By Stephen Joyce
NEW YORK--The Securities and Exchange Commission's enforcement function is poised to shift from investigating violative behavior associated with the 2008 financial crisis to monitoring newly regulated entities and products and market developments, SEC Enforcement Division Co-Director George S. Canellos said April 26.
New enforcement tools created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203), plus technological advances will also enhance the agency's ability to pursue violative behavior, he said.
“I think we will be working very closely with our colleagues in the examination program to ensure proper implementation of the new laws and rules.”
--George Canellos, SEC Enforcement
“I think you'll see a lot of our cases really geared toward ensuring that when new regulations are implemented, the industry is complying strictly with them, and I think we will be working very closely with our colleagues in the examination program to ensure the proper implementation of the new laws and rules,” Canellos said at a Practising Law Institute conference.
“When you have a whole new framework of regulations governing various segments of the market, I do think we all recognize it's critically important for us to play a role as enforcers in shaping those new laws and rules and creating the appropriate incentives for the industry to comply with those rules,” he said.
Canellos said over the next few years the SEC will make “significant strides in harnessing technology and information that is for the first time available and can be really be used as a means of identifying potential violations of the securities laws.”
He mentioned the SEC's relatively new practice of reviewing market participants' purported investment successes and analyzing whether entities reporting aberrant performances--outliers to the rest of an industry--present securities violation concerns, including misrepresentation of returns.
Technology will also allow the SEC to better analyze possible accounting-related violations and insider trading cases, he said.
“So I think there are a host of possibilities for taking advantage of both the ability to analyze data and the existence and free flow of data to better do our jobs,” he said.
The Dodd-Frank legislation provided the agency with more ammunition as well, Canellos said. The SEC now has the authority, for example, to sanction not only entities violating securities laws but entities causing those violations, a form of secondary liability that did not exist before Dodd-Frank, Canellos said.
By Stephen Joyce
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