July 15, 2015 / 9:05 AM / 4 years ago

U.S. Chamber calls for long list of reforms for SEC enforcement program

WASHINGTON (Reuters) - The U.S. Chamber of Commerce called for numerous reforms to the Securities and Exchange Commission’s investigative process on Wednesday, in a new report some of whose provisions the markets watchdog said would weaken its ability to protect investors.

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

The Chamber’s key recommendations lay out ways to bolster due process for defendants in SEC enforcement actions by strengthening policies surrounding in-house trials, admissions of wrongdoing and “Wells notices,” sent by the agency as a final warning to companies and individuals that it plans to bring charges against them.

“SEC enforcement should have a fair process for all,” the report says.

The Chamber’s report in particular takes aim at SEC in-house trials, an alternative to federal courts expanded via the 2010 Dodd-Frank law.

Administrative trials, presided over by an SEC judge, are usually expedited, have no jury, and limited discovery.

Critics say in-house trials violate their constitutional rights.

In its report, the Chamber calls for the SEC to adopt a uniform policy on when to use such trials and to create a process for defendants to challenge the choice of venue and amend its rules to permit more pre-trial discovery.

The SEC has repeatedly defended its right to bring a case in the venue of its choice, and has touted in-house trials’ speedy nature and the expertise of the judges who hear the cases.

“The report contains certain recommendations that would significantly weaken the Commission’s ability to protect investors through strong and effective enforcement of the federal securities laws,” SEC Enforcement Director Andrew Ceresney said in a statement.

SEC Chair Mary Jo White, a former federal prosecutor, has made tough enforcement a hallmark of her tenure.

In 2013, she launched a policy allowing the agency to extract admissions of wrongdoing in certain egregious cases - a departure from the past practice of letting defendants settle without admitting or denying the charges.

The Chamber’s report calls on the SEC to more routinely review this policy.

The report was unveiled at an event that featured Nelson Obus, a New York hedge fund manager who last year successfully defeated the SEC’s insider-trading charges against him in federal court.

Obus said he fully endorses the reforms laid out in the report.

“I never could have won my case in an administrative proceeding,” he said. “It was discovery that ultimately unhinged one of their key witnesses.”

Reporting by Sarah N. Lynch; Editing by Christian Plumb

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