SEC gets busy with bumper crop of enforcements

7 August 2009

Sarah Wilson

EU regulation

Judging by this week's crop of enforcement stories, the US securities regulator, The Securities & Exchange Commission appears to be relaunching itself with renewed vigour. The week of August 3rd to 7th is probably going to go down in history as one of the Commissions busiest and most high profile weeks. Here's the timeline:

3rd August: Bank of America charged with misleading investors over bonuses. The SEC said that BofA's agreement to let Merrill pay discretionary bonuses was in a separate document omitted from its proxy and the contents were never disclosed before shareholders voted on the deal.  The case is now held up after Judge Jed Rakoff of the Federal District Court in Manhattan said it might be unfair to the public to accept the settlement.

http://www.sec.gov/news/press/2009/2009-177.htm

4th August: GE agrees to pay $50 million to settle accounting fraud accusations. Former AIG head Hank Greenberg has agreed to pay $15 million to settle allegations of a handful of accounting flaws. The company’s former chief financial officer, Howard Smith, agreed to settle allegations for $1.5 million. The SEC contended that AIG under Greenberg’s leadership “faced a number of financial challenges that, had they been properly reported or accounted for, would have exposed significant missteps in AIG’s operations and caused the company to miss certain key earnings and growth targets.” The agency added that Greenberg and Smith“were aware of transactions that enabled AIG to create the false impression that it consistently met or exceeded expectations for these key financial measures,” and Smith, as chief financial officer, “knew or recklessly disregarded that AIG’s accounting” didn’t conform to accepted accounting rules.

http://www.sec.gov/news/press/2009/2009-178.htm

5th August: SEC to form 5 Enforcement Units. Speaking at a New York lawyers conference, Robert Khuzami, the director of the SEC's enforcement division announced his intentions to form five new specialized units focusing on asset management (hedge and mutual funds); structured financial products (derivatives); municipal bonds and public pensions; market abuse and manipulation; and foreign corrupt practices.  The Commission is taking steps to speed subpoenas and encourage more co-operation in investigations.

http://amlawdaily.typepad.com/amlawdaily/2009/08/meet-robert-khuzami-your-new-sec-enforcement-overlord.html

6th August: AIG Accounting Violations. Former AIG head Hank Greenberg agrees to pay $15 million to settle allegations of numerous accounting breaches. The company’s former chief financial officer, Howard Smith, agreed to settle allegations for $1.5 million. The SEC contended that AIG under Greenberg’s leadership “faced a number of financial challenges that, had they been properly reported or accounted for, would have exposed significant missteps in AIG’s operations and caused the company to miss certain key earnings and growth targets.” The agency added that Greenberg and Smith“were aware of transactions that enabled AIG to create the false impression that it consistently met or exceeded expectations for these key financial measures,” and Smith, as chief financial officer, “knew or recklessly disregarded that AIG’s accounting” didn’t conform to accepted accounting rules.

http://www.sec.gov/news/press/2009/2009-180.htm

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