Recent Columns By Bruce Carton

Bruce Carton is a former senior counsel in the SEC's Division of Enforcement. Previously vice president of Securities Class Action Services group at Institutional Investor Services (ISS, now RiskMetrics), he is also a former securities litigation partner with one of the world's largest law firms. The editor of Securities Docket, Carton also hosts a Compliance Week blog called, "Enforcement Action."  Some of his recent Compliance Week columns are below:

2011: The Year in Enforcement

January 10, 2012

The past year was a busy one for regulatory enforcement. The SEC says it filed a record 735 enforcement actions during the 2011 fiscal year. And while the SEC was in pursuit of Ponzi schemers, inside traders, and other scammers, it was defending itself from Congress, the judiciary, and its own inspector general. Inside, Columnist Bruce Carton takes stock of the year in enforcement, including the unprecedented and the bizarre.
 

One Judge's Battle Against the SEC's Settlement Practices

November 15, 2011

U.S. Judge Jed Rakoff is pushing for a change to the SEC's method of settling cases with language that allows the accused to neither admit nor deny their guilt, which he once called "a contrivance designed to provide the SEC with the facade of enforcement." Inside, Columnist Bruce Carton looks at what it could mean for SEC enforcement if Rakoff is successful in challenging the practice.
 

The Importance of a Strong Insider-Trading Compliance Program

October 04, 2011

Some companies still don't have a strong insider-trading compliance program, opting instead to let employees who violate the rules hang by their own rope. Indeed, some legal departments say it's better to have no policy than to have one that failed to prevent insider trading. Bad idea, says Columnist Bruce Carton. Inside, he lists the benefits of an insider-trading compliance program.
 

Back to Reality: Debunking the SEC 'Whitewash' Theory

September 07, 2011

Another month, another instance of Congress and ill-informed outsiders beating up on the SEC—this time, over its destruction of files related to preliminary investigations that end up going nowhere. So says Compliance Week legal columnist Bruce Carton, who urges those critics to think through what an exhaustive records retention policy at the SEC would mean. His full thoughts are inside.
 

Does the SEC's Revolving Door Raise Conflicts of Interest?

August 16, 2011

Critics have pointed to the eternal exodus of lawyers, accountants, and others who leave the Securities and Exchange Commission each year to join the private sector as a potential area for conflicts of interest. They say SEC employees have an incentive to go easy on Wall Street, since they eventually want to work there. Inside, Columnist Bruce Carton examines this and other claims and compares them to recent research on the topic.
 

The SEC and Congress Continue to Lock Horns

July 19, 2011

This past spring members of Congress sparred with officials at the Securities and Exchange Commission on several occasions over the agency's request for a budget increase. Eventually an agreement on the budget was reached, but the bad blood remains. Inside, Columnist Bruce Carton looks at the nasty battle between Congress and the SEC.
 

The Summer of FCPA

June 14, 2011

Enforcement actions of Foreign Corrupt Practices Act violations are intensifying as the summer begins. In May alone, several notable FCPA cases transpired, including the first ever jury conviction of a corporation, the first deferred-prosecution agreement by the Securities and Exchange Commission, and challenges to the law's defining language. Inside, Columnist Bruce Carton recaps the latest.
 

The SEC Remains Behind the Times on Social Media

May 10, 2011

The SEC is constantly nudging issuers to embrace 21st century technology to report financial data and communicate with investors. But when it comes to one online arena—social media—the SEC is decidedly behind the times. Inside, Columnist Bruce Carton looks at the SEC's paltry social media offerings on sites such as Facebook and Twitter and muses about what could be.
 

SEC Struggles With Inadequate Funding and Old Technology

April 12, 2011

SEC Chairman Mary Schapiro has gone to Congress to argue that the agency is starved of resources and without a budget increase will be unable to carry out some of the functions assigned to it by the Dodd-Frank Act. Inside, Columnist Bruce Carton examines that claim and looks at a recent report that just might buoy Schapiro's case.
 

Is the SEC Clamping Down on the Non-Denial Denial?

March 08, 2011

New signs are emerging from the SEC that it might revisit its longstanding policy of settling cases without requiring defendants to admit guilt, a potentially huge risk to executives later subject to private litigation. This week, Columnist Bruce Carton reviews how defendants fell back under SEC ire and how wise such a policy change may (or may not) be.
 

Securities Enforcement and Litigation Goes Global

February 08, 2011

Countries around the world are now seeing an increase in the level of public and private efforts to enforce securities laws, from anti-corruption laws and insider-trading prosecutions to fledgling efforts to launch investor class-action lawsuits. Inside, Columnist Bruce Carton examines what the trend means for global companies.
 

