Securities enforcement

us capital 2One of the Trump administration’s high profile initiatives is the review and rollback of many of the Dodd-Frank Act’s features.  Consistent with these efforts, an updated version of a bill that would undo many of the Act’s provisions is now making its way through Congress. The Financial Choice Act (H.B. 10) was introduced in April by Rep. Jeb Hensarling (R-Tex.) Because Hensarling introduced a similar bill with the same name during the last Congressional session, the recently introduced bill is referred to as Financial Choice Act 2.0. The bill, which has already passed through the House Financial Services Committee, addresses a number of high profile issues affecting the regulation of the financial system. The systemic issues are attracting all of the headlines. Other features of the bill are attracting less notice. Of particular interest here, the bill introduces a number of changes to the SEC’s enforcement authority. As Columbia Law School Professor John Coffee commented in congressional hearing testimony, these changes, if enacted, would “hobble the SEC’s enforcement program,” and the “cumulative effect” would be “devastating.”
Continue Reading Financial Choice Act 2.0 Proposes Significant Changes to the SEC’s Enforcement Authority

Blair Nicholas
David Kaplan

Among the many concerns in the early days of the new Presidency is the question of what we can expect from the SEC in the new administration. In the following guest post, Blair Nicholas and David Kaplan of the Bernstein Litowitz Berger & Grossman law firm advocate that the SEC take an aggressive approach to securities enforcement, and they have a specific proposal to advance that approach. A version of this article previously appeared in the National Law Journal. I would like to thank Blair and David for their willingness to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Blair and David’s guest post.
Continue Reading Guest Post: President Trump, Let’s Strengthen the SEC

weilWhile financial fraud has always been an important enforcement target for the SEC, the agency recently has shown increased attention to financial reporting cases. In the following guest post, Robert F. Carangelo, Paul A. Ferrillo and Andrew Cauchi of the Weil Gotshal law firm take a look at the SEC’s recent focus on financial reporting and the particular issues that have drawn the agency’s scrutiny. I would like to thank Rob, Paul and Andrew for their willingness to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ guest post.
Continue Reading Guest Post: The SEC’s Renewed Focus on Financial Reporting and Financial Fraud

doj1It has now been seven months since the U.S. Department of Justice announced — in the form of a September 9, 2015 memo from Deputy Attorney General Sally Yates — that it was adopting a policy focused on individual accountability for corporate wrongdoing. The keystone of the policy embodied in the Yates memo is that for companies to receive cooperation credit, they must completely disclosure “all relevant facts about individual misconduct.”  As discussed below, the Yates memo is having an impact in a number of ways. However, according to an April 22, 2016 publication from the Clifford Chance law firm (here), the Yates memo may be having unintended consequences – it may actually be deterring companies from divulging information.
Continue Reading The Yates Memo: What Impact So Far?

TheranosIn a speech last month, SEC Chair Mary Jo White signaled that the agency was going to be paying closer attention to private companies, particularly so-called “unicorns” – that is, the private venture-backed start-ups with valuations over $1 billion (as I discussed in a recent post). In her speech, White highlighted the concerns that can surround companies with these kinds of lofty valuations, noting that “the concern is whether the prestige associated with reaching a sky-high valuation fast drives companies to appear more valuable than they actually are.”   It wasn’t clear at the time exactly what the agency’s scrutiny of these private companies might mean, but recent news involving the high-flying start-up company Theranos shows what White had in mind.  The developments involving Theranos, in turn, raise the question of whether other high-flying privately held companies might also face scrutiny, as well.
Continue Reading Theranos, the SEC, and the Enforcement of the Securities Laws Against Private Companies

seclogoAccording to the agency’s recently released enforcement activity statics, the SEC’s overall enforcement activity and the number of independent enforcement actions both increased in the fiscal year 2015 (which just ended on September 30) compared to prior years. More specifically, during fiscal 2015, the agency filed a record number of independent actions for violations of the federal securities laws. The agency’s enforcement statistics reflect a significant increase in the number of financial reporting and audit cases. The agency’s October 22, 2015 press release presenting its 2015 fiscal year enforcement statistics can be found here.
Continue Reading SEC Files Record Number of Independent Enforcement Actions in Fiscal 2015

whistlesecIn recent years, one of the favored responses of legislative reformers and regulatory enforcement authorities to financial fraud and other corporate misconduct has been the encouragement of whistleblowing activity. Both the Sarbanes-Oxley and the Dodd-Frank Act contained elaborate provisions designed to encourage and even to reward whistleblowers. There seems to be no question that the

seclogoA number of factors might be supposed to affect the SEC’s exercise of its judgment in deciding which firms to investigate. Some possibilities that immediately come to mind are the nature and seriousness of the suspected problem; the way the problem came to the agency’s attention; and the availability of resources to investigate the problem.

satyamOn July 16, 2014, India’s securities regulator, the Securities and Exchange Board of India (SEBI), entered an order (here) against the founder and former executives of Satyam Computer Services to disgorge over $306 million in allegedly ill-gotten gains from their role in the scheme to falsify the company’s financial statements, as well as