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US Chamber calls for long list of reforms for US SEC enforcement program

Publisher: Reuters
Author: Sarah Lynch

The U.S. Chamber of Commerce called for numerous reforms to the Securities and Exchange Commission’s investigative process on Wednesday, in a new report some of whose provisions the markets watchdog said would weaken its ability to protect investors.

The Chamber’s key recommendations lay out ways to bolster due process for defendants in SEC enforcement actions by strengthening policies surrounding in-house trials, admissions of wrongdoing and “Wells notices,” sent by the agency as a final warning to companies and individuals that it plans to bring charges against them.

“SEC enforcement should have a fair process for all to ensure that the rights of the accused are preserved while allowing the process to achieve its goals of finding truth, punishing wrongdoers and preventing future harm,” the Chamber wrote.

The Chamber’s report in particular takes aim at SEC in-house trials. The 2010 Dodd-Frank law expanded the SEC’s powers to bring more cases against defendants through administrative proceedings instead of federal courts. In administrative trials, an SEC judge presides over the hearing. Such trials are usually expedited, there is no jury, and discovery is limited.

Critics say in-house trials violate their constitutional rights. In its report, the Chamber calls for the SEC to adopt a uniform policy on when to use such trials and to create a process for defendants to challenge the choice of venue and amend its rules to permit more pre-trial discovery.

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