In other words, without some help from the Justice Department, even a hot-shot prosecutor like White simply can’t deliver if the public wants to see Wall Street barons behind bars.
But that doesn’t mean that the agency doesn’t have plenty of muscle to flex.
“I would argue that she has a wider panoply in her quiver that she can fire off than she ever had at the Department of Justice,” said James Cox, a professor of corporate and securities law at Duke University.
One of the most effective tools at the SEC’s disposal is also one of the most basic: shame. The SEC has the power to carry out an investigation and issue a tell-all story about an individual, even if it finds no violation, Cox said.
“For individuals who sit in boardrooms, well-paid executives, that kind of shaming and damning report makes them say: ‘Ouch,’ ” Cox said.
The goal of federal securities law is not necessarily retribution but deterrence. That’s why the longest-standing remedy at the SEC’s disposal has been injunctive relief, basically barring a person from engaging in a particular conduct.
In the 1990s, Congress added to that the ability to seek monetary penalties and force individuals to return any ill-gotten gains. Mary Schapiro, who stepped down as SEC chairman in December, had asked Congress to boost the statutory limits on penalties.
Although those penalties are key, some securities experts say the SEC’s power to bar individuals from serving as officers or directors of a public company can be far more damaging. Fines may not mean much to a person of wealth, but taking away a person’s livelihood can be the ultimate punishment.
“I don't think that you’ll find that [White] is someone who will be frustrated because she can’t run out and lock people up,” said William R. McLucas, a former head of the SEC’s enforcement division who is now a lawyer at Wilmer Hale. “I don’t see it as a dramatically different mind-set. You size up what the facts are and make a decision.”
The dramatic difference may be tied to the cultural shift, SEC observers said.
As SEC chairman, White would be dealing with a sprawling operation many times larger than the U.S. attorney’s office, one that spans 11 locations. And unlike the attorneys in Manhattan, the attorneys in Washington are unionized. Trying to impose substantial changes in how people do their jobs might meet with stiff resistance.
The work environment is also more formal, said Scott Kimpel, a partner at Hunton & Williams and former counsel to SEC Commissioner Troy Paredes.
A U.S. attorney interacts with the Justice Department in Washington, “but basically, you’re on your own and you run your office and bring the cases you want to bring without having to consult others,” Kimpel said. “It’s a different dynamic at the SEC. You have to get the majority of the commissioners to go along with you before you can bring a case.”
Yet the commissioners can’t even meet privately and hash out their differences. By law, if more than two commissioners gather to discuss a matter of policy, they generally must give public notice and hold an open meeting.
Even if White wanted to devote all her energies to enforcement, there will be other and perhaps more pressing regulatory matters before the agency, including putting in place the sweeping regulations heaped on the agency by the Dodd-Frank Act and writing the rules required by the JOBS Act to ease the hurdles facing small businesses.
The burden of enforcement will fall largely to the SEC’s division chief, who will replace the departing Robert Khuzami.
Khuzami has been broadly praised for restoring the reputation of an enforcement unit that was badly damaged by its failure to detect Bernard L. Madoff’s massive Ponzi scheme. He revamped the office into a more nimble team that has brought a record number of cases, including one that led to a $550 million settlement with Goldman Sachs in 2010.
Khuzami, a former prosecutor who worked for White at the U.S. attorney’s office, brought to the division many of the features of that office. He flattened the management ranks and reorganized the division into specialized units focused on high-priority areas.
He also lured talent from there, including the division’s current deputy director, George Canellos, said Tom Sporkin, a former SEC enforcement official who recently left the agency. For all those reasons, White’s transition to the SEC may not be all that jarring.
“She’ll have kindred spirits in the building,” Sporkin said.