SEC's Ceresney Defends ‘Broken Windows' Strategy

By Rob Tricchinelli

Oct. 14 — Insider trading, market access violations and manipulative trading practices are among the Securities and Exchange Commission's short-term enforcement priorities, Enforcement Director Andrew Ceresney said Oct. 14.

“This has been a banner time when it comes to insider trading” enforcement, he said.

The SEC will bring more cases against broker-dealers that don't properly guard against the financial risks of providing direct market access, Ceresney said.

The agency will investigate exchanges and alternative trading systems for misusing confidential information, as well as “high frequency trading firms and others” for using manipulative trading practices.

Ceresney spoke on a panel with past enforcement directors at the agency, several of whom are now in private practice on the defense side. The conference was sponsored by Securities Docket and co-sponsored by Bloomberg BNA.

‘Broken Windows' Theory

Earlier in the day, SEC Commissioner Michael Piwowar criticized the “broken windows” theory, under which the commission pursues a raft of smaller violations in order to create a culture of compliance. “If every rule is a priority, then no rule is a priority,” he said. “If you create an environment in which regulatory compliance is the most important objective for market participants, then we will have lost sight of the underlying purpose for having regulation in the first place.”

At a later panel, Ceresney pushed back on those comments and said that the broken windows strategy is working.

“It's not about turning every violation into an enforcement action,” he said. Instead, the priority is targeting specific enforcement areas where the compliance culture is lax and demonstrating that the agency is serious about pursuing violations on those topics.

Recent areas of focus include financial reporting and Rule 105, he said, adding that the strategy “has increased compliance in those areas tremendously.”

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