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Enforcement Action

"Enforcement Action" is written by Bruce Carton, a former senior counsel in the SEC's Division of Enforcement. A "blawg pioneer" (according to The Wall Street Journal), Carton was the creator of Securities Litigation Watch, a blog that he wrote for more than three years while he was vice president of ISS' Securities Class Action Services. He is now editor of Securities Docket, an online publication that tracks securities litigation and enforcement developments on a global basis. Carton welcomes questions, comments and statements from readers on enforcement and litigation issues; he can be reached via email at BCarton@complianceweek.com.

SEC to Require Admissions of Wrongdoing in Settlements of Most Egregious Cases

June 19, 2013

SEC Chairman Mary Jo White announced yesterday that the agency is changing its long-standing "neither-admit-nor-deny" settlement policy to require admissions of wrongdoing from defendants in cases involving "egregious intentional misconduct" or "misconduct that harmed large numbers of investors." More details inside.
 

Video: Former KPMG Partner's Frank Interview on Courthouse Steps Should Be Wake Up Call

June 18, 2013

Former KPMG partner Scott London's frank and remorseful interview outside of the federal courthouse in Los Angeles where he was arraigned on insider trading charges should become required viewing at Big 4 compliance training sessions.
 

Amelia Cottrell Promoted to Associate Regional Director for Enforcement in NY

June 17, 2013

The SEC's Amelia Cottrell has been promoted to the position of Associate Regional Director for Enforcement in the agency's New York Regional Office, the position previously held by current Senior Associate Regional Director Sanjay Wadhwa.
 

The Internal Audit Function and Anti-Corruption Compliance

June 14, 2013

Corporations' internal auditors are Increasingly becoming involved in anti-corruption compliance efforts. Yesterday, I moderated a very interesting webcast that examined key issues such as the role of internal audit in anti-corruption compliance risk assessments, internal investigations, and post-enforcement remediation.
 

SEC Brings More Charges in Bribery Scheme

June 12, 2013

The Securities and Exchange Commission has brought charges against the former head of the Miami office of broker-dealer Direct Access Partners for taking part in an alleged massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank. So far, five individuals have been charged with fraud in the case. More details inside.
 

SEC Official Expects 'Extremely Significant Whistleblower Awards' in Coming Months

June 12, 2013

The wait for the SEC's Whistleblower Office to make a splash may soon be over. A senior official in the Enforcement Division stated recently that he expects to see the SEC bring some "incredibly impactful cases" with significant whistleblower awards in the next six to twelve months. Since the SEC's Whistleblower office opened nearly two years ago, it has paid only one award of just $50,000. More inside.
 

SEC Hammers CBOE for Lacking 'Fundamental Understanding' of Abusive Short Selling

June 11, 2013

The SEC charged the CBOE today with failing to adequately enforce Regulation SHO because CBOE staff never received any formal training and lacked a "fundamental understanding" of the rule.
 

SEC's White Defends 'No Admission' Settlements, But Says Policy Under Review

June 11, 2013

In a letter last week to Sen. Elizabeth Warren (D-Mass.) SEC Chairman Mary Jo White stated that while she believes the SEC's "neither-admit-nor-deny" settlement policy provides public accountability, it is under "active review." White says the SEC is looking at whether it is making "full appropriate use of its leverage in the settlement process."
 

After Monitoring Rakoff-SEC Battle, Ontario Limits 'No-Contest' Settlements

June 07, 2013

After monitoring the growing frustration by U.S. judges on approving "no admit, no deny" SEC settlements, the Ontario Securities Commission limited a proposed new rule that would have allowed such no-contest settlements in its enforcement cases. Institutional shareholders had argued that allowing defendants to settle cases without admitting guilt could lead them to view penalties as the cost of doing business. More inside.
 

Big Four Professionals Face Insider Trading Consequences in U.S., Australia

June 07, 2013

Just ten days but thousands of miles apart, two former Big Four professionals separately found themselves in hot water on insider trading charges.
 

The Migration of Former SDNY Prosecutors to the SEC Continues

June 03, 2013

The migration of former prosecutors from the U.S. Attorney's Office for the Southern District of New York to the SEC continued today, as Robert E. Rice joined the agency as Chief Counsel to SEC Chairman Mary Jo White.
 

Web Watch: Best of the Week Ending May 31

May 31, 2013

My picks for the most interesting recent columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation, including an FCPA case that goes back to 1995, how to maximize your chances of scoring an FCPA declination, and the need for independent compliance departments.
 

