‘It doesn’t matter what I believe. It only matters what I can prove,” barked Navy litigator Lieutenant Daniel Kaffee, Tom Cruise’s character in the movie A Few Good Men.1 Although Lt. Kaffee was commenting on proof he might offer to defend Marines in a court martial trial, his words are just as applicable to civilian government agencies. As the U.S. Securities and Exchange Commission rolls out new policies to enforce violations of securities laws, no matter how small, and to seek admissions from defendants in more settled cases, the SEC’s ability to prove what it believes will be tested. Recent trial results have suggested more belief than proof.
During her first six months leading the SEC, Chair Mary Jo White announced that the SEC would begin demanding that those deemed to have committed particularly egregious violations make certain admissions in order to settle SEC charges. She also announced an enforcement focus on charging any and all violations—no matter how small. Common consensus is that charging more defendants and making the settlement process more difficult will lead to more trials for the SEC. Although White recently championed the SEC’s 80 percent trial success rate over the prior three years,2 that success has taken a dive more recently due to a string of trial losses. Between October 2013 and mid-February 2014, the SEC won only 55 percent of its federal district court trials.3 If that trend continues, the SEC’s new enforcement policies may be challenged.4
