In the past year, several different issues have emerged as being noteworthy in the investment field, according to the Securities and Exchange Commission (SEC). The SEC “held its annual SEC Speaks conference in Washington, DC on February 24 and 25, 2017, and provided an update on recent litigation trends, the current enforcement initiatives in place at the Commission and the enforcement priorities for the coming year.” Thomas P. Cimino, Jr., “Highlights from SEC Speaks 2017: Litigation and Enforcement Trends,” National Law Review, Apr. 19, 2017. This article examines the trends and initiatives the SEC has discussed for the present and future.
(1). The Forgotten Investor: Acting Chair of the SEC, Michael Piwowar, first focused on what he called the “forgotten investor.” As Mr. Piwowar expressed, “[S]ecurities regulation today must take into account all investors, including those ‘whom securities regulation is meant to serve and protect but so often has not.’ Borrowing from sociologist William Sumner, who authored the book and coined the term ‘Forgotten Man,’ Mr. Piwowar asserted that the ‘Forgotten Investor’ has suffered as a result of certain securities regulations over the years, including disclosure provisions, the ‘accredited investor’ threshold and civil monetary penalties.” Id. If, in fact, such investors have been overlooked, experts in the field of securities and investments might make such an argument to persuade a jury on certain issues in litigation.
(2). The Dodd-Frank Act: The Dodd-Frank is a controversial piece of legislation that affected Wall Street. Some hail it as a boon, arguing: “By getting rid of Dodd-Frank, the Trump administration would also be getting rid of the Consumer Financial Protection Bureau, which, under the leadership of Richard Cordray, has returned nearly $12 billion to 29 million Americans. Without the leadership of Richard Cordray, the Consumer Financial Protection Bureau will not be able to fight for hard-working Americans as they have in the past.” The Berkeley Register-Herald, “Ask senators to fight for Dodd-Frank Act,” Mar. 31, 2017. On the other hand, there are many members of Congress who oppose the Act’s scope. Specifically, “Mr. Piwowar argued that ‘the Dodd-Frank Act is rife with examples of burdens ultimately borne by the Forgotten Investor through shareholder money and company resources being expended to provide non-material disclosures.’ Mr. Piwowar referenced three disclosure rules in particular, noting that he directed the SEC staff to begin reconsideration of two such rules, while Congress and President Trump recently vacated the third rule. Specifically, on January 31, 2017, Mr. Piwowar instructed the SEC staff to consider the propriety of its 2014 guidance on the conflict minerals rule.” Thomas P. Cimino, Jr., supra. If those rules change or get reconsidered, that could change the complexion and scope of regulations which, In turn, can affect securities regulations. It will be up to the experts to determine how these changes should be interpreted and implemented in a court of law.
(3). Civil Monetary Penalties: One final focus of the SEC is on the penalties assessed on corporate wrongdoers. Specifically, “[n]oting that, in the past, he voted both for and against the assessment of civil monetary penalties against a corporation, Mr. Piwowar stated that every case is different, and that ‘there are circumstances in which I am fully prepared to support the imposition of civil monetary penalties on a corporation.’” Id. This indicates that when litigation does arise, the SEC has somewhat conflicting views as to when it is most appropriate to impose financial penalties on companies. Expert witnesses will certainly play a role in guiding legal opinions in this area to determine when it is and isn’t the best policy to penalize a given corporation with a fine or some form of financial restitution.
Conclusion: Clearly, the SEC’s Acting Chair sees a number of situations where ambiguities and complexities in securities laws exist. In such cases, it may be largely left up to attorneys and expert witnesses in the field to help guide judicial opinion in a particular direction on the matter.