Since joining the Securities and Exchange Commission as chairman in April 2013, Mary Jo White has emphasized the importance of taking cases all the way to trial. And while critics have questioned whether the agency has the budget and the manpower to take on numerous drawn-out, resource-intensive trials, White has voiced her belief that the SEC is ready to engage more defendants in courtroom battles and to win those battles.

The early results, however, from the SEC's fiscal year 2014—White's first full year as the head of the agency—don't support such claims.  It's true that the SEC has engaged more defendants in trials, but the outcomes have been quite unfavorable for the SEC's trial unit. During the period from Oct. 1, 2013 to Feb. 1 2014, the SEC has taken at least nine cases to trial and either lost or suffered a mixed verdict in seven of them. The SEC will need to look hard at these adverse verdicts to determine if its new “take 'em to trial” approach is the right one for a perpetually resource-strapped agency.

Multiple factors have converged to spur the recent increase in SEC trials—factors that are likely to continue pushing up the number of SEC cases that go to trial in the future.  First, as she has emphasized several times, White is a firm believer in the notion that trials are a means for the agency to obtain greater public accountability from defendants and to develop “a full factual record of wrongdoing that should foster better development of the law.” An effort to develop and define the boundaries of insider-trading law through trials seems to be a particular focus in 2014.

Moreover, White announced last June that the agency's three-decade policy of allowing defendants to settle cases without admitting or denying the SEC's allegations would no longer stand in all settlements. The SEC now demands admissions in cases in which the defendant engaged in “egregious intentional misconduct” or “misconduct that harmed large numbers of investors.” Because some defendants will be unwilling to admit to wrongdoing as part of a settlement, this new policy will surely result in more cases going to trial.

During the period from Oct. 1, 2013 to Feb. 1 2014, the SEC has taken at least nine cases to trial and either lost or suffered a mixed verdict in seven of them. The SEC will need to look hard at these adverse verdicts to determine if its new “take 'em to trial” approach is the right one for a perpetually resource-strapped agency.

White stated in a November 2013 speech that the SEC's trial attorneys are “incredibly skilled and effective,” and she observed that in the past three years the trial unit has prevailed at an 80 percent success rate despite opposition from top defense law firms that are able to staff cases with a “horde of lawyers.” The trial unit lawyers, she said, have “shown that they won't back down and are very much up to the task.” The SEC's trial results so far in fiscal year 2014, however, call that assessment into question.

Consider the SEC's dismal record during the barrage of cases that have gone to trial just since fiscal year 2014 started in October:

SEC v. Cuban: In October 2013 the SEC conducted a high-profile, three-week trial of its insider-trading case against Mark Cuban, the billionaire owner of the National Basketball Association's Dallas Mavericks. The SEC argued that as a result of an eight-minute phone conversation in 2004 between Cuban and the CEO of search engine Mamma.com about an upcoming stock offering, Cuban had a duty to keep the information confidential and not trade on it. Cuban argued that he had no such duty and protested that the SEC was resorting to "regulation through litigation” instead of simply providing the public with “bright-line rules” it could rely upon. VERDICT—FOR DEFENDANT: After just a few hours of deliberations, a federal jury in Dallas found in favor of Cuban.

SEC v. AIC  Inc.: In September, the SEC went to trial against AIC Inc., Nicholas Skaltsounis, and another defendant on its claim that Skaltsounis offered and sold millions of dollars of AIC promissory notes and stock to investors while misrepresenting and omitting material information, such as the safety and risk associated with the investments, the rates of return on the investments, and how AIC would use the proceeds of the investments. VERDICT—FOR  SEC: On Oct. 10, 2013, a federal jury in Tennessee returned a verdict in favor of the SEC on all counts.

SEC v. True North Finance Corp.: In September, the SEC commenced a five-week trial against a Minneapolis lawyer and other defendants. The SEC alleged that the defendants engaged in securities fraud by raising over $21 million from investors in a series of unregistered offerings. VERDICT—FOR SEC: On Oct. 22, 2013, a federal jury in Minnesota returned a verdict in favor of the SEC on the vast majority of the SEC's claims.

