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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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