S.E.C. Defends Its Efforts to Fight Financial Fraud

Robert Khuzami, the S.E.C.'s enforcement director. Lucas Jackson/ReutersRobert S. Khuzami, the S.E.C.’s enforcement director.

Corporate crooks beware.

A panel of Securities and Exchange Commission regulators gathered in Washington on Friday to trumpet their recent crackdown on financial fraud and Wall Street wrongdoing. The regulators, in particular a group of high-ranking enforcement officials, highlighted efforts to root out everything from insider trading at hedge funds to troubled mortgage securities sold by big banks.

“The S.E.C. is now materially better able to enforce the law and identify and manage threats,” Mary L. Schapiro, the agency’s chairwoman, said at the conference on Friday titled “S.E.C. Speaks.”

This talk of a crackdown comes after the S.E.C. was assailed for failing to rein in Wall Street ahead of the 2008 financial crisis. Even now, critics question why the agency has not sued a top executive at any of the nation’s biggest banks.

But the S.E.C,, emboldened after shuffling its enforcement staff and gaining new powers through the Dodd-Frank regulatory law, did file 735 enforcement actions last fiscal year. The cases produced $2.8 billion in penalties and fees.

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Robert S. Khuzami, chief of the enforcement division, lauded what he called the “record performance” on Friday. The revamped enforcement division, Mr. Khuzami said, is “trying to identify misconduct early rather than chasing the headline.”

The S.E.C. on Friday played up the prominent cases filed in the aftermath of the crisis — including actions against Wall street titans like Goldman Sachs, Citigroup and JPMorgan Chase. Nearly 100 people and companies have been ensnared in the agency’s crisis-related cases.

Still, the enforcement team has hit some recent road bumps.

The S.E.C. has repeatedly clashed with Judge Jed S. Rakoff in Federal District Court in Manhattan, who has challenged some of the agency’s biggest cases. Judge Rakoff has taken aim at the S.E.C.’s long standing “neither admit nor deny” policy, which allows companies to settle enforcement cases without acknowledging wrongdoing.

Judge Rakoff, perhaps most notably, is now holding up the Citigroup case, which centers on whether the bank duped investors into buying mortgage bonds. Citigroup has agreed to settle the case.

The S.E.C.’s top litigator, however, defended the settlement policy and painted Judge Rakoff’s efforts as rogue.

“There’s only been one judge who’s rejected any of our settlements,” Matthew T. Martens, the chief litigation counsel, said on Friday, smiling as he declined to identify Judge Rakoff by name.

Mr. Martens rebuffed criticism that the S.E.C.’s settlement policy was too soft on Wall Street. The policy, he said, reflects concerns that the agency could lose at trial or rack up hefty expenses during a protracted legal battle.

He also noted that the agency did not settle with about three-quarters of people sued in crisis cases.

“The reality is we’ve had tremendous success,” he said, “and we’re not shying away from bringing cases.”