The U.S. Securities and Exchange Commission (SEC) recently initiated charges against a group of small companies for deficient filings on Form 12b-25, reflecting an apparent return to the controversial “broken windows” approach utilized by the regulatory body during the previous decade. The details of these developments can be seen in this
article by Jones Day, published on JD Supra.
The “broken windows” strategy, first imposed under former SEC Chair Mary Jo White, was named after the late-20th-century urban policy of rigorous enforcement against minor infractions to maintain law and order on a larger scale. The SEC’s version of this policy involved penalizing even minor securities law violations to signal intolerance for any level of noncompliance.
Critics of the “broken windows” policy in the financial sector argue that it mires both the SEC and businesses in paperwork and procedures for violations that may carry minimal or no harm. Supporters hold that strict adherence to all facets of securities laws is necessary for maintaining order and trust in the US market.
It remains to be seen how the reemergence of this approach might affect both the entities currently facing allegations and the broader landscape of securities law compliance. It’s worth keeping an eye on forthcoming developments in order to fully analyze their potential implications.