On October 13, 2006, Marc Fagel from the Securities and Exchange Commission (SEC) gave a presentation to attorneys in Redwood City, CA on the SEC Enforcement Division.
The SEC has between 500 to 700 new cases each year. In 2005, the largest categories related to: financial fraud and issuer reporting, investment adviser, broker-dealer, insider trading, market manipulation.
The types of financial reporting and issuer disclosure cases relate to whether a company has good disclosure and good accounting. As an example, in the case of Coca-Cola, the SEC instituted and settled a cease and desist based on end of quarter channel stuffing. Another example, in the case of Kmart, the SEC filed fraud charges against the former CEO and CFO alleging misleading disclosures in the company’s liquidity in a Form 10-Q. There have also been various cases involving compensation disclosures with Disney and Tyson.
Accounting, company directors, and legal professionals have had cases against them. Attorneys have been named as respondents or defendants in approximately 30 enforcement actions during 2004 and 2005. Auditors such as Deloitte & Touche, KPMG, Grant Thornton, Ernst & Young have received penalties in connection with their audits of public companies. The SEC has investigated whether company directors have performed their roles as guardians of shareholders. There is an emphasis on the integrity of documents and personal accountability.
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