SEC v. Kovzan: In December, the SEC conducted a nearly-three week trial against Stephen Kovzan, the chief financial officer of NIC Inc. The SEC alleged that Kovzan prepared and signed SEC filings that concealed more than $1.18 million paid to the company's CEO to cover personal expenses such as vacations, spa treatments, and more. The company and the CEO settled the SEC's claims against them, but Kovzan refused and took the SEC to trial. VERDICT—FOR DEFENDANT: A federal jury in Kansas found against the SEC on all 12 of its claims.

SEC v. Jensen: Also in December, the SEC went to trial against the former CEO and CFO of Basin Water Inc. The SEC alleged that the men intentionally mis-stated the company's revenues and that the CEO sold stock while knowing about the fraudulent accounting. VERDICT—FOR DEFENDANTS: Following a two-week trial, U.S. District Judge Manuel Real found against the SEC, finding no evidence of sham transactions as the SEC alleged. “In fact, everybody involved in the various transactions testified that they were actual, legitimate deals,” Judge Real wrote in his decision.

SEC v. Schvacho: In January 2014, the SEC litigated a two-day bench trial on its claims that Larry Schvacho engaged in insider trading in the stock of Comsys IT Partners before a merger announcement. The SEC alleged that Schvacho was tipped off by the Comsys CEO, who was a close friend.  VERDICT— FOR DEFENDANT: U.S. District Judge William Duffey ruled against the SEC on all of its claims, finding that “the circumstantial evidence that the SEC offered at trial is insufficient to prove … that Schvacho possessed material, non-public information about Comsys and used such information to trade in Comsys stock.” Indeed, Duffey criticized the SEC's “overreaching, self-serving interpretation” of evidence.

SEC v. Yang: Last month the SEC went to trial against Siming Yang, his investment firm Prestige Trade Investments, and two related defendants. The SEC alleged that Yang knew he was about to place “enormous, market-moving purchases” of a certain stock for Prestige's account, and sought to “front-run” that trade by purchasing stock and call options in a personal brokerage account. VERDICT—MIXED: In a mixed verdict, a federal jury in Illinois found against the SEC on its claims of insider trading, but in favor of the SEC on claims of front-running and false filings by Yang.

SEC v. Steffes: The SEC also began a nine-day insider-trading trial last month against a large group of family members and their friends related to the acquisition of Florida East Coast Railway. The SEC alleged that two of the defendants who were employed by the railway obtained non-public information about the acquisition. The information was unusually vague, however, such as “an unusual number of yard tours involving people dressed in business attire” and the fact that the CFO asked one of the defendants to prepare a comprehensive list of equipment owned by the company. VERDICT—FOR DEFENDANTS: A federal jury in Illinois found against the SEC on each of its claims in the matter.

SEC v. Life Partners: In late January, the SEC began a trial against Life Partners and certain of its executives concerning alleged financial and accounting fraud related to the company's sale of life settlements, as well as insider trading. VERDICT—MIXED: On Feb. 3, 2014, both sides claimed victory after a federal jury in Texas found against the SEC on its fraud and insider-trading allegations, but found that the company did mis-state its revenue recognition policy. The jury also found that Life Partners' CEO falsely certified that the company's public filings were accurate.

A look at the number of weeks that the SEC trial unit devoted to just these trials—not to mention the even greater amount of pre-trial preparation that goes into each one—offers a glimpse of the tremendous resources that the SEC must dedicate to cases that it does not settle. Given this investment of resources, a loss at trial is obviously bad for the agency, but it is not a catastrophe. Even in losses, there are some benefits to the SEC's insistence on going to trial.

As White stated in her November speech, the SEC's ability to extract admissions under its new settlement policy is closely tied to maintaining a credible threat to take cases to trial and prevail if the defendant will not settle on such terms. A perfect trial record, she explained, is not required to achieve that credibility and would arguably indicate that the SEC was shying away from more difficult cases.

Under White, the SEC has shown by its actions and its words that it is more committed than ever to taking cases to trial when necessary. What remains unclear, however, is whether the SEC's low batting average so far under the strain of a heavy trial schedule in the first part of FY 2014 is just a fleeting slump or whether the agency's trial unit is simply not equipped to handle the greater caseload.