By Sarah N. Lynch
WASHINGTON, Oct 9 (Reuters) - The top U.S. securities
regulator on Wednesday placed everyone from auditors to fund
board members on notice, saying her agency plans to look for
violations in all corners of the market, from major Wall Street
investment firms to boiler room operations.
"Minor violations that are overlooked or ignored can feed
bigger ones, and, perhaps more importantly, can foster a culture
where laws are increasingly treated as toothless guidelines,"
Securities and Exchange Commission Chair Mary Jo White said in a
speech at a conference about SEC enforcement issues.
"I believe it is important to pursue even the smallest
White, a former federal prosecutor, has made tough
enforcement a cornerstone of her chairmanship at the SEC since
she took the helm of the agency in April.
She has already broken from the SEC's long-time practice of
allowing defendants to settle cases without admitting or denying
charges, saying the SEC will seek to extract admissions if the
circumstances are right.
Just last month, she also said the SEC planned to step up
efforts to bring charges against individuals and would not shy
away from seeking large penalties against executives and
White on Wednesday said she believes that the "Broken
Windows" theory that former New York City Mayor Rudy Giuliani
applied to his crackdown on crime in the city should also apply
to the SEC's enforcement program.
Under that theory, making sure that the urban environment is
well maintained and that broken windows are fixed helps to deter
even more serious crimes.
"We are looking for the 'broken windows' in our markets -
and not overlooking the small violations to avoid breeding an
environment of indifference to our rules," she said.
White said the SEC will still continue pursuing major cases
against the big names on Wall Street, such as the high-profile
matters brought this year against JPMorgan Chase & Co
and hedge fund tycoon Steven A. Cohen of SAC Capital Advisors.
However, she also singled out several other target areas
where she said the SEC plans to dedicate its resources.
One focal point in particular, she told the audience, is
"Auditors serve as critical gatekeepers - experts charged
with making sure that the processes that companies use to
prepare and report financial information are ones that are built
on strength and integrity," White said.
Just last week, the SEC said it had launched a new imitative
known as "Operation Broken Gate." The operation snagged three
auditors, whom the SEC accused of failing to comply with U.S.
standards during their reviews of public companies' books.
"You should expect more of these cases," White said.
In addition, she sought to put fund board members on notice
that they have a fiduciary obligation to uphold.
"Being a director or in any similar role where you owe a
fiduciary duty is not for the uninitiated or the faint of
heart," she said.