SEC on Attack, Vows More Action on Crisis

The US Securities and Exchange Commission has vowed to bring more high-profile enforcement actions against Wall Street over the financial crisis, following last month’s $550 million settlement with Goldman Sachs.

New York Stock Exchange (NYSE)
Oliver P. Quilla for
New York Stock Exchange (NYSE)

US regulators told the Financial Times the SEC’s contentious civil fraud case against the bank over the sale of mortgage-backed securities was an example of the type of high-profile action its revamped enforcement division was working on.

“Deterrence works in the white-collar world. Financial institutions look at cases like Goldman and review their own practices and risk-tolerance and think about how risky behaviour affects their brand,” said Robert Khuzami, SEC director of enforcement.


The regulator has come under fire for not bringing more cases over the 2008 financial crisis. But senior SEC officials said the regulator had a significant number of potential enforcement actions against banks and insurers still in the pipeline.

These new civil lawsuits could include cases where the alleged victims are institutional investors. Some commentators criticized the Goldman action on the basis that IKB, the German bank that suffered losses as a result of the alleged malpractice, should have been able to look after its own interests, without regulatory interference.

But several judges have questioned the SEC’s deals with Citigroup and Bank of America, and some plaintiffs’ lawyers believe the regulator has been too soft.

“There’s no real difference now to what it was like before Mary Schapiro became chairman,” said Jacob Zamansky, a lawyer for investors and longtime SEC critic.