(Bloomberg News) The U.S. Securities and Exchange Commission, long known for settling enforcement actions without having to prove its case in court, is struggling to cope with a surge in the number of executives and companies willing to go to trial to defend themselves.
The SEC's office in Washington is actively litigating about 90 cases, up more than 50 percent in the past year, Matthew Martens, the SEC's chief litigation counsel, said in an interview. At the same time, Martens's trial unit staff has stayed relatively flat at about 36. Martens, who recently added three more lawyers to his group and is looking to hire more, said it's critical that his unit present a credible threat.
The wave of litigation has two main sources: more complex cases stemming from the 2008 financial crisis and a related increase in lawsuits filed against individual executives.
The collapse of the housing market and resulting financial turmoil involved complex securities for which there was little legal precedent. In addition, the agency has brought more financial crisis lawsuits against executives -- more than 50 so far -- and individuals are often inclined to fight claims that could damage or end their careers.
Prolonged courtroom battles could sap resources from the SEC, which has said funding gaps have already diminished its ability to regulate securities markets.