SEC needs more authority to oversee financial markets

Speaking on the sidelines at the Association of the Bar of the City of New York, Robert Khuzami, the director of the SEC`s enforcement division, said that it plans to issue more subpoenas and give people more incentives to cooperate with investigations as it works to tighten oversight of financial markets. The changes will help the regulator as it focuses "on cases involving the greatest and most immediate harm and on cases that send an out-sized message of deterrence," he added.

The changes call for Securities and Exchange Commission staff to now generally have power to issue subpoenas by getting approval only from their supervisors, not the full Commission. Other changes include plans to seek authority to submit more immunity requests to the Justice Department to encourage people to testify without fear of criminal prosecution.

Furthermore, Khuzami said that the SEC plans to create new groups to investigate cases involving asset management, foreign corrupt practices, market abuses, municipal securities and public pensions, and structured products. One group already exists to investigate subprime mortgage abuses. Besides, it will also create a new office to monitor incoming tips and complaints, and hire its first chief operating officer to boost efficiency and speed the reimbursement of funds to harmed investors. The SEC will also streamline management, so staff will need his permission for "tolling agreements" that give them more time to conduct investigations, he said.

In addition, Khuzami said the emphasis on deterrence does not mean the SEC will overemphasize higher-profile cases at the expense of cases involving fewer investors or smaller amounts of money. "Deterrent impact is not tantamount to high-profile," but could focus on novel areas of potential wrongdoing. It's not connected to big corporate cases necessarily."

Khuzami did say that the increased subpoena power may induce companies to be more aggressive in addressing wrongdoing to avoid "the necessity" of a subpoena. Some companies do not disclose SEC probes before subpoenas are actually issued.