Category: Individual Liability
A June 15, 2017 settlement with two former executives of a publicly-traded, multinational freight forwarding and logistics company provides the most recent example of two emerging SEC enforcement initiatives in financial reporting and accounting-based actions that we spotlighted recently – a non-reliance on financial statement materiality and an absence of fraud-based allegations. Exchange Act Rel. No. 80947 (Jun. 15, 2017). According to the SEC, Eric W. Kirchner and Richard G. Rodick, the former chief executive officer and chief financial officer of UTi Worldwide, Inc. (“UTi”), purportedly were responsible for inadequate Management’s Discussion & Analysis (“MD&A”) disclosures in a Form 10-Q that UTi issued during fiscal year 2013. Without admitting or denying the findings, both agreed to settle purported violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-13, and 13a-14, thereunder, and to pay a $40,000 civil penalty.
According … Read More »
Andrew J. Ceresney, Director of the Division of Enforcement, reaffirmed the SEC’s focus on FCPA enforcement actions at the International Conference on the Foreign Corrupt Practices Act. Mr. Ceresney’s speech focused on companies’ need to self-report violations.
Mr. Ceresney stated that the SEC uses “a carrot and stick approach to encouraging cooperation,” where self-reporting companies can receive reduced charges and deferred prosecution and non-prosecution agreements, while companies that do no self-report do not receive any reduction in penalties. Mr. Ceresney warned that “companies are gambling if they fail to self-report FCPA misconduct.”
Mr. Ceresney gave examples of how this policy has benefited companies recently. Mr. Ceresney highlighted the SEC’s decision not to bring charges against the Harris Corporation after it self-reported violations and mentioned to examples where the SEC entered into non-prosecution agreements as a result of self-reporting.
Mr. Cerseney stated that the … Read More »
SEC “Claws Back” Bonuses and Stock Sale Profits From CFOs of Public Company Charged With Accounting Fraud
On February 10, 2015, the SEC announced settlements with two former chief financial officers of Saba Software, a Silicon Valley software company, that require the CFOs to repay Saba more than $500,000 in bonuses and profits from stock sales earned subsequent to Saba’s false filings. Notably, the SEC did not allege that either former officer violated the federal securities laws in any fashion, nor was there evidence of either officer’s knowledge of, or complicity in, the underlying conduct that prompted the company to settle accounting fraud charges lodged against it by the SEC in September 2014. See Press Release, SEC Announces Half-Million Dollar Clawback from CFOs of Silicon Valley Company that Committed Accounting Fraud (Feb. 10, 2015).
The first CFO, William Slater, a former accountant who served as CFO from November 2011 through February 2013, and the second, Peter E. Williams … Read More »
The SEC’s Municipalities Continuing Disclosure Cooperation Initiative: Carrot for Issuers & Underwriters, Stick for Individuals
It’s no secret that the SEC is stepping up its enforcement efforts in the estimated $3.7 trillion municipal securities market. In 2012, the Commission published a 165-page report calling for Congress to give it more authority to improve disclosures in municipal bond offerings. See SEC’s Report on the Municipal Securities Market (July 31, 2012). In the last year, the Commission has filed a number of enforcement actions against municipal bond issuers and underwriters based on alleged misstatements or omissions concerning various topics, including: compliance with tax exemption requirements, continuing disclosure obligations, and debt limitations and property values.
Most recently, in March 2014, the SEC launched a new cooperation initiative designed to encourage issuers and underwriters of municipal securities to self-report certain violations of federal securities laws. Under the Municipalities Continuing Disclosure Cooperation Initiative (“MCDC Initiative”), SEC staff will recommend favorable settlement terms … Read More »