The SEC is starting to repair its image.  The Madoff scandal dealt a terrible blow to the reputation and morale of the SEC staff.

The SEC is quietly increasing its enforcement efforts.  For fiscal 2011, the SEC brought a record number of enforcement cases.  While such figures are impressive, some critics claim that the SEC’s cases do not match the impact of cases brought in the past — meaning they are building up statistics on “low-hanging fruit.”

The Department of Justice has been criticized for failing to bring criminal cases after the financial crisis.  Meanwhile, in the non-FCPA enforcement arena, some observers have noted that the SEC is building an aggressive portfolio of enforcement actions.

The SEC claims that it is now reaping the benefits of its reorganization.  Robert Khuzami created five new enforcement units: asset management; structured and new products; municipal securities and public pension; market abuse; and foreign corrupt practices. 

The reorganization also launched an “enforcement cooperation initiative.”  But this initiative is of limited value unless it is clear that the Justice Department will not prosecute the company or any individuals.  A pass from the SEC does not necessarily mean a pass from the Justice Department.  Defense lawyers in this arena discount the value of the SEC’s leniency or deferred prosecution program.

The SEC is trying to be more proactive and get ahead of trends in the industry.  That will be hard to do.  It is difficult to keep up with the new products being offered on Wall Street or demanded by sophisticated investors.  In order to try and understand these products and the industry, the SEC has hired industry experts to assist staff attorneys.

The asset management unit is the largest in the SEC enforcement division —  60 attorneys in Washington and eight regional offices.    Hedge funds continue to be the focus of SEC staff investigations,  especially hedge fund advisers who use capital for unauthorized purposes. 

The SEC also has focused on  public pension fund liabilities and specifically the accounting procedures used by states and municipalities and the disclosures of such procedures.  The SEC continues to focus on on pension fund asset values and the level of disclosures relating to the fund.

The SEC’s enforcement record also reflects an emboldened enforcement attitude, some of which reflect the Administration’s priorities and the new powers created by Dodd-Frank, particularly its expanded enforcement ability to use administrative proceedings. 

While the trade press focuses on FCPA violations, the SEC’s overall enforcement prpogram is picking up speed.