New SEC director Margaret Ryan resets enforcement priorities

The SEC’s Division of Enforcement is experiencing a shift in focus under the leadership of new director Margaret Ryan, embracing a ‘back to basics’ regulatory approach advocated by chairman Paul Atkins. At a recent address to the Los Angeles County Bar Association, Ryan emphasized a commitment to enforcing federal securities laws while also highlighting resource constraints and a change in philosophical approach at the SEC. She debunked rumors that enforcement efforts were being neglected, asserting that enforcement work remains a top priority.

Ryan’s leadership places emphasis on the quality and impact of enforcement actions over sheer volume, stressing the importance of utilizing finite resources judiciously to protect investors and uphold market integrity. Melissa Hodgman, a partner at Freshfields and former SEC official, commended Ryan’s disciplined and fair approach, noting her commitment to process enhancements likely to be formalized in an updated enforcement manual.

Under Ryan’s direction, the enforcement division has identified three main priorities. First, targeting classic fraud schemes that harm investors, Ryan echoed Atkins’ focus on pursuing ‘liars, cheats, and thieves’, particularly those scams targeting US retail investors. The division also aims to prosecute cases involving accounting fraud, insider trading, wash trading, and market manipulation to prevent distortions in market prices.

Secondly, Ryan underscored the importance of enforcing compliance with federal securities requirements, including obligations for public companies to maintain accurate records and internal controls. She also highlighted broker-dealers’ and investment advisers’ duties to adhere to fiduciary standards and financial responsibility rules, signaling a willingness to pursue cases where such violations threaten investors or market integrity.

Ryan also emphasized transparency and fair opportunity for respondents in enforcement investigations, outlining enhancements to the Wells process to provide potential defendants with a four-week window to respond and the opportunity for meetings with division leadership. This commitment to process aligns with the SEC’s mission to protect investors, maintain fair markets, and facilitate capital formation.

Atkins’ regulatory philosophy of a ‘back-to-basics’ approach is mirrored in Ryan’s enforcement priorities, both focused on investor protection through targeting clear wrongdoing, safeguarding fair markets, and deploying limited resources effectively. The alignment between Ryan and Atkins suggests a shift away from aggressive novel theories of liability towards traditional fraud and clear investor harm. The question arises of how this renewed focus on foundational securities laws will impact market conduct in the future.