From Naked Capitalism, Yves continues to point to enforcement theater:
One of Teddy’s Roosevelt’s famed sayings was “Speak softly and carry a big stick.” The SEC seems to be hoping that speaking loudly and brandishing a water pistol will be as effective.
As we’ve written, the securities regulator made an impressive initial salvo at the private equity industry. The first was Mary Jo White describing industry abuses in surprisingly specific detail in Congressional testimony. That was followed shortly by SEC official Andrew Bowden giving a simply stunning speech in May. Bowden described more than half the firms in the industry as engaging in what amounted to embezzlement or other serious compliance violations and depicting at length the sort of troubling behavior the SEC was unearthing.
Normally, when the SEC is that pointed in calling out abuses, it means the agency is about to send out Wells notices, which are official warnings that an enforcement action is imminent. But here it is, five months later, and the agency has been walking its tough talk back. What gives?
One can reasonably argue that Lincolnshire was too penny-ante a case for it to be worth it for the SEC to pursue. But one can just as easily point out the reverse: that the SEC has gotten to be in the business of taking cases only so far and settling, and that includes letting its targets off with virtually nothing in the way of admissions.
The fact that even small firms on small matters are getting away with this sort of treatment is a worrisome sign. If the SEC’s posture is that it is not going to chase big guys too hard because they’ve got the agency outgunned, and the SEC won’t pursue small guys aggressively because they are too penny-ante to be worth hounding, then what pray tell are they going to go after? Despite all the private equity saber-rattling, its posture appears to be that it is content to let inmates continue the asylum provided they are willing to play along with occasional exercises in enforcement theater.