SEC chair pledges stronger enforcement in House hearing

SEC chair pledges stronger enforcement in House hearing
Christian Ehret at 11:38 AM ET

[JURIST] The US Securities and Exchange Commission (SEC) [official website] is engaging in more vigorous enforcement of its rules and policies [testimony] in order to address the financial crisis and improve investor protection, Chairman Mary Schapiro [official profile] testified before the US House of Representatives Subcommittee [official website] on Capital Markets, Insurance and Government-Sponsored Enterprises Tuesday. Schapiro testified that proposed policy changes will greatly improve the odds of preventing investment fraud and holding perpetrators responsible, maintaining that the SEC is "dedicated to learning from recent events," such as the Bernard Madoff scandal [JURIST news archives], and will make the necessary changes to restore investor confidence and efficient markets. Reforms include enhancing investor disclosure, streamlining enforcement procedures, strengthen standards governing brokers and advisers, and improving risk assessment capabilities. Schapiro discussed the motivation behind the commission's actions:

[I]n the wake of the Madoff fraud, I believe we owe it to investors to show them that we can and will adapt our ways and learn from our past errors so that we do not repeat them. The Madoff fraud is one that the agency did not detect, and not a day goes by that we don't regret it. ... I felt strongly that we could not wait for the conclusion of the Inspector General's investigation to begin making significant changes in response to the Madoff fraud. That is why we are implementing many of the measures I will outline today.

Schapiro welcomed President Barack Obama's increased SEC budget for 2010, saying that the near six percent increase is a key step in expanding staff and resources.

The policy reforms come in the wake of recent fraud litigation. Last month, financier Bernie Madoff was sentenced to 150 years in prison [JURIST report] on securities fraud charges [complaint, PDF; JURIST report] stemming from his multi-billion dollar Ponzi scheme. Billionaire financier Allen Stanford [BBC report] last month pleaded not guilty [JURIST report] in federal court to 21 charges [indictment, PDF; JURIST report] of fraud, conspiracy and obstruction related to a $7 billion fraud scheme. Former HealthSouth CEO Richard Scrushy [defense website; JURIST news archive] was ordered [JURIST report] to pay $2.88 billion to shareholders after being found guilty of fraud for inflating company profits, insider trading and other charges.