U.S. Securities and Exchange Commission Chair outlines evidence based enforcement shift and stronger role for economists

In remarks at a conference for scholars, researchers and practitioners, the U.S. Securities and Exchange Commission Chairman, speaking in his personal capacity, said the agency has spent the past year recalibrating enforcement toward cases that deliver meaningful investor protection and strengthen market integrity, rather than using enforcement to signal regulatory displeasure or extend the agency’s reach. He presented rigorous economic analysis as central to that approach, including in determining whether a securities law violation occurred and in setting corporate penalties that are proportionate to the benefit gained from the misconduct. The Chairman said economic analysis should also support cases such as preferential allocation or cherry-picking matters and guide the accurate, transparent and fair distribution of recovered funds to harmed investors. He said SEC economists should play a larger role in helping enforcement staff test facts and distinguish stronger cases from weaker ones, while fraud, manipulation and trading on material non-public information would still be pursued vigorously. He also pointed to new Enforcement Director David Woodcock and said he intends to strengthen, not diminish, the role of the Division of Economic and Risk Analysis.