SEC Chair Mary Jo White, in a recent speech to a group of white collar criminal attorneys, stressed the importance of prosecuting individuals. She said that a corporation acts through individuals and that “if an enforcement program is to have a strong deterrent effect, it is critical that responsible individuals be charged.” Ms. White cited statistics indicating that the SEC charges individuals in over 80% of its actions. Moreover, she said the SEC is looking for “ways to innovate in order to further strengthen our ability to charge individuals.” As part of this innovation, she said the SEC will bring cases under Section 20(b) of the Exchange Act, which imposes primary liability on a person that acts through another person. She said the SEC will use Section 20(b) against those participating in the dissemination of misleading information to investors including offering documents and marketing materials. She also indicated that the SEC wants to step up the use of industry bars against individuals.
OUR TAKE: Every investment management executive should be concerned that enforcement actions will likely include actions against them personally and will likely include an industry bar, which is tantamount to a career death penalty.