Cornell Yorkville Clients

[IPO$]

Top SEC official proposes program to check repeat offenders

10/18/2012

By Sarah N. Lynch

http://newsandinsight.thomsonreuters.com/Legal/News/2012/10_-_October/Top_SEC_official_proposes_program_to_check_repeat_offenders/

WASHINGTON, Oct 18 (Reuters) - The U.S. Securities and Exchange Commission should consider creating a program to monitor fraudsters who repeatedly break the law, one of the regulator's top officials said on Thursday.

SEC Commissioner Luis Aguilar, a Democrat, proposed that a potential program for recidivists could entail home and office visits, and giving regulators access to phone, bank and tax records.

"Many offenders, particularly Ponzi scheme offenders, have long track records," Aguilar said in a speech at the Securities Enforcement Forum in Washington.

"That tells me that the first time many of these defendants were prosecuted, the remedies and penalties did not effectively deter them from engaging in egregious fraud again."

Aguilar acknowledged that there would be costs involved in running the program but he said that "a limited and targeted regime on the most dangerous recidivists" could help deter fraud.

Whether such a program could ever come to fruition, however, is unclear.

The agenda for the SEC is set by the chairman, and the agency also faces an uphill battle in its efforts to convince skeptical Republicans in Congress not to slash its funding.

Aguilar said the SEC should be self-funded through the fees it imposes on the industry, a mechanism used by some other financial regulators such as the Federal Deposit Insurance Corporation.

SEC Chairman Mary Schapiro had tried to get a self-funding provision included in the 2010 Dodd-Frank Wall Street reform law, but at the last minute, her efforts fell short.

Instead, lawmakers decided to retain control of the SEC's budget through the appropriations process, and included a new provision in the law directing the agency to match its annual budget with the fees it charges the industry.

On Thursday, Aguilar also advocated other ways to strengthen the SEC's enforcement program, including tougher penalties.

He said he supports legislation introduced earlier this year which would boost the penalties that the SEC can seek from firms and individuals accused of wrongdoing and triple the cap on funds the agency can seek from repeat offenders. The legislation was proposed by U.S. Senators Jack Reed, a Democrat from Rhode Island, and Charles Grassley, a Republican from Iowa.

Follow us on Twitter @ReutersLegal | Like us on Facebook

http://newsandinsight.thomsonreuters.com/Legal/News/2012/10_-_October/Top_SEC_official_proposes_program_to_check_repeat_offenders