In remarks last week at the MFA Legal & Compliance Conference, the SEC’s newly minted Enforcement Director, David Woodcock, outlined how he intends to lead the Division and what that means for current enforcement priorities. Here’s an excerpt:

As a matter of first principles, my goals are aligned to those of Chairman Atkins: to return the enforcement program back to basics. That means vigorously protecting investors and safeguarding markets, while also providing transparency and certainty to those we regulate.

A quick aside, there has been considerable attention paid to the decline in the number of cases brought over the last several years. Let me be clear: this Commission has deliberately shifted toward an emphasis on quality over quantity, and I fully support that direction.

Our focus is, and will remain, on protecting investors and safeguarding markets from real harm. That means identifying and stopping fraud and manipulation in all its forms—for instance, offering frauds, accounting and disclosure fraud, insider trading, market manipulation, fraud by foreign actors targeting U.S. markets and investors, and breaches of fiduciary duties by advisers misusing client assets.

To emphasize the Division’s focus on rooting out fraud, David has reinstituted the “Retail Fraud Working Group” – which focuses on protecting retail investors and strengthening coordination with state and federal partners. The speech says we’ll hear more on this in the coming weeks.

Another key takeaway from the speech is that the Commission is committed to distinguishing fraud from errors – and calibrating remedies accordingly. But investigative targets who want to try to show that their missteps were unintentional will have to be able to make a case with evidence and facts. According to these remarks, the Division will also look favorably on self-reporting and cooperation. Here’s more detail on that point:

A company that self-reports, cooperates fully, and remediates will not be treated the same as one that conceals or obstructs.

The takeaway is simple: engage early, engage seriously, and engage candidly. If your client operates in a gray area, take advantage of the Commission’s stated commitment to pre-enforcement dialogue. If we misunderstand your business model, use that opportunity to clarify. The days when a subpoena was our primary tool of communication are behind us.

That being said, I want to emphasize that the Division’s staff are some of the finest securities lawyers anywhere. Zealous client advocacy by defense counsel is wanted and expected, but I ask that you respect the Division chain of command, and not assume that you as counsel have a perfect understanding of the Commission’s priorities and what cases will or will not ultimately be brought. Similarly, respect and dialogue go both ways. You should treat our staff with the utmost respect, because that is how we aim to treat you.

Check out this Cleary memo for more color on David Woodcock’s impact on the Division and its priorities.

– Liz Dunshee