decisions on the facts, the law and due process considerations, rather than whether there is public outcry over the incident, said the former commissioner.

Paredes addressed the Securities Enforcement Forum in Washington. He left the SEC in August after the Senate approved the nomination of his replacement, Michael Piwowar .

Enforcement Decisions
Paredes said that after he joined the commission, he realized the weight of responsibility that commissioners bear in deciding whether or not to advance enforcement actions. “What a sobering responsibility it is, what a significant issue it is, when the government decides to charge one of its citizens with violating the law,” he said.

The former member reminded the commission that there is an opportunity cost to its enforcement actions, and that sometimes people just make mistakes. Accordingly, it might be the best use of the SEC's resources not to sue over technical violations and other deficiencies that do not involve scienter, he said.

Moreover, Paredes urged the commission not to lose sight of wrongdoing involving pump and dumps, boiler room tactics, and affinity fraud. Such violations require commission attention because they result in great harm to their victims and can have drastic consequences for U.S. markets, he said.

Meanwhile, it is likely that Paredes's recommendation about technical violations will fall on deaf ears. On the same day that the ex-commissioner issued his remarks and at the same event, SEC Chairman Mary Jo White said that the SEC--to make its presence felt “everywhere”--will pursue all wrongdoing, no matter how small, including “violations of prophylactic rules with no intent requirement”.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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