The U.S. Securities and Exchange Commission, long known for settling enforcement actions without having to prove its case in court, is struggling to cope with a a surge in the number of executives and companies willing to go to trial to defend themselves.
The SEC’s office in Washington is actively litigating about 90 cases, up more than 50 percent in the past year, Matthew Martens, the SEC’s chief litigation counsel, said in an interview. At the same time, Martens’ trial unit staff has stayed relatively flat at about 36. He recently added three more lawyers to his group and is looking to hire more.
“It doesn’t take many cases to eat up limited resources,” said Mark Schonfeld, the former head of the SEC’s regional office in New York who is now a partner at law firm Gibson Dunn & Crutcher LLP. “It’s not just an expenditure of resources in the near-term; these cases go on for years and years.”
The SEC has become increasingly vocal in recent months about the resource drain of prolonged litigation after U.S. District Judge Jed Rakoff rejected a $285 million settlement with Citigroup. Rakoff criticized the agency for its practice of settling cases without requiring an admission of wrongdoing.
Martens “was like a one-man dynamo,” Chertoff, who later served as secretary of Homeland Security and is currently chairman of a security management firm called the Chertoff Group, said in an interview. “Matt is not a guy who’s going to be afraid to take a case to trial.”