How Can Congress Kill Dodd-Frank? By Underfunding It

January 19, 2011

One of the last acts of the 111th Congress was to freeze the SEC's budget until at least March 4. The move forced the SEC to hold off on plans for a new whistleblower office, required by the Dodd-Frank Act. Inside, Columnist Bruce Carton examines Congress' efforts to stifle reform by limiting the SEC's ability to fund it.
 

Who's Checking Your Channel?

December 07, 2010

As part of the recent insider-trading crackdown, investigators are focusing on whether an analyst practice commonly known as "channel checking"—talking to suppliers, distributors, and manufacturers to glean insights into performance—constitutes illegal insider trading. Inside, Columnist Bruce Carton provides tips for reviewing corporate policies on preventing the misuse of such information.
 

The SEC’s Newest Targets? Muni-Bonds and Pension Funds

November 09, 2010

In years past, the Securities and Exchange Commission used a light touch on its enforcement efforts in municipal securities and pension funds. Not any more.
 

Why September was ‘Insider Trading Month’

October 12, 2010

Everyone knows that with its limited resources, the Securities and Exchange Commission cannot hope to catch everyone who engages in insider trading. Still, the agency does try to be as visible and smart in this area as it can be; publicity is its favorite weapon. As Enforcement Director Robert Khuzami emphasized in a speech last year, the SEC seeks to focus its resources on cases that send an outsized message of deterrence.
 

Pitfalls Emerge in Dodd-Frank Bounty Provision

September 08, 2010

In a span of just six weeks, the whistleblower provisions in the recently enacted Dodd-Frank Act have gone from a little-known sleeper section of the law to one of its most highly scrutinized provisions. Congress has been vocal that the whistleblower provisions are a smart way to uncover more fraud—at no cost to the taxpayers, they say, since the funds used for whistleblower bounties will come out of penalties companies pay to the Securities and Exchange Commission.
 

Changes in Enforcement Thanks to Dodd-Frank

August 03, 2010

You may feel like the Dodd-Frank Act has been with us for months already, but President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law only two weeks ago. Lawyers, bankers, auditors and compliance executives have now had several weeks to digest the final version of the 2,300-page law, and how it will affect their clients and industries.
 

Court Rules Against SEC in Section 10(b) Case

July 13, 2010

One year ago the Securities and Exchange Commission made headlines when it charged two Wall Street bankers with insider trading in credit default swaps. In brining the case—the first-ever insider-trading enforcement action involving credit default swaps—the SEC sought to stake out new ground under the decade-old Gramm-Leach-Bliley Act.
 

Virginia, Epicenter of Fraud Enforcement. Yes, Really.

June 08, 2010

When Neil MacBride, U.S. attorney for the Eastern District of Virginia, told The Wall Street Journal in May that he was putting together a new “investigative taskforce” to crack down on financial crime and securities fraud, the news didn’t strike many as a significant development.
 

A Glimpse Into SEC Enforcement, by Way of Goldman

May 11, 2010

In a time of ongoing heightened scrutiny for the Securities and Exchange Commission, many current and former leaders of the SEC’s Division of Enforcement met recently for an extraordinary panel discussion at the National Press Club in Washington, D.C.
 

U.K. Enforcement Takes New, Stronger Tone

April 13, 2010

Oh, what a difference a financial crisis and an election can have on the entire philosophy and future of financial regulation in a country!
 

DoJ and SEC Go All Out to Stop Fraud

March 09, 2010

When Assistant Attorney General Lanny Breuer was recently asked to comment on enforcement of the Foreign Corrupt Practices Act in 2009, he minced no words: “One can say without exaggeration that this past year was probably the most dynamic single year in the more than 30 years since the FCPA was enacted.”
 

Details Emerge on SEC Office of Market Intelligence

February 09, 2010

One of the first tools that the Securities Exchange Commission launched after it ushered itself into the Internet era in the mid-1990s was the “Enforcement Complaint Center,” a fancy name for an e-mail box at the SEC where the public could send tips. The Enforcement Complaint Center initially received only about 20 complaints per day, but that number snowballed through the years. Today it’s not uncommon for the ECC to receive up to 1,000 e-mail tips per day.
 

Deceptive, and Elusive, Metrics for SEC Enforcement

December 08, 2009

For many years, Securities and Exchange Commission statements about the performance of its Enforcement Division have centered on the number of enforcement actions brought during each fiscal year. At the end of fiscal 2008, for example, the SEC issued a press release announcing that the 671 enforcement actions brought that year were the second-highest number of enforcement actions in agency history. The volume of actions brought, the SEC implied, resulted from “the dedicated enforcement staff … working around the clock to investigate and punish wrongdoing.”
 

Lessons Taken From SEC Hedge Fund Enforcement

November 10, 2009

When the Securities and Exchange Commission announced its massive insider-trading bust against Galleon Management last month, SEC Enforcement Director Robert Khuzami gave a warning: “It would be wise for investment advisers and corporate executives to closely look at today’s case, their own internal operations, and the increasing focus and scrutiny on hedge fund trading by the SEC and others.”
 

