2010 Year in Review: SEC and SRO Selected Enforcement Cases and Developments Regarding Broker-Dealers

January 2011

This Outline highlights selected U.S. Securities and Exchange Commission (the "SEC" or the "Commission"), Financial Industry Regulatory Authority ("FINRA") and NYSE Euronext enforcement actions and developments regarding broker-dealers during 2010.

In 2009, the SEC's Division of Enforcement began a comprehensive review and reorganization. Over the last year, Enforcement worked on implementing many of the changes to its program that resulted from that review.

One of the most far-reaching changes was the creation of five national specialized units within the Enforcement Division. The leaders of those units were announced in January 2010, and the groups have been staffed with attorneys and other experienced personnel throughout the country. The specialized units have identified a number of initiatives and brought significant enforcement actions in their area of expertise. Examples include several insider trading cases involving rings of tippers and traders initiated by the Market Abuse Unit, and the Structured and New Products Unit's focus on collateralized debt obligations and other complex financial products.

Enforcement's restructuring also included the creation and staffing of two new offices: the Office of the Managing Executive and the Office of Market Intelligence. The Office of Market Intelligence is working on an important Commission initiative - the handling, tracking and distributing for investigation tips, complaints and referrals received at the SEC. In 2010, an FBI agent was embedded into the Office to continue the Commission's coordination with criminal prosecutors to combat financial fraud.

Last year, Commission officials expressed an intention to evaluate the Enforcement Division's performance based on qualitative, instead of solely quantitative, metrics. Indeed, SEC Chairman Mary Schapiro and the Director of Enforcement, Robert Khuzami, have emphasized that metrics reflect the number of cases brought, but not the effect and impact of those actions. Consistent with that philosophy, the SEC has developed a list of "National Priority" or "High Impact" actions, which the Commission hopes will be widely covered by the media and affect the future conduct of market participants. At the end of FY 2010, National Priority or High Impact cases comprised 3.26% of the Division of Enforcement's active docket. In FY 2010, 33 such actions were filed.

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