SEC Pitch
Most industry gatherings have online networks where participants can communicate with each other and see who plans to attend. The SEC has used those lists to e-mail attendees, asking whether they might be free to chat at the conference, said the people.
One person who met with SEC officials while attending a conference in Miami said the agency’s pitch is simple: It can’t adequately police markets if it doesn’t know where to look for bad behavior, the person said.
SEC enforcement attorneys have also held closed-door discussions with groups of investors from companies such as Vanguard Group Inc. and BlackRock Inc., said one of the people. At one meeting, SEC officials said the firms should feel open to sharing information with regulators, particularly when practices strike them as inappropriate, the person said.
While Vanguard does not comment on specific meetings with government agencies, “we work to build good relationships and strong rapport with various regulators on policy-related issues,” Vanguard spokeswoman Katie Hirt said.
BlackRock spokesman Ed Sweeney declined to comment.
Possible Downside
One possible downside of the SEC’s social sleuthing is that officials will get so close to industry employees that some may be lured to leave for higher paying jobs on Wall Street, said James Cox, a professor at Duke University School of Law.
“Overall, it’s a good thing but a byproduct could be that SEC officials develop contacts for an industry job down the line,” Cox said.
Still, the latest overtures have led to some SEC inquiries of possible wrongdoing, according to a person familiar with the matter. And in prior years, investigations into securitized debt have yielded high-profile cases for the government. Based on a tip from one of his customers, Jesse Litvak, the former Jefferies Group LLC trader, was convicted of fraud in 2014 for misleading clients about how much he made on bonds he sold. That conviction was overturned in December with a new trial set for July.