Review of SEC Enforcement Developments in 2014, and a Look Forward, A Memorandum from Bill McLucas, WilmerHale

https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/review-of-sec-enforcement-developments-in-2014.pdf

Review of SEC Enforcement Developments in 2014, and a Look Forward, A Memorandum from Bill McLucas, WilmerHale

As we noted last year in our memorandum focused on 2013 developments, Securities and Exchange Commission (SEC) Chair Mary Jo White has called for the SEC to be more aggressive in its enforcement program. By all accounts, the Enforcement Division has responded to that call. The past year saw the SEC continue the trend, started under Enforcement Director Robert Khuzami in 2009, of transforming the SEC’s civil enforcement arm into an aggressive law enforcement agency modeled on a federal prosecutor’s office. This should not come as a surprise since both Andrew Ceresney, the current Director, and George Cannellos, Ceresney’s Co-Director for a brief period of time, like Khuzami, spent many years as federal prosecutors in the Southern District of New York. And the Commission itself is now led for the first time by a former federal prosecutor, Mary Jo White, the US Attorney for the Southern District of New York from 1993 to 2002. Given the events of the past decade involving the Madoff fraud and the fallout from the 2008 financial crisis, we believe both the aggressive tone and positions the SEC has taken in recent years will continue. In this memorandum, we outline some of the developments in the SEC’s enforcement program and the remedies it has pursued over the past year. We also discuss important developments in areas where we expect to see continued enforcement attention during 2015, including insider trading law, the private equity industry, and accounting and financial reporting matters.

SEC Enforcement Program Focus

Accounting and Financial Reporting

Another area where we expect to see increased SEC enforcement activity in 2015 is in accounting and financial reporting cases. Although this has not been much of a focus area since the financial crisis, that is beginning to change. After several years of seeing the number of such actions decline year over year, the number of financial reporting and disclosure cases brought by the SEC shot up 45% in fiscal 2014.66 The SEC has said it expects to “continue the momentum in pursuing financial reporting and accounting fraud” in 2015.67 The Financial Reporting and Audit Task Force mentioned above was established by the Commission to identify and develop potential cases that can then be referred to the Enforcement Division for investigation. While the Task Force has begun issuing information requests to public companies, it remains to be seen how active or effective it will be in generating enforcement recommendations. Continue reading

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Regulatory Capture in India/Asia: DLF gains after Securities Appellate Tribunal (SAT) quashes SEBI’s market ban on the company; the ruling comes as a blow to SEBI which has stepped up its efforts to curb market manipulation and has called for better disclosures by listed companies

http://money.livemint.com/news/market/equity/movers-today/dlf-gains-after-sat-quashes-sebi%E2%80%99s-market-ban-on-the-company-364388.aspx

DLF gains after SAT quashes SEBI’s market ban on the company

16 March 2015

Accord Fintech

India, March 16 — DLF is currently trading at Rs. 161.75, up by 4.25 points or 2.70% from its previous closing of Rs. 157.50 on the BSE.The scrip opened at Rs. 162.10 and has touched a high and low of Rs. 163.90 and Rs. 158.85 respectively. So far 13,10,000 shares were traded on the counter.The BSE group ‘A’ stock of face value Rs. 2 has touched a 52 week high of Rs. 242.80 on 09-Jun-2014 and a 52 week low of Rs. 100.00 on 16-Oct-2014.Last one week high and low of the scrip stood at Rs. 163.90 and Rs. 139.20 respectively. The current market cap of the company is Rs. 28,840.00 crore.The promoters holding in the company stood at 74.91% while Institutions and Non-Institutions held 20.18% and 4.91% respectively.Securities Appellate Tribunal (SAT) has quashed a Securities and Exchange Board of India (SEBI) order against DLF, lifting a capital markets ban on the company’s promoters and related entities. The case relates to alleged non-disclosure of information by the company during its IPO in 2007, which had garnered about Rs 9,000 crore. Earlier in October 2014, SEBI had banned DLF and its key officials from accessing the capital markets for three years. This verdict will boost DLF in its struggle to reduce its net debt, which stood at $3.3 billion at the end of December. However, the ruling comes as a blow to SEBI which has stepped up its efforts to curb market manipulation and has called for better disclosures by listed companies.DLF is one of India’s largest real estate companies that has over 60 years of track record of sustained growth, customer satisfaction, and innovation.

Korean prosecutors are investigating DongA One, a flour maker owned by Lee Hi-sang, the father-in-law of former President Chun Doo-hwan’s third son, Jae-man, for alleged stock manipulation; stockbroker detained on suspicion he helped the firm inflate its stock price

http://www.koreatimes.co.kr/www/news/nation/2015/03/116_175390.html

DongA One under probe for stock manipulation

17 March 2015

Korea Times

By Lee Kyung-min

Prosecutors said Tuesday they are investigating DongA One, a flour maker owned by Lee Hi-sang, the father-in-law of former President Chun Doo-hwan’s third son, Jae-man, for alleged stock manipulation. The Seoul Southern Prosecutors’ Office said it detained a stockbroker, surnamed Kim, on suspicion he helped the firm inflate its stock price in 2010 and 2011. During the period, the company’s stock price doubled from 3,000 to 6,000 won. The company reaped some 38 billion won in illegal gains by selling its stock to institutional and individual investors, the prosecution said. DongA One is suspected of providing money to the stockbroker to help raise the stock’s price. The Securities and Futures Commission first detected the manipulation last year and referred the case to the prosecution in May. Previously, Lee was investigated for allegedly helping the Chun family create a slush fund to hide assets.

S.E.C. Chief Voices Support for Higher Advice Standard for Brokers; Such a move would hold stockbrokers to a fiduciary duty standard, under which they must put their clients’ interests ahead of their own

http://www.nytimes.com/2015/03/18/business/dealbook/sec-chief-voices-support-for-higher-advice-standard-for-brokers.html

S.E.C. Chief Voices Support for Higher Advice Standard for Brokers

By MICHAEL J. de la MERCEDMARCH 17, 2015

PHOENIX — The chairwoman of the Securities and Exchange Commission announced on Tuesday that she planned to explore setting a higher standard for brokers in dispensing investment advice, putting the agency in the middle of a potential fight between the Obama administration and the financial industry. Continue reading