SEC’s Thomsen: Focus of SEC’s ARS Investigations Turning to Individuals

On September 18, the SEC’s Linda Chatman Thomsen, Director of the Division of Enforcement, testified before the U.S. House of Representatives Committee on Financial Services. Thomsen’s testimony focused on the SEC’s response to the meltdown of the auction rate securities market in mid-February 2008.

Thomsen praised the “tremendous level of cooperation by state and federal regulators” to arrive at early and comprehensive solutions to a market-wide problem. She stated that the SEC’s Enforcement Division formed a nationwide “ARS Working Group” made up of  dozens of professionals to coordinate the various investigations and to facilitate the sharing of information and experience among staff at Headquarters and our Regional Offices.  She stated that because of the SEC’s work to help secure settlements with UBS, Citigroup, Wachovia, and Merrill Lynch, over $40 billion in liquidity will be made available to tens of thousands of customers in the near future.

Thomsen also testified that with respect to the settling firms and other firms under investigation, the SEC’s focus is shifting to the conduct of particular individuals.   “The Commission will seek to hold individuals accountable if they violated the federal securities laws. Individual accountability provides a additional and powerful deterrent to others on Wall Street who might consider engaging in similar improper conduct.”

Beyond the ARS arena, Thomsen testified that the Enforcement Division’s Subprime Working Group is presently conducting more than 50 investigations in the subprime area in three broad categories: first, those involving subprime lenders; second, those involving investment banks, credit rating agencies, insurers and others involved in the securitization process; and third, those involving banks and broker-dealers who sold mortgage-backed investments to the public.

Read the Testimony of Linda Chatman Thomsen