Amid efforts to revive enforcement and to restore the Securities and Exchange Commission’s reputation, another commissioner is sounding off on how to improve enforcement.

SEC Commissioner Troy Paredes publicly offered his suggestions for how best to allocate the Enforcement Division’s resources in a March 19 speech at the 2009 Southeastern Securities Conference in Atlanta.

Paredes stressed the need to have overarching strategic goals for enforcement that “serve as guideposts to ensure that we are getting the most out of our resources.”

Among other things, Parades emphasized that case selection is “critical.” To be most effective, he said, any enforcement program “… must have a strategy for selecting the investigations and enforcement actions to pursue and then determining how aggressively to pursue them.”

Among the considerations in that selection process are how and to what extent did the misconduct harm investors; whether the misconduct was intentional or the result of negligence; and whether there are alternative ways to address the violation without bringing an enforcement action.

While Paredes said the SEC shouldn’t abstain from bringing cases for negligence-based violations, he said, “We need to ensure that we have adequate resources available to dedicate toward aggressively pursuing those who intentionally violate the federal securities laws.” For example, he said certain technical violations and mistakes may be better addressed through remedial steps without enforcement action.

Another question is whether there’s a deterrent effect from bringing another case of one type or whether “diminishing returns” have already set in. In some cases, Paredes said the SEC may be able to get all (or nearly all) the relief it seeks without expending more resources to bring a more far-reaching case. For instance, if an individual is being pursued by state authorities or federal criminal authorities, he said, “it may be more productive for the SEC to dedicate its efforts to matters that others may not pursue. Parades said private litigation “may also counsel against an SEC action,” since the benefit of bringing a case against the same defendants is reduced.

Parades suggested increasing the size of the SEC’s Trial Unit. Doing so would provide the SEC with additional resources to try cases when warranted, and more trial attorneys could be more actively involved in charging decisions and the ongoing development of cases, he said.

“Having an expanded pool of experienced trial lawyers to engage early on would help us bring even stronger cases and would increase the prospect of our getting more exacting relief when appropriate,” he said.

Paredes also said the SEC shouldn’t overemphasize the number of cases brought or the penalties imposed in judging enforcement performance. He said enforcement lawyers “should never feel that they must bring or continue a matter if resources can be spent more productively elsewhere.”

While he said recent events have “placed an unfortunate stigma on closing investigations,” Paredes added, if the decision to close an investigation is based on a thorough analysis, the SEC “must stand behind the staff and defend the staff’s decision against second-guessing by others.”

Pointing to a watchdog report criticizing the SEC for allowing investigations to linger for years, he said inactive investigations also present troubling due process concerns.

Noting the SEC’s recent announcement that it has begun a review of its systems and processes for handling whistleblowers’ complaints and tips, Paredes said a “robust centralized tracking system would serve investors well” by giving enforcement officials a comprehensive look at ongoing and potential investigations and cases, enabling them to allocate resources more strategically.

For example, he said a centralized system would enable the staff to better see interconnections among investigations and cases and may enable the SEC to spot trends in fraud and manipulation cases “sooner rather than later.”

Meanwhile, he also said the SEC should “encourage defendants to cooperate” and should consider whether it can improve its practice of giving credit—laid out in the 2001 Seaboard Report—“to ensure that we get the most out of the potential for cooperation.”

“If we are too stingy with credit, defendants may not see the ‘credit for cooperation’ trade as worth it,” he said.

In addition, Paredes said the SEC needs to guarantee an atmosphere where whistleblowers feel comfortable contacting enforcement lawyers and examiners without fear that they may become the subject of an investigation themselves.

Finally, he said the SEC should conduct a periodic self-assessment to evaluate whether the enforcement program is accomplishing its goals. Repeating his caution against measuring the impact of enforcement by overemphasizing the number of cases brought or monetary sanctions imposed, Paredes said such a self-audit “should not be taken as an opportunity to second-guess the staff.”

“Any review, to be constructive and fair, must account for the actual environment in which decisions were made, recognizing that our lawyers do not have the luxury of making decisions with the benefit of hindsight,” he said.