BUSINESS

SEC May Hold More People Accountable For Financial Crisis: Report

09/30/2011 06:17 pm ET | Updated Nov 30, 2011

The federal government is trying to make it easier to hold people responsible for the financial crisis.

The Securities and Exchange Commission (SEC) could charge more people and financial institutions for negligence in the lead-up to the financial crisis, The Wall Street Journal reported. The turn to negligence marks a shift from the SEC's typical strategy of pursuing charges of wrongdoing or recklessness, which are harder to prove, according to the WSJ. The change means the SEC could charge far more people and financial institutions involved in the financial crisis.

The SEC has filed civil charges against more than 70 people and financial institutions since the beginning of the financial crisis, and it's won more than $1.5 billion in penalties and repayments to investors so far, according to the WSJ.

Joshua Rosner, managing director at Graham Fisher & Co., told The Huffington Post that the SEC's settlements with banks so far have supported an assumption that it is generally "in the interest of corporations to break those rules."

But it's been difficult for the SEC to pin down evidence of outright fraud. In many cases, the SEC decided that it did not have enough evidence in order to press charges, according to WSJ. Charging people and firms with negligence may be a more reasonable path forward for the SEC, since SEC lawyers do not need to prove that bankers knew that the investments that they were selling were going to fail.

The SEC also has faced difficulties in its probes of credit-rating agencies that bestowed AAA ratings on subprime mortgage-backed securities, since there are limitations to the laws that the SEC is tasked with enforcing, according to Reuters.

In addition, Congress has restricted funding for the SEC even as it has increased the SEC's responsibilities with the new Dodd-Frank regulations. Just 44 percent of SEC staffers said they feel they have the resources to do their jobs, according to an SEC survey cited by Bloomberg News. The SEC has regularly missed deadlines as it aims to implement and enforce the Dodd-Frank Act, according to The New York Times.

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