After the financial collapse of 2008, the Securities Exchange Commission (SEC) rightfully came under fire for not doing enough in advance to regulate the toxic investments known as mortgage backed securities. After the collapse, the corporate bailouts, the bonus scandals, and all the Hollywood movies and documentaries, the American taxpayers still have not received justice. So far, there has been no “big case” that everyone has wanted to see and no “major” players have been held accountable. What is all the more troubling is that we are approaching the five-year statute of limitations that restricts the sanctions the SEC can get for the gross misconduct. In total, the SEC has filed crises-related enforcement actions against 105 individuals. Fifty-nine of those individuals have reached settlements and six others were either dismissed or dropped. The rest are pending. As usual, justice delayed is justice denied.
But fortunately all of the news from the SEC isn’t bad. After a series of scathing attacks from those outside the Commission – particularly from Judge Jed Rakoff – the SEC has changed its policy on allowing corporations to enter into settlement agreements without “admitting” any wrongdoing. The SEC has now indicated that defendants will have to admit wrongdoing as a condition of settling claims against them. It is too early to tell if the SEC will stick to its guns and require all defendants to admit liability, or if they will quickly start creating exceptions to this common sense minded policy.
Another area where the SEC should get some credit is in the enforcement of actions for “insider trading.” According to the Securities Exchange Commission, insider trading cases continue to be a high priority area for enforcement and allocation of additional resources. The SEC brought 58 insider trading actions in FY 2012 against 131 individuals and entities. In the last three years, the SEC has filed more insider trading actions (168 total) than in any three-year period in the agency’s history. These insider trading actions were filed against nearly 400 individuals and entities with illicit profits or losses avoided totaling approximately $600 million. Many of these actions involved financial professionals, hedge fund managers, corporate insiders, and attorneys who unlawfully traded on material non-public information, undermining the level playing field that is fundamental to the integrity and fair functioning of the capital markets. Again, it is too early to tell if this trend is an aberration or a good sign of things to come.
Sources: Zero Hedge, Compliance Week
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