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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:

Why Law Firms Are a Breeding Ground for Insider Trading

April 08, 2014

There have been a spate of insider-trading cases against individuals who work at law firms and gain access to information about pending corporate mergers and transactions. And it's not always lawyers who are working on the sensitive cases and deals, but others who gain access to the firms' computer systems. Inside, columnist Bruce Carton looks at the vulnerability of law firms to insider-trading scams and why they need to bulk up their data security practices.

Behind the Myth of Insider Trading by SEC Employees

March 11, 2014

A new academic study on trading habits by employees of the Securities and Exchange Commission published last month led some observers to accuse staffers of widespread insider trading. The idea was that SEC staffers, privy to information on non-public enforcement actions, were making abnormal profits by trading on it. Inside, columnist Bruce Carton takes an in-depth look at such charges and finds that they just don't add up.

SEC Increasingly Taking Cases to Trial, but Recent Record Is Dismal

February 11, 2014

The Securities and Exchange Commission appears to be following through on Chairman Mary Jo White's pledge to pursue trials in more cases when defendants refuse to settle on the agency's terms. But the SEC's winning percentage in trials since the start of fiscal 2014, a period of increased caseload, isn't good. Inside, columnist Bruce Carton assesses the SEC's spotty trial record and whether its strategy of pursuing more trials makes sense.

A Look Back at the Significant Enforcement Developments of 2013

January 14, 2014

2013 was the latest in a string of busy years for securities enforcement and litigation. New SEC chairman Mary Jo White made several big changes to the Commission's enforcement strategy, while enforcement regulators at the SEC, Department of Justice, and other agencies landed several startling settlements with those charged with bank fraud, insider trading, money laundering, and more. Inside, columnist Bruce Carton takes stock of what could be called "the year of the settlement."

SEC Whistleblower Program Shifts Into High Gear

December 10, 2013

After a slow start, the Securities and Exchange Commission's whistleblower program seems to have found some traction. A recent report on the program showed that the number of tips and complaints filed in fiscal year 2013 climbed 8 percent to 3,238. Inside, columnist Bruce Carton unpacks the latest data on the program and sheds some light on what it means for compliance.

SEC Sets New Enforcement Course

November 12, 2013

The Securities and Exchange Commission is taking a new tack on enforcement and signaling that it will use every weapon in its enforcement arsenal, including some new tactics introduced in the last few months, to create an environment where the SEC's enforcement presence is felt "everywhere." Inside, columnist Bruce Carton examines what the SEC is doing and how likely it is to succeed.

SEC Goes Hunting for Accounting Fraud

October 08, 2013

After years of neglecting financial and accounting fraud—at least according to some critics—the Securities and Exchange Commission is revitalizing its enforcement efforts in the area. It recently launched a Financial Reporting and Audit Task Force and repurposed enforcement staff to crack down on accounting fraud. Inside, columnist Bruce Carton examines the SEC's renewed effort and the likelihood that it will bear fruit.

SEC Must Tread Carefully With New Admission of Guilt Demands

September 10, 2013

The SEC announced an extraordinary settlement in August in which the defendants—hedge fund manager Philip Falcone and his firm Harbinger Capital Partners—confessed to the charges. The deal ended a 40-year-old settlement policy that let individuals and companies avoid admissions of guilt. Inside, columnist Bruce Carton looks at what the policy change means for companies and why it could strain SEC resources.

Closing the Revolving Door

August 13, 2013

Last month, former SEC enforcement chief Robert Khuzami resurfaced as one of the top corporate lawyers at law firm Kirkland & Ellis—prompting the usual complaints that a revolving door between government and private-sector service weakens enforcement. Inside, Compliance Week columnist Bruce Carton takes that old stereotype to task. The research, he writes, does not support those complaints, and common sense about strong enforcement doesn't either.

Why the U.K. Has Failed to Bring Significant Bribery Act Cases

July 09, 2013

Two years have now passed since the U.K. Bribery Act took effect on July 1, 2011, and Britain's Serious Fraud Office has yet to bring a single significant case. Inside, Columnist Bruce Carton looks at why Bribery Act enforcement actions haven't materialized, when the first cases could start shedding more light on compliance with the law, and what to expect in the near future.

Behind the SEC's Renewed Focus on Financial Fraud

June 11, 2013

The Securities and Exchange Commission may be renewing its focus on financial and accounting fraud under new Chairman Mary Jo White. During the last 10 years, the number of such cases has declined from 199 in 2003 to just 79 cases during its last fiscal year. Word is that White may be retooling the SEC to hone in on financial fraud through increased analytics and more resources. Inside, Columnist Bruce Carton looks at what's behind the initiative.

A Slow Start for the SEC's Whistleblower Office?

May 14, 2013

After 21 months in operation, a ramp-up in the office's staff members, and the roll-out of a $21 million "Tips, Complaints, and Referrals" database, the Office of the Whistleblower has only paid one small award to a whistleblower. With no other clear success stories to point to thus far, questions about the program's effectiveness are starting to arise. Inside, Columnist Bruce Carton examines the SEC's Whistleblower Office as it nears its second year in operation.