Beleaguered SEC Seeks Fresh Start in 2010

October 13, 2009

For the Securities and Exchange Commission, which operates on a fiscal year that ends every September, Oct. 1, 2009, could not come soon enough. It seems almost beyond dispute that the agency’s fiscal 2009 was the most dismal in its history, and perhaps the most transformational.
 

Empowering the SEC to Do Its Job

September 09, 2009

As I argued in this column last month, the Securities and Exchange Commission budget has been well below where it should be for several years. This shortfall has caused the SEC to suffer a 10 percent reduction in staff and a cut of more than 50 percent in its new technology investments since 2005, a period during which the securities markets it regulates have continued to see explosive growth. Most recently, of course, the agency has had to operate in this weakened state in the pressure-cooker of the current economic crisis.
 

Lack of Funding Cripples SEC Enforcement Division

August 11, 2009

Back in January, U.S. Rep. Gary Ackerman (D-N.Y.) was recognized to speak at a House sub-committee hearing about the Madoff Ponzi scheme and the need for better regulatory oversight to prevent such fraud. He promptly lashed out at a witness from the Securities and Exchange Commission, stating: “I want to know who is responsible for protecting the securities investor, because I want to tell that person or those people whose job it is that they suck at it.”
 

Answering Lingering Questions in Madoff Wake

July 14, 2009

On June 29, federal judge Denny Chin handed down the sentence heard 'round the world: 150 years in prison for Ponzi schemer Bernard Madoff.
 

SEC Heal Thyself: Compliance Program Revamped

June 09, 2009

The Securities and Exchange Commission just hasn’t had enough bad news recently, so last month the media piled on even more: a probe of insider-trading allegedly going on inside the SEC.
 

Specialization Key to SEC Enforcement Division Overhaul

May 05, 2009

In last month’s column, I noted the arrival of a new Securities and Exchange Commission enforcement director, Robert Khuzami. I suggested that Khuzami had to hit the ground running and discussed the flood of suggestions from within the SEC and from the outside that Khuzami had already received as to what he should prioritize and pursue upon his arrival.
 

Can New Enforcement Director Restore SEC’s Image?

April 14, 2009

Robert Khuzami began his new job as director of the Enforcement Division at the Securities and Exchange Commission on March 30. His arrival marks the first change in leadership for the Enforcement Division since 2005.
 

Closing the Congressional Insider-Trading Loophole

March 10, 2009

In the days leading up to Nov. 16, 2005, the stock prices and trading volumes of several companies with asbestos-related liabilities including USG Corp., W.R. Grace & Co., and Crown Holdings, began to spike up in an otherwise flat market. No publicly available news about these companies or the industry explained the increases in price and volume.
 

Making a Case for the SEC’s Enforcement Division

February 10, 2009

Ladies and gentlemen of the jury, you have heard the people’s case against the Securities and Exchange Commission’s Division of Enforcement. It now rests in your hands to decide whether this is a guilty party.
 

Madoff Scheme Leads to Host of Problems

January 13, 2009

It may feel like the Bernard Madoff case has been with us for years, but it was only Dec. 11, 2008, when news broke that the supposed Wall Street titan and former chairman of Nasdaq had been arrested for running a Ponzi scheme of unimaginable size.
 

Inside Look at the Weird World of Insider Trading

December 09, 2008

If you want a glimpse into just how weird complaints, schemes, and allegations of insider trading can be, consider the following. In 2003, the Securities and Exchange Commission actually published the Q&A guidance below on its Website:
 

SEC Office of Internet Enforcement Still Going Strong

November 11, 2008

I was a lawyer in the Securities and Exchange Commission’s Division of Enforcement from 1995 to 1997, a time perhaps most notable for being the infancy of the public’s use of the Internet. When I first arrived at the SEC, our online resources consisted of a single station that we called a “Bridge machine” that provided some basic business news and a “Ticker Room” that consisted of a couple of Bloomberg terminals.
 

SEC Enforcement Quandary: Where Do We Go From Here?

October 14, 2008

Still in the thick of the recent financial turmoil, the Securities and Exchange Commission began its new fiscal year Oct. 1, with as much uncertainty about its future as there has been in many years.
 

SEC Pays Up! Fair Funds Doled Out to Investors

September 09, 2008

A little known office established just six months ago within the Securities and Exchange Commission seems to have hit its stride this summer, producing tangible results for investors and possibly signaling the end of six years of frustration for the SEC.
 

Last Week's Events Provide Reminder On SEC Probes

March 16, 2004

According to former SEC enforcement division senior counsel Bruce Carton, companies need to remember that the period immediately following an SEC investigation must be treated as the "no-spin zone."
 

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