Are you tired of the winter weather we have been dealing with? New Hampshire, where Carol resides, and Minnesota, where George resides, have not had so much snow in years, and the cold has been relentless. Even Atlanta has had its share of crazy winter weather, although as Northerners, we are amazed to see what snow does to that city.
Now that we are finally done with January and into mid-February, perhaps we can begin to believe that winter will eventually end. As we go from February to March, hopefully into the last phases of this extreme winter, we are thinking about an old saying about March – “In like a lion, out like a lamb.” With luck this old saw will be true this year and a wintery early March might give way to a warmer, almost spring like late March.
How does all this relate to SEC reporting? Well, the SEC Enforcement Division has definitely come in this year like a lion. There have been several high-profile cases and campaigns in the enforcement division.
One of our favorite programs even has a cool name, “Operation Shell-Expel.” This program suspended trading in 255 dormant shell companies. We are often asked about the viability of using shell company reverse mergers as a means of becoming a public company and our advice is – beware, shell companies are easy tools of market fraud, and their registrations are not often clean. The SEC’s press release calls them “ripe for abuse in the over-the-counter markets.” You can read all about it at:
In another action earlier this February the enforcement staff moved against 20 “purported” mining companies, all alleged to be including false information in registration statements. Interestingly, all of them were also apparently connected to an individual who had been the subject of an earlier enforcement action and who is suspended from practice before the SEC. You can read about this one at:
In January the SEC settled a case with KPMG involving auditor independence and other issues, a lesson for registrants and their audit committees, in addition to audit firms. The settlement involved a large fine, and details are at:
And, of course, insider trading cases continue to be a major focus of the enforcement division, with several big wins in recent years. The latest is the conviction of Mathew Martoma, the eighth win by the SEC and DOJ against former SAC Capital employees. Mr. Martoma faces prison for his actions.
As a last “in like a lion” thought, and as a cheap tie to a new movie, don’t forget the SEC’s new Financial Reporting and Audit Task Force. This group, one of the prime users of the technology-based tools such as the “Accounting Quality Model,” or the SEC’s RoboCop tool, is already watching reporting carefully.
You can read about the Accounting Quality Model at:
So, while hopefully March comes in like a lion and goes out like a lamb, I suspect this year the enforcement division which has already come in like a lion, will also go out like a lion!
Carol Stacey and George Wilson,
Directors of The SEC Institute, a Division of Practising Law Institute®