In a little noticed speech last week, Luis Aguilar gave the back of his hand to the Securities and Exchange Commission (SEC).
Which is remarkable, in that Aguilar is one of the five sitting SEC Commissioners.
In a speech titled “Taking a No-Nonsense Approach to Enforcing the Federal Securities Laws,” and delivered to the Securities Enforcement Forum 2012 at the Mayflower Hotel in Washington, D.C., Aguilar said that five years after the financial crisis, “the public still asks why more individuals and entities have not been held accountable.”
“The public must have faith that the SEC and other institutions are aggressively working to protect the integrity of the securities market,” Aguilar said. “And, for that faith to return, the SEC must be pro-active in demonstrating that it is pro-investor.”
Backhand implication: The SEC has not been pro-active in demonstrating that it is pro-investor.
“The lack of individual accountability for misconduct during the financial crisis has generated a significant amount of public concern, and understandably so,” Aguilar said. “Senator Ted Kaufman expressed his frustration with the lack of individual accountability for misconduct during the financial crisis when he stated that ‘we have seen very little in the way of senior officer- or boardroom-level prosecutions of people on Wall Street who brought this country to the brink of financial ruin.’ In fact, a recent survey found that 81% of Americans do not believe the government has done enough to stop corporate wrongdoing.”
“Yet, the facts show that the SEC has brought actions against 115 individuals and entities, naming 57 CEOs, CFOs, and other senior corporate officers for misconduct related to the financial crisis.”
“Clearly the above statistics do not tell the whole story. An important question to consider in evaluating the efficacy of our enforcement program is whether or not we are, as Stanley Sporkin once described, ‘getting in the first strike.’”
“Are we creatively and aggressively looking for ways to hold every responsible individual, regardless of title, accountable for violations of the federal securities laws in an entity?”
“And more importantly, is the SEC sending the wrong message in those cases when it charges an entity with wrongdoing without charging an individual for misconduct?”
“The fact remains that corporations and other business are led by men and women, who are ultimately responsible for their actions.”
“When an entity is charged with a violation of the federal securities laws, it is clear that there are human beings who are responsible for the misconduct.”
“The investing public has a right to expect that government regulators will continue to hold accountable those individuals responsible for misconduct – and that includes those culpable at the top, not just the flunkies below.”
“It is important that all enforcement investigations continue to recognize that the tone in any organization is set at the top, and that all enforcement investigations should have a laser-like-focus on any potential misconduct by senior officials at any entity.”
Aguilar again called for SEC self-funding.
“It is common knowledge that the Commission’s resources are limited, and that our resources have completely failed to keep up with the growth into the markets we oversee – both in terms of sheer size and of complexity,” Aguilar said. “In the past I have been a vocal advocate for SEC self-funding, and I continue to be an advocate today. The SEC’s staff must have the resources to adequately police the marketplace and to fulfill its mission to protect investors.”