This Summary, which draws from a wide range of sources, endeavors to condense important investment management regulatory news of the preceding week into one, easily digestible source. This Summary is not intended as legal advice. Readers should not act upon information contained in this Summary without professional legal counsel. This Summary may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts.
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SEC issues statement regarding corporate penalties
January 27, 2006 11:23 AM
In connection with the filing of two settled actions against corporate issuers, the SEC recently announced and established a framework designed to provide clarity, consistency and predictability to its imposition of corporate penalties. The two principal considerations that will guide the SEC’s application of corporate penalties are:
Other factors the SEC may consider include:
In its press release, the SEC stated that its intentions in clarifying these guiding principals are to provide a high degree of transparency to the SEC’s decisions, and to be of assistance to the SEC’s professional staff, corporate issuers, their counsel and the public.
SEC Press Release No. 2006-4 (January 4, 2006)
SEC offers incentives for companies to file financial reports with interactive data
January 27, 2006 11:18 AM
The SEC staff announced that it will offer expedited reviews of registration statements and annual reports to companies that volunteer for a test group as part of the SEC’s interactive data initiative. The use of interactive data is intended to replace static, text-only documents companies file with the SEC with dynamic financial reports that can be quickly and easily accessed and analyzed.
SEC charges former officers of transfer agent, but not transfer agent, with defrauding clients of $4 million
January 27, 2006 11:13 AM
The SEC filed charges against six former senior officers of a Boston-based registered transfer agent, for engaging in a scheme beginning in January 2001 by which the defendants defrauded a defined contribution plan client and group of affiliated mutual funds of approximately $4 million.
The SEC’s complaint alleges that the defendants’ misconduct arose out of the transfer agent’s one-day delay in investing certain assets of a defined contribution plan client. The markets rose steeply on the missed day, causing the defined contribution plan to miss out on nearly $4 million of market gains. According to the complaint, rather than inform the defined contribution plan client of the one-day delay or compensate their client for the missed trading gain, the defendants decided to improperly shift approximately $3 million of the costs of the delay to shareholders of certain affiliated mutual funds through deception, illegal trade reversals, and accounting machinations related to the use of “as of” trading activity. The complaint also alleges that the defendants improperly allowed the defined contribution plan client to bear approximately $1 million of the loss without disclosing to the defined contribution plan client that they had done so. The complaint further alleges that certain of the defendants took steps to cover-up the wrongful conduct, resulting in the misconduct not being discovered until January 2004.
In connection with the complaint against the six individual defendants, however, the SEC announced that it would not bring any enforcement action against the transfer agent because of its swift, extensive and extraordinary cooperation in the SEC’s investigation of the transactions that are the subject of the SEC’s complaint. The transfer agent’s cooperation consisted of:
Walter G. Ricciardi, Deputy Director of the Division of Enforcement and District Administrator of the SEC’s Boston District Office noted that, although the conduct alleged here was egregious, the transfer agent’s cooperation in this investigation and the remedial steps taken were extraordinary. He further indicated that he hoped the SEC’s determination not to bring any enforcement action against the transfer agent will “encourage those who become aware of wrongdoing to do the right thing - stop the wrongful conduct, promptly report it to the SEC staff, and cooperate fully in any subsequent investigation of the conduct.”
SEC Press Release No. 2006-2(January 3, 2006)
SEC Chairman appoints acting Director of the SEC Division of Investment Management
January 27, 2006 11:09 AM
SEC Chairman Christopher Cox today announced the selection of Susan Ferris Wyderko as the Acting Director of the SEC’s Division of Investment Management, which oversees mutual funds and investment advisers. A 20-year veteran of the SEC, Ms. Wyderko has served as the Director of the Office of Investor Education and Assistance since March 2000. In that position she has been principally responsible for the SEC’s outreach to individual investors, ensuring that their problems and concerns are known throughout the SEC and considered when the agency takes action. Ms. Wyderko has held several senior positions within the SEC, including Director of the Office of Legislative Affairs and Acting Director of Public Affairs. She previously served as a Counsel to Chairman Arthur Levitt and as an Assistant General Counsel at the SEC with responsibility for filing SEC briefs with the Courts of Appeals and the Supreme Court. From 1993 to 1995 she was an Assistant Chief Litigation Counsel for the Division of Enforcement at the SEC. She earlier headed the SEC’s Rule 2(e) program of disciplinary proceedings against professionals who practice before the SEC. Before coming to the SEC she was at a Washington, D.C. law firm.
SEC press Release No. 2006-8 (January 12, 2006)