Better in their words…

“A more open and transparent Government…”
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By RUSSELL G. RYAN
More than three months ago, the Supreme Court unanimously dismissed Securities and Exchange Commission penalty claims against investment adviser Marc Gabelli because the SEC 5304.OK -1.84%took too long to file its case. But you wouldn’t know that if you monitored the case on the SEC website. You’d find the regulator’s initial fraud allegations against Mr. Gabelli but no official acknowledgment that the Supreme Court has significantly gutted the case.

The same is true for many other cases the SEC loses or abandons in court. For instance, two executives of Knight Securities KCG -0.82%took the SEC to trial in 2008 and defeated charges of fraudulent trading, yet the agency’s website reflects only the initial allegations of wrongdoing. In another case, a federal judge in New York twice dismissed the bulk of the SEC’s 2004 book-cooking charges against a former accountant at Lucent Technologies (and the SEC voluntarily abandoned the remaining claim against her in late 2010). But the SEC website—while keeping the allegations online—doesn’t mention the dismissal.

Like other federal agencies, the SEC has long been good at publicizing its initial accusations of wrongdoing—which is fair enough—but not so good at letting the public know when those accusations turn out to be unfounded or an overreach. With new leadership at its helm, the SEC should set an example by preventing lapses that can inadvertently result in airbrushed versions of law-enforcement history.

When the SEC files enforcement charges, it summarizes the case in a “litigation release” posted to its website, usually linking to a more detailed complaint filed in court. In prominent cases, the regulator also issues a news release adding statements from senior officials to amplify the broader message of the case. If and when the SEC ultimately wins, it usually issues another release touting the victory, sometimes with a link to the relevant court decision.

And if the SEC loses? Sometimes it publicly announces the defeat, but too often mum’s the word. The original charges and news releases remain on the SEC website forever, with no update to prevent misperceptions and damaged reputations.

These oversights were less problematic in the pre-Internet era. Back then, SEC news releases largely disappeared into file cabinets after a one-day press cycle. Except for the most prominent cases, media coverage was typically short-lived and soon relegated to expensive subscription databases and the dusty microfilm rooms of public libraries.

But today’s SEC publicity is permanent and widely dispersed. The regulator’s accusations can persist indefinitely among the top search-engine results for the names of those accused.

This presents an issue of fairness and transparency for a venerable agency where I proudly served from 1994 to 2004. And the solution is simple.

The SEC could easily post a litigation release whenever it loses a case or suffers a major setback in court. Or the agency could insert a brief update on the pages of its website that had previously touted the case, letting the public know what later happened. The SEC already does this after some losses—and appears to be getting better at it—but the practice remains inconsistent at best. And there’s no obvious explanation for the disparate approach from one case to the next.

Ironically, the SEC might benefit from enhanced public awareness of its setbacks in court. Some critics appear to think SEC cases are all slam dunks, and they are quick to accuse the regulator of spinelessness when it settles without draconian sanctions or a public confession of wrongdoing. Increased publicity about SEC trial losses could help manage public expectations and serve as a reality check by illustrating the agency’s vulnerability when it pushes too far.

The SEC ought not be burdened with posting interim updates every time something happens in each of its many cases. Nor should the agency erase history altogether by taking down every vestige of its original allegations simply because it lost a case. But when major litigation developments occur, and when a case is finally over, the SEC should routinely announce the result—good or bad.

Mr. Ryan, a former assistant director of the SEC’s division of enforcement, is a partner with the law firm King & Spalding LLP.