The Securities and Exchange Commission (SEC) is carrying its aggressive enforcements too far, says Russell Ryan, former assistant director of the SEC's division of enforcement.

"Like never before, the SEC has transformed itself from sleepy New Deal regulator into a prosecutorial 'cop on the beat' that harshly punishes companies and executives for financial misconduct," he writes in The Wall Street Journal.

The SEC garnered a record $3.4 billion in penalties during fiscal 2013, according to Ryan, now a partner at the law firm King & Spalding.

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"Many investors and commentators think it's about time the SEC got tougher on financial fraudsters and treated them more like common criminals," he notes. "But policymakers and judges should think twice about whether this trend of quasi-criminal administrative prosecution is a good idea. It isn't."

Administrative agencies like the SEC weren't created to act as law enforcement entities, Ryan argues. "They were created to regulate, not prosecute."

Another problem is that "courts have exempted SEC prosecutions from many bedrock due-process protections taken for granted in criminal cases," Ryan writes. That includes the presumption of innocence and the right to remain silent, he says.

"Basic constitutional safeguards should protect American citizens and businesses whenever a law enforcement agency seeks to punish them for alleged wrongdoing, even in nominally civil proceedings. It's time to incorporate those safeguards into an increasingly penal administrative prosecution system that is quickly sliding down a slick and constitutionally hazardous slope."

However, just-retired SEC attorney James Kidney complains that the agency is too meek.
The SEC has turned into "an agency that polices the broken windows on the street level and rarely goes to the penthouse floors," according to a copy of his retirement speech obtained by Bloomberg.

"On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening."

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