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SEC to Test Punishments That Fit the Crimes

“WASHINGTON (Reuters) – The Securities and Exchange Commission is experimenting with punishments that more closely fit the wrongdoing at issue in a bid to give its enforcement cases more bite.

Criticized for its traditional practice of a broad ban on wrongdoers breaking securities law again, theSEC is testing injunctions that specifically bar certain behavior, such as giving advice to pension funds or profiting from presenting investment seminars.

Critics of the SEC’s typical broad prohibitions say they are ineffective and not well enforced. Customized injunctions could also be a more precise tool than the blunt instrument of barring an individual from being a company officer or director.

“We want to use all of the tools available to us to specifically discourage repeat misconduct and go beyond the injunctions we traditionally obtain,” George Canellos, the SEC’s acting enforcement director, told Reuters in an interview.

In the past year SEC lawyers have slowly started seeking injunctions that bar defendants from specific types of conduct, even if that conduct is itself legal.

They are relying on authority derived from the 2002 Sarbanes-Oxley investor protection law that makes explicit courts’ authority to follow through on the SEC’s recommended injunctions.

“We are actively exploring ways to invoke that authority more creatively toward the goal of creating remedies tailored to the misconduct at issue,” he said….”

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