How SEC Enforcement Affects Insider Leakage

In 2012, Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission,  argued that market participants had “short memories” and that the SEC as a result had to take regular enforcement actions “so that people don’t forget that they have [regulatory] obligations and that somebody is watching and […] willing to hold them accountable.”

Schapiro’s claim has intuitive appeal: If the capital markets regulator does not enforce its rules with some regularity, potential wrongdoers may interpret the resulting inactivity as a reduced risk of apprehension and commit more wrongdoing. In our recently published paper “Short Memories? The Impact of … Read more