Kit Addleman in Law empowers SEC to go after more US market players


As the Dodd-Frank financial overhaul bill moved through Congress this summer, the U.S. Securities and Exchange Commission - virtually unnoticed - gained a powerful new weapon that could significantly increase the agency's force and reach.

The SEC's administrative-law judges handle a variety of enforcement matters, mostly involving securities professionals who have been accused of misrepresenting investments to clients, pocketing investor money, or other securities-law infractions. Of the hundreds of administrative proceedings brought each year, only a fraction result in trials; typically, administrative-law judges rule on settlements that have been negotiated between the SEC and respondents, the term for defendants in administrative proceedings. So far this year, the agency's four judges (one recently retired) have issued 13 initial decisions in litigated cases, consistent with the roughly 15 to 25 they've issued annually in recent years.

But the new provision could result in more trials in administrative-law courts, and that worries some in the defense bar. Lawyers for respondents in SEC administrative-law courts have limited subpoena rights, and except in rare circumstances, they can't take depositions. Also, the SEC's administrative-law judges are required to issue an initial decision within 300 days of a case's filing. This strict time limit favors the agency, defense lawyers say, because commission lawyers typically have spent months or even years developing their investigation, while lawyers for the respondents may still be scrambling. "The SEC has had time to build that record, and it's dumped on opposing counsel all at one time," says Katherine Addleman, a white-collar defense lawyer at Haynes and Boone in Dallas.

Excerpted from, October 27, 2010. To read the full article click here.

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