As highlighted in this prior post, earlier this year SEC Commissioner Caroline Crenshaw (appointed by President Trump and sworn into office in August 2020) stated that the SEC’s historical practice of placing emphasis on factors beyond the actual misconduct when imposing corporate penalties is “fundamentally flawed.”
In pertinent part, Crenshaw stated: “Over the years, Commissioners on both sides of the political aisle have agreed that a strong enforcement program incentivizes compliance with the securities laws, and that enforcement helps to promote a market that inspires investor confidence, creating a level playing field for market participants. But Commissioners have had different views about when corporate penalties further those goals. It is clear to me that the Commission has historically placed too much emphasis on factors beyond the actual misconduct when imposing corporate penalties – including whether the corporation’s shareholders benefited from the misconduct, or whether they will be harmed by the assessment of a penalty. This approach is fundamentally flawed. This approach, more concerningly, could allow companies to profit from fraud as it unnecessarily limits the Commission’s ability to craft appropriately tailored penalties that more effectively deter misconduct. If we are going to confront the novel issues today’s markets present and deter ever more complicated and hard to detect frauds, we must revisit our approach.”
In this recent public statement, Commissioner Crenshaw returned to the topic in connection with the recent Kraft Heinz Company enforcement action (see here for the prior post).
