SEC Chair Targets Industry Executives as Ultimate Deterrence
SEC Chair Mary Jo White said that the SEC will focus on prosecuting individuals, “especially senior executives,” because it is the strongest deterrent against firms assuming a “cost of business” mentality that prevents them from future misconduct or changing their culture. Ms. White said that the SEC charged individuals in 70% of actions in 2014 and 66% in 2015. She said that the SEC will “not hesitate to use remedies” to hold accountable executives “who were at least negligent in failing to prevent misconduct” and to pursue CEOs or CFOs under Sarbanes-Oxley even where they were not involved in the wrongdoing. She wants remedies “with teeth” because “[s]uch outcomes for individuals are seldom regarded as merely inconvenient costs of doing business – they are often career-ending.”
OUR TAKE: To avoid a “career-ending” SEC action, senior executives must build a culture of compliance to at least defend themselves. Executives that ignore Ms. White roll the dice on their livelihoods.