[Exclusive] Former SEC Lawyer "Possesses Full Investigative Authority... Can Summon Witnesses Across the US" [War Against Stock Manipulation]

Samuel J. Winer, partner attorney at Foley & Lardner and associate professor at George Washington University Law School

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Samuel J. Winer, a partner attorney at the major U.S. law firm Foley & Lardner and a former SEC Enforcement Division official, said in a written interview with Asia Economy Newspaper on the 19th, "The SEC regularly utilizes mutual legal assistance treaty provisions to obtain necessary evidence."

Attorney Winer worked as an investigator in the SEC Enforcement Division from the late 1970s to the early 1980s. The 1970s was a period when investigative authority related to unfair practices was centralized within the SEC Enforcement Division, elevating its status as a centralized agency within the capital market. After leaving public service and moving to the private sector, he has served as an independent consultant to the SEC and as an independent monitor for both the SEC and the U.S. Department of Justice (DOJ). He has authored numerous publications and currently serves as an associate professor at The George Washington University Law School.

Winer stated, "The U.S. Congress grants the SEC the authority to enforce laws, and the SEC imposes penalties and monetary sanctions on wrongdoers," adding, "While recovering illegally obtained gains, the SEC also prevents individuals such as public company executives or directors, licensed investment advisers, brokers, accountants, or attorneys handling SEC matters from continuing in their roles to preempt potential future violations." However, administrative sanctions fall under the SEC's independent jurisdiction, whereas criminal prosecution is the exclusive domain of the U.S. Department of Justice and U.S. federal prosecutors."

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As crimes have become more sophisticated, the bounty system to encourage whistleblowing has also been strengthened. For example, the SEC's Whistleblower Office actively publicizes the size of rewards monthly to promote the bounty program. In May last year, the SEC paid a record $279 million (approximately 373.7 billion KRW) to a single whistleblower. At that time, the SEC explained, "The largest reward in the program's history not only encourages whistleblowers to provide accurate information about violations but also reflects the program's great success."

Attorney Winer said, "The whistleblower program is very effective in strengthening the SEC's enforcement power," noting, "According to the annual report, it has induced thousands of reports of U.S. securities law violations and helped SEC enforcement staff identify and address violations they might have otherwise missed." He added, "Civil penalties imposed by the SEC on wrongdoers have significantly increased, which likely contributed to the rise in rewards. Large reward amounts encourage whistleblowers to provide useful information to the SEC."

The funding for the SEC's whistleblower program rewards comes from the 'Fair Fund'?a fund established to distribute disgorged ill-gotten gains or civil penalties recovered under U.S. federal securities laws to investors harmed by violations, instead of transferring these amounts to the Treasury. Similar discussions have taken place several times in Korea to introduce such a system, but they have not resulted in legislation. The Fair Fund was created to compensate victims of securities violations using recovered ill-gotten gains. In 2002 and 2010, Korean laws were amended to allow civil penalties, similar to administrative fines, to be used as funding sources.

Winer explained, "The Fair Fund provides an important means to compensate those who suffered losses from securities fraud," citing a contribution in the Stanford Law Review that noted the scale of losses recovered through class actions in the early 2000s was comparable to the number of securities fraud victims."

Despite having various remedies for unfair practices such as the Fair Fund, class actions are also active in the U.S. According to a recent report by the Korea Capital Market Institute, more than 100 securities class actions are filed annually in U.S. federal courts. This is a stark contrast to Korea's capital market, where despite early adoption of class action systems, the number of cases accepted by courts remains very low.

Winer stated, "For decades, the U.S. Supreme Court has ruled that securities victims have the right to seek compensation for losses caused by securities fraud," adding, "In 1980, the Supreme Court ruled that defendants found liable in securities fraud cases brought by the SEC could not deny responsibility in similar securities class actions based on similar claims." He continued, "For these reasons, SEC enforcement procedures have been able to assist plaintiffs in securities class actions," and "In the U.S., attorneys can receive a substantial portion of amounts recovered in class actions, and there are many law firms specializing in class action litigation."

He emphasized, "The U.S. has empirically learned that protecting investors and fostering investor confidence is the most reliable way to sustain growth and vitality in its capital markets," adding, "The U.S. invests significant resources in actively detecting, preventing, and punishing unfair practices to earn investors' trust."

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We plan to intensively report from various perspectives on unfair trading such as insider trading, fraudulent transactions, market manipulation, and reporting violations. We will strive to prepare comprehensive countermeasures to eradicate capital market crimes. Please send tips to lsa@asiae.co.kr. We will investigate thoroughly and report.

▲Team Leader Seon-ae Lee, Manager △Min-young Kim, Yoon-joo Hwang, Min-young Cha, Dae-hyun Kim, Reporters

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