SEC Enforcement Focus Shifts to Dodd-Frank Compliance

SEC’s Canellos cites new derivatives regulations.

George Canellos, co-chief of the U.S. Securities and Exchange Commission’s enforcement division, said investigators are turning their focus to enforcing new regulations from the 2010 Dodd Frank Act.

“You’ll see a lot of our cases geared toward showing that when new regulations are written that people must comply with them,” said Canellos, who was speaking today on a panel at a Practising Law Institute event in New York. Enforcers play a “critically important” role in shaping new rules, he said.

Canellos, who highlighted new regulations aimed to bring transparency to the derivatives market, said investigators are pursuing issues such as the role of fiduciaries who are responsible for setting up internal safeguards against fraud and improper risk taking. The shift in focus comes as the agency wraps up cases linked to the credit market turmoil of 2008, he said.

Investigators are also trying to harness technology to drive more data-driven cases, Canellos said. The agency is looking for evidence of companies distorting their earnings reports by comparing past performance records against analyst estimates. A consistently close correlation could indicate fraud, he said.

Canellos also said the agency will take “less of a one-size-fits-all” approach to its cases, highlighting the “rich variety of misconduct” that probes reveal.

“We shouldn’t be applying formulaic approaches to cases that obscure critical differences that exist,” he said.

 

Bloomberg News

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