SEC Going Too Far on Crackdowns, Chamber of Commerce Says
The Securities and Exchange Commission, which gained more authority to punish corporate wrongdoing in a government crackdown on fraud four years ago, is going too far, a U.S. Chamber of Commerce report said Thursday.
The chamber, which lobbies for 3 million U.S. companies and 830 business associations, said it was concerned about the SEC’s use of “industrywide sweeps and pressure on corporations to waive attorney-client privilege during investigations” as well as “fines on corporations for violations caused by corporate employees or for perceived lack of cooperation.”
The group, one of the SEC’s chief critics, recommended that the agency appoint an advisory committee to study its enforcement practices.
The chamber cited nine federal court rulings and administrative law judgments last year and in 2004 that questioned how the agency interpreted law, presented evidence and determined when defendants knowingly broke securities rules.
The “SEC’s enforcement program has taken on an increasingly punitive tone,” the chamber’s report said. “It is evident that a major focus of the current SEC enforcement program is to exact punishment for the avowed purpose of deterring violations by others.”
Last week, SEC Chairman Christopher Cox rebuked his enforcement staff for not consulting him or other commissioners before subpoenaing two reporters in an investigation.
In a statement, Cox said he would review the chamber report. At the same time, he defended the “vigorous efforts” of agency enforcers and their director, Linda Thomsen.
“So long as a business is friendly to its investors, the SEC will be friendly to it,” Cox said. “But anyone who attempts to drive a wedge between the interests of their business and the interests of investors in that business will find themselves confronted by a relentless and powerful adversary in the Securities and Exchange Commission.”
The report echoes criticisms of the SEC by others. SEC Commissioner Paul Atkins complained in a March 3 speech that announcements of staff departures “include lists of the significant penalties obtained over that person’s tenure.”