Total S.A. to Pay $398 Million to Resolve Bribery Charges

May 30, 2013

Total S.A. has agreed to settle FCPA charges from the SEC and Justice Department by paying a combined $398 million in disgorgement and penalties, and agreeing to other terms including a deferred prosecution agreement for a term of three years and the retention of an independent corporate compliance monitor.
 

Sen. Warren Asks SEC for Any Research on Benefits of 'No Admission' Settlements

May 30, 2013

Senator Elizabeth Warren asks the SEC to provide her with any research it has done on "trade-offs to the public between settling an enforcement action without admission of guilt and going forward with litigation as necessary to obtain such admission."
 

Professional SEC Whistleblower Firm Seeks Investors to Finance Investigations

May 29, 2013

The first generation of professional SEC whistleblowers is upon us. Ted Siedle, a former SEC lawyer, now a self-proclaimed industry watchdog, is reportedly seeking to raise about $1.8 million from investors to create an "investment fund to cash in on the agency's new whistleblower program." More details inside.
 

Whistleblower Whose Tip Led SEC to Charge ISS Will Not Receive Award

May 24, 2013

The SEC's case against ISS is said to have resulted from a whistleblower tip. However, the whistleblower will not receive an award under the SEC's Dodd-Frank whistleblower program because the resulting enforcement action did not result in more than $1 million in sanctions.
 

SEC Settles 'Pay-to-Play' Case Against Former Goldman Sachs Banker

May 23, 2013

Former Goldman Sachs investment banker Neil M.M. Morrison has agreed to pay $100,000 and accept a bar from the securities industry for five years to settle the SEC's "pay-to-play" charges. The case marks the first time an individual has been barred from the securities industry for such violations.
 

'Whistleblower Directors Speak' at CW 2013

May 22, 2013

At CW 2013 today, three senior officials representing major government whistleblower programs addressed issues including retaliation against whistleblowers and "interference with communications."
 

SEC Wraps Up Its 'Golden Goose' Insider Trading Case

May 16, 2013

Yesterday, four and a half years after the SEC filed its complaint in what is now known even by the agency as the "Golden Goose" case, the SEC announced that final settlements were reached with the last remaining defendants in the high-profile matter.
 

SEC Charges 'Imaginary' Cloud Computing Business with Financial Fraud

May 15, 2013

The SEC brings dozens of financial fraud cases each year. In most cases, there is (or was) an underlying business at the company involved and management is simply trying to make it look better than it really is through financial shenanigans. But sometimes the entire business is "imaginary."
 

SEC Enforcement Action and Report a Warning Shot to Municipalities on Disclosures

May 14, 2013

Last week's enforcement action against the City of Harrisburg, Pa., and accompanying Report of Investigation should serve as a warning to municipalities: beware making misleading statements about a municipality's financial condition outside of securities disclosure documents.
 

Harbinger Discloses Settlement With SEC Imposing Two-Year Bar on Philip Falcone

May 10, 2013

In June 2012, the SEC sued hedge fund adviser Philip Falcone and Harbinger Capital for alleged misconduct that it claimed resembled "the final exam in a graduate school course in how to operate a hedge fund unlawfully." This week a settlement was reached that, among other things, would bar Falcone from serving as an investment adviser for two years.
 

SEC's White Testifies Current Budget 'Not Sufficient,' Seeks 26% Increase

May 08, 2013

In her first testimony before Congress as SEC chairman, Mary Jo White made her case for why the SEC's budget should be increased by 26 percent in fiscal year 2014. White testified that the SEC's current budget was not sufficient to permit the SEC to properly enforce the securities laws "in a way that investors deserve and expect."
 

Must-Read: Vanity Fair's 'The Hunt for Steve Cohen'

May 06, 2013

"The Hunt for Steve Cohen" in the June 2013 issue of Vanity Fair is a terrific, in-depth look at the broad investigation conducted by Preet Bharara of the Southern District of New York into insider trading by hedge funds. It shows that while SAC Capital's Steve Cohen has not been named as a defendant in Bharara's massive sweep, Bharara is "getting closer to the biggest fish of them all."
 

Justice Department: $1.5 Billion Returned to Fraud Victims

May 03, 2013

Acting Assistant Attorney General Mythili Raman said in a recent speech that the Justice Department has returned more than $1.5 billion in forfeited assets to more than 400,000 crime victims since January 2012. The sum includes tens of millions of dollars returned to fraud victims from Enron, Qwest Communications, and more. Details inside.
 

