Monday, October 31, 2016

Data on SEC cases show commissioners’ agreement, occasional fault lines

By Mark S. Nelson, J.D.

The SEC published a trove of data detailing votes in hundreds of enforcement cases mulled by commissioners during Chair Mary Jo White’s tenure. Overall, the data show remarkably few cases that were not approved, and a comparatively small number of cases that were approved with exceptions noted by one or more commissioners. The SEC’s Office of Freedom of Information Act Services posted a spreadsheet containing the enforcement data.

Commissioner votes. Based on analysis of the various components included in the data release, the Commission considered over 400 cases between April 2013 and August 2016. Four cases were listed as not approved, in each instance by Commissioner Michael Piwowar. Another 21 cases were approved but with exceptions noted by one or more of the Republican commissioners. In seven of those cases, Commissioner Piwowar and former Commissioner Daniel Gallagher joined in taking exception to municipal adviser and NRSRO bars (Commissioner Piwowar made the same exception on his own in another such case).

Commissioners Piwowar and Gallagher also joined forces in several other cases by taking exception to corporate penalties, charges of direct violations of Investment Advisers Act Sections 206(1) and (2), and the retroactive application of Sarbanes-Oxley Act Section 105(c)(7)(B). Former Commissioner Troy Paredes noted concerns in one case with the injunctive relief sought and the use of a corporate negligence theory. In another case, Paredes took exception to a charge rooted in Exchange Act Section 14(e) and Rule 14e-3.

Non-participation by commissioners. Data published by the SEC also indicated when commissioners did not participate in a case. For the time period covered, non-participation ranged from a low of 10 cases (Paredes) to a high of 66 cases (Gallagher). Commissioner Luis Aguilar, one of the longest-serving commissioners in SEC history, did not participate in 55 cases over nearly 7.5 years.

White was listed as not participating in 19 cases, including a few with prominent defendants such as Bank of America, N.A. (LR-22772; Complaint) (Gallagher also did not participate and Paredes noted exceptions in that case regarding the relief sought and the negligence theory). White also did not participate in a case against hedge fund manager Martin Shkreli (LR-23433; Press release; Complaint), whom the SEC charged with Advisers Act and other violations and whom Congress separately called to publicly testify about drug price spikes in the pharmaceuticals industry. But the SEC’s data release did not indicate the reasons why commissioners did not participate in specific cases.

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