SEC Litigation Settlements Up in First Quarter
Under heightened scrutiny, but with its staff empowered by reforms mandated by Chair Mary Schapiro, the SEC reached 182 new settlements in the first quarter of 2009, according to NERA Economic Consulting. This exceeds both the 123 settlements in the previous quarter and the 157 settlements in the first quarter of 2008.
Ms. Schapiro has announced many new policies in 1Q09 that have implications for SEC enforcement actions, NERA says in its SEC Settlements Trends:1Q09 Update. For example, she has ended the “penalty pilot” program initiated by former Chair Christopher Cox in 2007. Under this program, SEC staff were required to obtain pre-approved settlement ranges from the Commission prior to beginning negotiations with publicly-traded companies.
The press speculated that this program was intended to reduce settlement amounts. Indeed, when she announced that she would bring the penalty pilot program to an end, Ms. Schapiro stated: “In speaking to our Enforcement staff, I’ve been told that [the penalty pilot program] introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed.”
Ms. Schapiro also announced that she would put new procedures in place to provide for more rapid approval of subpoena power for SEC staff. And n recent testimony before the Senate Banking, Housing, and Urban Affairs Committee, Ms. Schapiro stated her intention to request that the SEC be granted authority to compensate whistleblowers for providing “well-documented evidence of fraudulent activity.” Such authority would represent an extension of the SEC’s existing authority to offer rewards to sources in insider trading cases.
The largest settlement was the $200 million that UBS (NYSE: UBS) agreed to disgorge in connection with allegations that it operated as an unregistered broker/dealer in the United States.
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