SEC Enforcement's David Bergers Leaving Agency After 13 Years

May 02, 2013

The SEC announced today that David P. Bergers, Acting Deputy Director of the SEC's Enforcement Division and Director of the Boston Regional Office, will be leaving the SEC this spring after 13 years with the agency.
 

SAC's Cohen Pledges 'Zero Tolerance' for Insider Trading, Rolls Out Clawbacks

May 02, 2013

After months of being buffeted by news of SAC Capital employees charged with insider trading, the firm's founder, Steve Cohen, who is also the target of an insider-trading investigation, is trying to flip the script a bit. Cohen recently told investors that the firm would increase the compliance staff by 25 percent and institute a clawback program on deferred compensation. More inside.
 

Insider Trading Goes Mainstream, Part II: Bharara as Ahab, Steve Cohen as Moby Dick

May 01, 2013

The June issue of Vanity Fair takes the "Preet-as-pop-icon" movement one step further, with some interesting art that is almost guaranteed to end up on Bharara's office wall. The art for the VF article "The Hunt for Steve Cohen" depicts Bharara as Ahab and SAC Capital's billionaire founder Steve Cohen as Moby Dick.
 

e-Discovery Rules on the Brink of an Overhaul

April 26, 2013

The Federal Rules of Civil Procedure may soon get a major overhaul, including changes to e-discovery requirements. The proposed rules could effectively limit the scope of discovery, alleviating some of the e-discovery burdens often placed on companies and their in-house counsel. The move is a departure from past amendments that have broadened discovery obligations. More details inside.
 

U.K. Passes Crime and Courts Act

April 26, 2013

Deferred prosecution agreements are officially coming to the U.K. The Crime and Courts Act received Royal Assent in the British Parliament this week, giving the U.K. Serious Fraud Office the ability to offer companies DPAs in exchange for cooperation. The law also gives the SFO the power to impose larger fines on offenders. Details inside.
 

Kluger Asks Appeals Court to Reduce His Record 12-Year Sentence for Insider Trading

April 25, 2013

Yesterday in federal appeals court, attorney Matthew Kluger asked the court to reduce his record 12-year sentence and return the title of "longest sentence for insider trading" back to Raj Rajaratnam.
 

Jon Stewart Rains Down on Congress for Weakening STOCK Act

April 24, 2013

Earlier this month, Congress quietly repealed a key provision of the STOCK Act that applied to roughly 28,000 senior government officials. It was not quiet enough to escape notice by Comedy Central's Jon Stewart, however, who ridiculed Congress last night for weakening the STOCK Act in his standard, hilarious fashion.
 

SEC Enters First-Ever Non-Prosecution Agreement in FCPA Case

April 23, 2013

Last week the SEC announced a non-prosecution agreement with Ralph Lauren Corp. related to alleged bribes a subsidiary of the company paid to government officials in Argentina from 2005 to 2009. It is the first NPA that the SEC—which cited Ralph Lauren's self-reporting, cooperation, and agreement to enhance compliance programs—has entered into involving Foreign Corrupt Practices Act misconduct. More details inside.
 

SEC Names George Canellos and Andrew Ceresney Co-Directors of Enforcement Division

April 22, 2013

The SEC announced that Acting Director of Enforcement George Canellos will serve as a co-director of the Division of Enforcement, along with Andrew Ceresney, a partner at law firm Debevoise & Plimpton, where he worked with new SEC chairman Mary Jo White. It is believed to be the first time the role has been filled with two individuals.
 

News Corp. Reaches $139M Settlement With Shareholders

April 22, 2013

News Corp. reached a $139 million settlement this week with shareholders over the company's phone-hacking scandal and its acquisition of television production company Shine Group. Under the settlement, News Corp. also has agreed to enhance its global compliance structure and corporate governance program. Details inside.
 

Parker Drilling Reaches DPA With Justice Department

April 22, 2013

Parker Drilling Company last week reached an $11.6 million settlement with the Department of Justice over violations of the Foreign Corrupt Practices Act. The company's swift actions also earned it a deferred prosecution agreement. Inside, find out how Parker Drilling convinced the Justice Department to go easy.
 

Web Watch: Best of the Week Ending April 19

April 19, 2013

My picks for the most interesting recent columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation, including a sudden burst of FCPA activity, the SEC's settlement policy and the "near-impossible" standard for proving auditor fraud.
 

