Backdating Battle Focuses on Fraud

We've got a very good, solid staff. There are still about a thousand of us in enforcement. And that seems both large and small. We're always outnumbered -- always. The notion of us ever getting to the point where we're not going to have to worry about resources and the appropriate deployment of resources I think is not going to happen.

What portion of your resources are being devoted to the backdating issue?

Well, as I said, we have a lot of investigations. But at any given time, we have, I think, on average, 2,000 investigations ongoing throughout the country. And we are keenly interested in covering the waterfront.

We have 12 offices that do enforcement work. One is in Washington, D.C., and 11 throughout the country. And different offices may have a concentration in one area because it matches what is going on in their patch.

I would imagine that the San Francisco office is devoting a lot of attention to backdating, given that the tech companies based here have represented the lion's share of companies caught up in the scandal so far.

There is a fair amount here. There's some in other places.

Besides the backdating issue, what other enforcement issues are at the fore of what you are focusing on right now?

We continue to have an interest in financial fraud generally. I think it's fair to say that [we're looking at] hedge funds, generally speaking -- not so much for a particular practice -- but as a place where there is opportunity for illegal behavior, just because there's tons of money in hedge funds.

You have said that there are going to be more cases coming out of the backdating scandal. Given the SEC's limited resources, do you expect to make examples of a limited number of people, or do you expect to see a large number of cases coming out of this?

We bring cases where the conduct warrants bringing the cases.

Because of things like limited resources, we try to regularly assess whether something looks like it's a good use of law enforcement resources and continually assess the evidence we have and ask, "Does this amount to a violation of the securities laws as we look at it? If it is, is it on the more fraudulent, not fraudulent, but 'technical'? Does it matter?"

Those are questions we ask ourselves all the time. For the world at large, and not with respect to the securities law in particular, there's more illegal behavior going on than law enforcement.