Suggestions To Improve The Enforcement Program From Commissioner Atkins

SEC Commissioner Paul Atkins recently published an article tracing the history of the enforcement division, calling for a new Wells Committee and making recommendations for items to be considered by the Committee. Paul S. Atkins and Bradley J. Bondi, Evaluating the Mission: A Critical Review of the History and Evolution of the SEC Enforcement Program, 13 Fordham Journal of Corporate & Financial Law 367 (2008).

This is not the first time Commissioner Atkins has raised the issue of a new Wells Committee or raised some of the points contained in the article. Some of the suggestions have been raised by the Commissioner in speeches discussed here and here. Nevertheless, the article does contain a number of thoughtful suggestions regarding the enforcement program.

According to Commissioner Atkins, a new Wells or advisory committee should be formed with the “mission … to conduct an independent review of the Commission’s enforcement program from multiple, diverse perspectives, and to recommend to the Commission, if warranted, any needed changes.” In the article, Commissioner Atkins then suggests several topics for consideration by the new committee including:

1) The implementation of mechanisms to provide more efficacy, predictability and transparency to the enforcement program. In this regard, the overall management and approach of the enforcement program would be examined in view of its mission and goals.

2) The implementation of an “open jacket” policy, such as that used by criminal prosecutors. Under this policy, which Commissioner Atkins as recommended before, the enforcement staff would disclose to defense counsel the evidence supporting its claims.

3) A review of the closing process. As noted the article, a prior GAO report harshly criticized the Enforcement Division for failing to promptly close investigations.

4) An examination of enforcement practices from a due process stand point and consideration of ways to improve the current Wells process.

5) A review and analysis of the costs and burdens imposed by the investigative process. This would include consideration of the necessary scope of requests for documents and consideration of ways to ease the burdens and costs of electronic data production.

6) An examination of the use, effects, amount and appropriateness of issuer penalties.

7) Consideration of the minority recommendation from the Senate Finance Committee regarding the Pequot Capital Management inquiry suggesting that Enforcement adopt a manual of procedures which would be similar to the U.S. Attorney Manual.

These are thoughtful and serious recommendations which deserve careful consideration. Hopefully, the Commission will act on the suggestion of Commissioner Atkins and convene an appropriate committee to consider these and other issues.