Chairman White Reportedly Set On Ceresney as Next Enforcement Director

April 18, 2013

It is still not official, but Reuters is now reporting that Andrew Ceresney, said for over a month to be the leading candidate to follow Robert Khuzami as the SEC's next Director of Enforcement, will in fact be named to that post by Chairman Mary Jo White in the near future.
 

Supreme Court: Companies Are Not Liable in the U.S. for Abuses Abroad

April 18, 2013

The U.S. Supreme Court's ruling this week on the case of Kiobel v. Royal Dutch Shell Petroleum effectively ends corporate liability under the Alien Tort Claims Act for charges of human rights violations abroad. The court decided that companies can't be held liable in the United States for violations of international law in foreign countries under the ATC. More in the ruling inside.
 

Documentary Promises 'New and Shocking' Look at Madoff Scandal

April 17, 2013

The Tribeca Film Festival kicks off in New York City today, and includes an interesting-looking documentary called "In God We Trust" about the Bernard Madoff scandal. The film tells the story from the point of view of Eleanor Squillari, Madoff's personal secretary for decades.
 

Rogue Broker's 'Brazen, Ill-Conceived Scheme' Brings Down Conn. Brokerage Firm

April 16, 2013

The SEC alleges that on October 25, 2012, a registered representative named David Miller came to work at Rochdale Securities LLC and, by the end of the day, had taken the entire firm down through a very misguided scheme.
 

Justice Department Amends Carve-Out Practice Regarding Corporate Plea Agreements

April 12, 2013

The Department of Justice's Antitrust Division announced this week that it has amended the division's carve-out practices regarding corporate plea agreements. Details inside.
 

Before You Accept that Envelope Full of Cash In Exchange for Inside Info...

April 12, 2013

Before you accept that envelope stuffed with cash in exchange for inside information about public companies, just remember that sometimes it is a set-up. And the FBI is watching and taking photographs that, in short order, may become "Exhibit A" in the U.S. Attorney's Office criminal complaint against you for securities fraud.
 

Will Compliance Officers' New Favorite Tool Be ... Google Glass?

April 11, 2013

Is Google Glass, a wearable computer that looks like eyeglasses, the answer for compliance officers seeking to reduce the risks associated with rogue traders and other corporate ne'er-do-wells? Some say the device could be used by employers to monitor and record every move their employees make. Cue the privacy debate now.
 

'Sympathetic' Second Circuit Rules Against Madoff Victims in Suit vs. SEC

April 11, 2013

A "sympathetic" Second Circuit nonetheless becomes the second appeals court to rule against Madoff victims seeking to impose liability against the Securities and Exchange Commission for the agency's negligence in handling and investigating the Madoff Ponzi scheme. The Ninth Circuit and at least four lower courts have already ruled against the Madoff victims.
 

Report Shows Sharp Decline in Number of Accounting Class Actions

April 10, 2013

A report on securities class-action filings and settlements shows that the number of new accounting class actions filed in 2012 fell sharply to the lowest level in recent years. Accounting class-action settlements continue to represent a disproportionately high share of total settlement dollars, however. More findings inside.
 

'Rogue' Audit Partner Leads KPMG Resignations

April 09, 2013

Audit firm KPMG has fired one of the top audit partners in its Los Angeles office amid allegations of insider trading, and then resigned from two client companies, Herbalife and Skechers USA, ensnared in the scandal. Both the Justice Department and the Securities and Exchange Commission are now circling.
 

DOJ Discloses it May Reduce Former Enron CEO Skilling's Prison Sentence

April 05, 2013

The Justice Department disclosed last week that it is considering entering into a sentencing agreement with former Enron CEO Jeffrey Skilling that would reduce his sentence. In 2006, Skilling was convicted on fraud and conspiracy charges related to the fall of Enron and sentenced to 24 years in prison. Details inside.
 

Hedge Fund Survey Shows Misconduct Believed to be Widespread

April 04, 2013

A recent survey of hedge fund professionals indicates that misconduct is widespread in the industry and that a very large percentage of them are prepared to report wrongdoing to authorities. Such whistleblowing, however, might not do much good; more than half say the SEC is "ineffective in detecting, investigating, and prosecuting securities violations." More survey results inside.
 

Departing SEC Chair Schapiro Joins Other Former SEC Officials at Promontory Financial

April 02, 2013

Consulting firm Promontory Financial Group is becoming a sanctuary for former SEC chairmen and other senior officials. Most recently, Mary Schapiro, who stepped down last December, joined the firm as a managing director and chairman of its governance and markets practice. See the list of other notable SEC alumni already employed or affiliated with Promontory inside.
 
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