Breaking Down the Stats and Reasoning Behind SEC Enforcement Cases Against Individuals

The Same Old Song: Securities Enforcement Cases Against Executives

… At a high enough level of abstraction, everyone wants truly bad actors to face the music. As we say to our kids, “Your actions have consequences.” But how do we decide who deserves career-crippling public sanctions or even a one-way ticket to the clink? And how do we decide that, even though mistakes were made, no one person should take the fall?

In this post, I’ll give you a few tips on some of the things that make government attorneys want to bring securities enforcement actions against individuals. (As an aside, and on an encouraging note, outside directors are much, much less likely to be charged than executives.) I’ll also talk about the role of D&O insurance for those who find themselves in the crosshairs of one of these agencies.

‘Gag Rule’ at Wall Street regulator attacked from the right

“People tend to put a lot of weight in it when the SEC brings a case, even when it’s a No-Admit, No-Deny settlement,” Peirce said. She added that she doesn’t believe that anything would have to change in the SEC’s enforcement program if the policy went away.

But former Enforcement Director Bill McLucas argues that if defendants were able to openly criticize charges that they already settled with the agency, the SEC would likely begin pursuing more admissions of guilt. That, he said, could “present a very real concern” for many defendants and spur more litigation for the SEC, which the agency “would not likely wish for.”

More Cell Phones

The US Securities and Exchange Commission does various things, but one thing that it does these days is charge financial services firms large fees for using mobile phones. I mean, it doesn’t provide the phones or anything. But the SEC has developed a theory that it is illegal for employees of securities brokerages and investment managers to use WhatsApp or personal text messages to talk about work, and it has applied that theory retroactively to fine firms whose employees did that. And since, as far as I can tell, every single employee of every single securities brokerage and asset manager has at some point at least texted their boss to say “hey sorry I’m running late for this meeting,” the SEC can more or less fine every financial firm for doing this. It’s not exactly a flat per-seat fee, but the fines do seem to scale with the size of the firm.

Coinbase’s lawyer doesn’t expect to win latest legal round with SEC

Any day now, a US judge is expected to rule on whether the most important legal case in crypto history will go to trial or be dismissed.

Coinbase, the top crypto exchange in the US, has asked Judge Katherine Polk Failla to jettison all or at least part of the lawsuit brought last year by US Securities and Exchange Commission.

Coinbase Chief Legal Officer Paul Grewal expects to lose this skirmish.

“Judges generally don’t like to deprive any plaintiff of their full opportunity to prove their case — and that’s especially true when the US government is the plaintiff,” he told DL News in an interview.

“Our odds, even before we get out of the gate, are pretty low of getting this thing dismissed early.”

But it may not matter in the long run.

What Are the Consequences of Auditors Subject to Regulatory Enforcement Actions? Apparently Not Much

Researchers at Temple University and the University of Michigan looked at what happened to the auditors one year after settled orders were issued by the Securities and Exchange Commission (SEC) or the Public Company Accounting Oversight Board (PCAOB), and they observed three intriguing consequences, or lack thereof.

A significant number of those who were involved in professional misconduct remained gainfully employed by their firms—26% of Big Four firms and 43% of non-Big Four firms.

By contrast for context, another research found that 95% of corporate executives named in the SEC’s accounting and auditing enforcement releases (AAERs) who had enforcement actions against them lost their jobs.

Criminal sentencing of Binance founder CZ postponed to late April

The criminal sentencing of Binance founder Changpeng Zhao on a money laundering rule charge has been postponed until April 30, according to a notice Monday in Seattle federal court.

That docket entry did not explain what would be a two-month delay in sentencing Zhao, a Canadian national widely known as “CZ” who is free on a $175 million release bond in the United States.

Zhao’s lawyer, William Burck, declined to comment when asked about the postponement. CNBC has asked the Department of Justice about the delay.

Federal sentencing guidelines suggest a maximum sentence of 18 months in prison for Zhao, but prosecutors reportedly have considered asking for a harsher sentence.