New York partner John Carney and Washington, D.C., partner Jonathan Barr co-authored an article, "SEC's New Enforcement Program: Rewriting the Rules of Engagement," which was published in the September 17, 2009, edition of the New York Law Journal.
According to Carney and Barr, the Securities and Exchange Commission's [SEC] new Director of Enforcement, Robert Khuzami, recently "gave a speech before the New York City Bar where he announced what is perhaps the most radical reorganization of the enforcement program since the creation of the Enforcement Division in the mid-70s. Based upon a top to bottom review of the program during his first 100 days, Khuzami described a series of initiatives to bring cases faster, with greater impact and, most importantly, to secure litigation victories at trial."
The authors continue: "To achieve these goals, the SEC will incorporate some of the key strategies utilized by U.S. Attorney's Offices in investigating and prosecuting criminal cases, including: the creation of specialized units, flattening the management structure by eliminating an entire supervisory level, delegating the authority to issue formal orders conferring subpoena authority to field supervisors; creating an Office of Market Intelligence; hiring more trial attorneys to build a credible trial threat; and pursuing policies to foster and incentivize individuals and whistleblowers to come forward and cooperate with investigations. In the face of these dramatic efforts to create an accelerated, more aggressive SEC enforcement program, the unprepared company, individual or practitioner will be placed at a critical disadvantage."
With "the goal of providing some insight into the new rules of engagement," the article goes on to examine the announced initiatives, including:
Carney and Barr conclude: "With less direct control and oversight of the investigation process, the SEC's commissioners will face the challenge of assuring that diminished review and supervision combined with the focus upon speed and aggressive enforcement does not result in the bringing of marginal cases or in significant litigation defeats. Hopefully, a leaner enforcement program will produce a more effective regulator and safer markets rather than result in unnecessary litigation—a scenario where no one wins."
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