Despite Many Missteps, the SEC Has Made Progress On One Front — Extracting Larger Payouts, at Least Compared to a Decade Ago
by The Compliance Exchange on April 12, 2012
It has been a tough few years for the Securities and Exchange Commission.
It failed to spot Bernard L. Madoff’s multi-billion dollar Ponzi scheme after numerous warnings and investigations.
Its blindness leading up to the financial crisis dropped its reputation to unprecedented lows as Congress and the media bashed the agency like a piñata, painting it as a bumbling and ineffectual sheriff incapable of serving as a watchdog over clever and fleet-footed miscreants.
The SEC’s accomplishments in the wake of the 2008 economic meltdown did little to endear it with critics.
Allowing companies to settle without admitting guilt mocked many people’s sense of fairness, confirming for many Americans that government regulators were incapable of taming Wall Street. TheNew York Times pointed to a devastating inability to punish serial rule-breakers. And in November, District Court Judge Jed. R. Rakoff broke with tradition by rejecting the SEC’s proposed settlement with Citigroup. Rakoff admonished the agency for failing to obtain any admission of wrongdoing by the bank and deemed the $285 million payout “pocket change” to an entity as large as Citigroup.
Even an apparent triumph like the $550 million settlement with Goldman Sachs in 2010 – which the agency’s head of enforcement Robert Khuzami praised as the “largest penalty ever assessed against a financial services firm” – turned sour, as it seemed to exemplify a victory for the investment bankrather than the “stark lesson to Wall Street firms” claimed by Khuzami.