SEC Commissioner Lizárraga Resigns from Agency, Effective January 17, 2025

Commissioner Lizárraga Statement on His Planned Departure from the Commission

I notified President Joe Biden of my intent to step down as SEC Commissioner, effective January 17, 2025.

For the better part of this year, my wife, Kelly, has confronted serious illness with admirable courage and a strong spirit. We are grateful for the support of colleagues, friends and family and are hopeful for her speedy and full recovery in the ensuing months.

In reflecting on the challenges that lie ahead, we have decided that it is in the best interests of our family to close this chapter in my 34-year public service journey.

Until my departure in January, I will remain fully engaged in the Commission’s ongoing work and activities.

I don’t yet know what comes next, but I do know that it has been a great honor to serve as SEC Commissioner.

UPS to Pay $45 Million Penalty for Improperly Valuing Business Unit

The Securities and Exchange Commission today announced settled charges against United Parcel Service Inc. for materially misrepresenting its earnings because it failed to follow generally accepted accounting principles (GAAP) in valuing one of its worst performing businesses.

According to the SEC’s order, UPS determined in 2019 that UPS Freight, a business unit that transported less-than-truckload shipments, was likely to sell for no more than about $650 million. GAAP required UPS to use the price it would receive to sell Freight in calculating whether it needed to write-down the value of the goodwill it had assigned to the business unit on its balance sheet. UPS’s own analysis indicated that nearly $500 million of goodwill it had associated with Freight was impaired. Rather than use that analysis, however, UPS relied on an outside consultant’s valuation of Freight without giving the consultant information necessary to conduct a fair valuation of the business. Using assumptions approved by UPS, which were clearly not ones a prospective buyer of Freight would make, the consultant estimated Freight was worth about $2 billion – three times as much as UPS had determined. On that basis, UPS did not record a goodwill impairment in 2019. Had UPS properly valued Freight, its earnings and other reported items would have been materially lower.

SEC Announces Enforcement Results for Fiscal Year 2024

The Securities and Exchange Commission today announced that it filed 583 total enforcement actions in fiscal year 2024 while obtaining orders for $8.2 billion in financial remedies, the highest amount in SEC history.

The 583 enforcement actions represent a 26 percent decline in total enforcement actions compared to fiscal year 2023. Of those cases, the Commission filed 431 “stand-alone” actions, which was 14 percent less than in the prior fiscal year; 93 “follow-on” administrative proceedings seeking to bar or suspend individuals from certain functions in the securities markets based on criminal convictions, civil injunctions, or other orders, which was 43 percent less than the prior fiscal year; and 59 actions against issuers who were allegedly delinquent in making required filings with the SEC, which represented a decrease of 51 percent.

The $8.2 billion in financial remedies consisted of $6.1 billion in disgorgement and prejudgment interest, also the highest amount on record, and $2.1 billion in civil penalties, the second-highest amount on record. Approximately 56 percent of the $8.2 billion financial remedies ordered is attributable to a monetary judgment obtained following the SEC’s jury trial win against Terraform Labs and Do Kwon, who were charged with one of the largest securities frauds in U.S. history.

Musk Ducks Sanction for Choosing Rocket Launch Over SEC Meeting

A judge declined to sanction Elon Musk for skipping a meeting with the US Securities and Exchange Commission to watch one of his rockets launch.

US District Judge Jacqueline Scott Corley said Friday there is no need to sanction Musk because he already agreed to reimburse the SEC $2,923 to cover airfare for the trio of agency lawyers he stood up in Los Angeles in September. Musk finally met with the SEC lawyers to give testimony on Oct. 3, Corley noted.

Criminal Investors

This Article reassesses the culpability of those of who invest in law-breaking firms. Prosecutors currently treat investors as victims of corporate wrongdoing rather than as actors who might bear responsibility for it. One explanation for this tendency is that corporate law’s doctrine of limited liability creates so strong a presumption of investor blamelessness that it permeates other spheres, including criminal law. Another is that investors are too remote from the firms they invest in to be blamed for corporate wrongdoing. This Article observes, though, that investment can facilitate, and even cause, illicit corporate activity. When investors intentionally contribute to those effects, substantive criminal law imposes liability on them just the same as it does on accomplices, conspirators, or principals in other contexts. Despite this formal parity, however, investor criminal liability is more a theoretical proposition than a practical reality.

This Article challenges that status quo by asking whether and when culpable investors should be held criminally accountable for corporate wrongdoing….

What’s Next for the Leadership at the SEC?

For the most part, all of this churn means that policy initiatives will be on hold until the new Chair can set the regulatory direction for the agency. In the trenches, nothing really changes, as the Staff will continue reviewing registration statements and periodic reports and conducting Enforcement investigations, regardless of who is in charge.

Speaking from my own experience, this sort of inevitable leadership change roughly every three-and-half years is always a stressful time when serving at the SEC. Projects that you may have been working on for years go “pencils down” all of the sudden, and you may face a regulatory future that does not necessarily align with your own views and values, but you know that you have to follow the agenda set by the agency’s new leadership. I imagine that all of this uncertainty is compounded by the prospect of the DOGE, which will be led by a person that has no love lost for the SEC. As an SEC alum and longtime student of the SEC’s history, I am hoping that the agency can pull through!

What is Michael Saylor Doing?

A massively important factor in all of this is Bitcoin, which we haven’t addressed yet.

The biggest thing Bitcoin has going for it is also the same thing that gets its haters all up in arms. “It has no use case. It doesn’t do anything. IT DOESN’T HAVE ANY FUNDAMENTAL VALUE.”

Exactly! That’s part of what makes the story work. It doesn’t report earnings. It can’t beat expectations and still drop 30%. Bitcoin is a supply and demand story, and right now, thanks to Michael Saylor and the ETFs and the deregulation via the incoming administration, there is way more demand than supply. I’m not saying that will always be the case, but it certainly is for now and the foreseeable future.

So how does this end? What stops the madness? I have a few ideas….