PrintThe Washington Post reported today that on at least two occasions the SEC has been forced to grapple with conflicts between their enforcement role and the role of the U.S. government as a significant investor in (Regions Financial) or influencer of (Bank of America) a large financial services firm. In both cases, the SEC chose to pursue an enforcement action, but additional conflicts are likely to surface in the future since the government has acquired interests in a number of banks and other financial institutions through the TARP program. Nevertheless, the Post quotes Robert Khuzami, who directs the SEC’s Enforcement Division, as saying that he expects few actual conflicts to arise. And, for the larger, systemically-important institutions such conflicts may not alter the balancing act underlying their decision to proceed with enforcement: the article points to an example last year where the regulator felt the need to pause to consider a similar concern concerning potential damage to the system if a settlement pushed one or more of the large institutions involved over the edge.
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