U.S Senator Sherrod Brown has sharply criticized the U.S. Securities and Exchange Commission (SEC) for allowing huge financial institutions to escape mandatory penalties despite being found guilty of serious misconduct. In a letter to SEC Chairwoman Mary Jo White, Sen. Brown, who chairs a Senate banking subcommittee, said recent decisions by the commission that waived punishments for Credit Suisse Group AG and the Royal Bank of Scotland Group PLC imply that the policy makes the reprieves “the rule rather than the exception.” The Senator’s letter stated:
I hope that the SEC will reconsider and revise a process that has now been questioned by the public, lawmakers, and a sitting SEC commissioner. Removing privileges enjoyed by large firms will promote better behavior, increase accountability, and demonstrate to the financial markets that certain firms do not enjoy special treatment by virtue of their size.
Senator Brown was referencing a recent $2.6 billion settlement between Credit Suisse and the U.S. Department of Justice, announced on May 19. As part of the settlement, Credit Suisse pled guilty to a massive tax evasion scheme in which prosecutors said it concealed customers’ transactions by limiting withdrawal amounts and using offshore debit and credit cards to repatriate money, deliberate subversion of disclosure requirements and destruction of bank records.
Even though U.S. Attorney General Eric Holder called the scheme an “extensive and wide-ranging conspiracy,” the bank was still allowed an exemption from an SEC rule that would have stripped it of its ability to act as an investment adviser. The RBS case is in regards to an April decision in which the SEC voted to allow the bank to maintain its regulatory privilege status as a “well-known seasoned issuer” despite one of its subsidiaries being convicted for its role in rigging the London Interbank Offered Rate (LIBOR) earlier this year. That status confers several significant advantages to banks offering securities under the Securities Act.
The decision also created dissent in the SEC’s own ranks, as commission member Kara M. Stein said it drew attention to “a structural problem with [the agency's] policy” that implied large financial institutions with global reach were essentially immune from many of the agency’s rules. Senator Brown cited Commissioner Stein’s comments in his letter, and asked Chairwoman White to hand over a comprehensive list of waiver provisions available to banks under federal securities laws, and to clarify whether the SEC has specific policies that guide decision on whether to grant waivers.
Sen. Brown has also requested that White inform whether she has examined the agency’s policies regarding the reprieves since taking over as chair last year. If you need additional information on this matter, contact Clay Barnett, a lawyer in our firm’s Consumer Fraud Section, at 800-898-2034 or by email at Clay.Barnett@beaselyallen.com.
Source: Law 360
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