Volume Rising in Opposition to SEC Settlement Practices

April 09, 2013

What was once a lone voice berating the SEC's practice of letting defendants settle cases without admitting wrongdoing—that of U.S. Judge Jed Rakoff, who questioned an SEC agreement with Citigroup—has grown into a small chorus. At least five judges have now questioned the wisdom of letting defendants settle cases without taking any blame. Inside, Columnist Bruce Carton considers the ramifications of such objections and whether a resolution is in sight.

A Look Back at Enforcement Developments in 2012

January 15, 2013

Last year was a wild one in the world of securities law enforcement. Several high-profile insider-trading and fraud cases finally concluded, including those against Allen Stanford and Rajat Gupta. 2012 also saw a number of departures of high-level enforcement figures both in the United States and Britain. Inside, Columnist Bruce Carton looks back on the highs and lows of securities law enforcement developments in 2012.

Grading Schapiro's Term as SEC Chairman

December 11, 2012

Assessments of Mary Schapiro's tenure as chairman of the SEC—she announced she is stepping down later this month—vary from high praise to deep derision. But despite hiccups, such as the SEC's botched attempt to add more office space, Columnist Bruce Carton thinks she deserves credit for turning around the Commission's Enforcement Division. Inside, he recounts the steps she took to reinvigorate the division after the failures of the Bernie Madoff affair.

Ending Frivolous M&A Litigation

November 13, 2012

Shareholder lawsuits now follow nearly every proposed merger or acquisition. They are easy money for plaintiffs' lawyers, who have learned that the defendant corporations in such cases will almost always agree to settle the case. Inside, Columnist Bruce Carton examines the factors that drive M&A shareholder suits and what could be done to minimize meritless cases.

Should the SEC Have Power to Impose Higher Penalties?

October 10, 2012

A bill in Congress would greatly expand the SEC's power to impose higher penalties on securities law scofflaws. Supporters of the legislation, introduced after criticism that the penalties in a case against Citigroup were too low, say it would give the SEC the ability to levy fines that actually deter violations. Critics, though, says it gives the SEC too much power without evidence that such penalties improve compliance. More inside.

Stanford Conviction Sets a Series of Legal Activity in Motion

September 18, 2012

After a large corporate fraud is uncovered, government prosecutors usually pursue smaller players as they build toward a grand finale prosecution against the big fish CEO. In the Allen Stanford Ponzi scheme case, however, Stanford's conviction set a new series of legal activity in motion. Inside, Columnist Bruce Carton runs through the remaining cases, including a rare negligence case filed against the SEC.

No Harm in SEC Lawyers Going to the Private Sector

August 07, 2012

For years critics have argued that SEC lawyers give Wall Street sympathetic treatment in an attempt to increase their future private-sector job prospects. Others say SEC lawyers are motivated to gain experience and get noticed by bringing high-profile cases. Inside, Columnist Bruce Carton looks at both sides of the argument and new evidence that supports the idea that the revolving door at the SEC may actually have its benefits.

Don't Be Lulled by the U.K. Bribery Act's Uneventful First Year

July 17, 2012

The U.K. Bribery Act turned one year old this month, but so far the British government hasn't brought a single significant case forward. That dearth of enforcement action could lead to complacency on Bribery Act compliance. That would be a mistake, says Columnist Bruce Carton. His reasoning is inside.

A Million for Your Thoughts

June 19, 2012

Whistleblower programs that encourage insiders to bring information about corporate fraud to regulators are gaining traction in the United States and Britain. And SEC officials say that when they start paying out millions in awards, the phones will really start ringing. Inside, Columnist Bruce Carton examines the early results of programs in the United States and Britain and what they mean for compliance programs.

SEC Cracking Down on Questionable Tactics by Defense Counsel

May 08, 2012

The Securities and Exchange Commission is sending a message to defense attorneys and in-house counsel that it's on the lookout for "questionable tactics" and "sharp practices" by lawyers who try to impede its investigations. Inside, Columnist Bruce Carton looks at what the SEC finds objectionable and the penalties the Commission says it will impose for such practices.

Is the SEC's Whistleblower Program Working?

April 10, 2012

The SEC is preparing to dole out its first rewards under the whistleblower program established by the Dodd-Frank Act—and yet, for all the hand-wringing over concerns that its program would ruin internal compliance hotlines, early evidence suggests the SEC's program is not harming internal corporate compliance efforts. Inside, Columnist Bruce Carton looks at the SEC's whistleblower program and its effect on compliance so far.

Taking the Sting Out of the Justice Department's FCPA Enforcement

March 13, 2012

A bruising loss in a landmark FCPA case against 22 individuals could help curb what some consider to be aggressive enforcement tactics by the Justice Department in foreign bribery cases. Inside, Columnist Bruce Carton examines the wreckage and considers what the Justice Department's colossal failure on its "Africa Sting" operation will mean for future enforcement of FCPA allegations.

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.

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